Accounts receivable factoring is a way of getting cash for any business that is in need of some. The process is quite simple and involves almost no paperwork and above all, it is quick and quite efficient way of getting immediate fund. If you are a small or middle sized businessperson and you are strapped for cash, you can sell your invoices at a discount and get instant financial assistance because of this funding system.
There are times when one does not need a lot of financial assistance and so avoids seeking a business loan. Or else one gets turned down by the bank and is not able to get the loan just because of some credit issues. Perhaps you need the money to pay your vendors and employees or need cash as working capital to fulfill requirements of other clients. This is the time when account receivable funding comes for assistance provided the nature of your business allows it.
Accounts receivable funding is possible only when you have sold goods to your clients on credit. Only when the bills are due for payment, you can sell them to factoring company on a discount. Depending on the type of services you offer you can either borrow against the money you expect to come in soon or sell the invoice at a discount. Usually you get more than 80% of the money due immediately and the rest of the money you receive once the invoice gets cleared. The factoring company gives you the remaining amount after deducting its fees from it.
One of the most remarkable and apparent benefit of account receivable funding is that the business gets financial help immediately. This also helps freeing the working capital and this makes the business run smoothly. One of the facts that every businessperson is aware of is that recovery of the money is a real headache and this is taken over by the factoring company if you opt for this type of funding.
Just like any other kind of lending, you pay a price for the service that an accounts receivable factoring offers. Usually the fee ranges from 1% to 3% per month. However the rate depends on the size of the amount and the age of your invoice. So, if you think that your company is in real need of cash, look for a good factoring company and seek help. Shop around to get a competitive rate.
There are times when one does not need a lot of financial assistance and so avoids seeking a business loan. Or else one gets turned down by the bank and is not able to get the loan just because of some credit issues. Perhaps you need the money to pay your vendors and employees or need cash as working capital to fulfill requirements of other clients. This is the time when account receivable funding comes for assistance provided the nature of your business allows it.
Accounts receivable funding is possible only when you have sold goods to your clients on credit. Only when the bills are due for payment, you can sell them to factoring company on a discount. Depending on the type of services you offer you can either borrow against the money you expect to come in soon or sell the invoice at a discount. Usually you get more than 80% of the money due immediately and the rest of the money you receive once the invoice gets cleared. The factoring company gives you the remaining amount after deducting its fees from it.
One of the most remarkable and apparent benefit of account receivable funding is that the business gets financial help immediately. This also helps freeing the working capital and this makes the business run smoothly. One of the facts that every businessperson is aware of is that recovery of the money is a real headache and this is taken over by the factoring company if you opt for this type of funding.
Just like any other kind of lending, you pay a price for the service that an accounts receivable factoring offers. Usually the fee ranges from 1% to 3% per month. However the rate depends on the size of the amount and the age of your invoice. So, if you think that your company is in real need of cash, look for a good factoring company and seek help. Shop around to get a competitive rate.
