Factoring: Unlock The Money You've Already Earned

If you run your own business there?s no reason to wait thirty days or more to get paid - you can now have the money paid within 24 hours.

When you run a small business which depends on your customers making timely payments, you may find certain times of the year to be hard going. Even with your business being a really solid going concern, at times you may not be able to find the necessary cash for running your operations.

This can lead to some vicious cycles: your suppliers are discontent with your payment delays, so you may lose out on some good deals. Your employees get frustrated if they don?t receive their wages on time, and this can lead to a loss in productivity and higher staff turnover rate. So when you do finally get paid and you want to pick up activity again, you may have no one to supply you and no one to get the work done!

You need cash up front. What are the alternatives?

There are a number of ways for you to get more cash into your business:

* Inject personal funds. This is not usually an ideal solution.
* Find a new investor, if you are prepared to give away equity in your business
* Use an overdraft. A solution that usually implies a great deal of time and a lot of conditions your business has to comply with. Overdrafts can be recalled at any time and can be restrictive on your business.
* Apply for a bank loan. In this case you may be spending a lot of time only to find out that you are not eligible. Small businesses aren't usually banks' favorites when it comes to loaning them money.

The good news is that you don't actually have to wait. A good way to avoid these cash flow gaps and not enter the vicious cycle is to set up an agreement with a factoring company.

How to use your own money?

If you?re thinking that the money you've honestly earned is all locked up in outstanding or aging invoices, think again. A factoring facility can really work for you and help you to unlock the cash in your business.

Your invoices can be as good as any other assets from a factoring company?s point of view. Through factoring you can capitalise on your largest asset, your sales ledger today as opposed to waiting for payment from your customers.

How do you put an invoice through a factoring company?

The process is simple. When you invoice a customer you also send an electronic copy of that invoice to your factor. Then, within 24 hours or less, the factor advances you up to 90% of the invoice value. The factor usually takes on the responsibility of collecting the money from your customer the day the invoice is due to be paid. After that step is accomplished, the factor pays you the rest of the money, minus a small fee for the service.

For small to medium companies outsourcing the sales ledger management function can be of great benefit because it saves you the burden of managing invoices and undertaking the collections activity. By contracting out that element, you can effectively distance yourself from that function and concentrate on the relationship with your customers and focus on sales.

An additional service offered by such companies is protection against bad debts, which would typically cover up to 90% of the outstanding balance on any customer, where you have a designated protection limit in place.

Why should you use factoring?

Factoring is a complementary solution to be used alongside your standard banking facilities. You should look for the right factoring solution for your business.

Here are a few reasons why factoring should be another source of cash to consider:

* Because you'll never run out of cash again as a consequence of extending the payment terms to your customers.
* Because the facility will grow in line with your business growth
* Because the facility will allow you to take up opportunities available to you. to propel your business forward
* Because you can grow your business at the right pace without worrying about how long it takes your customers to pay you.
* Because you want the competitive edge against your competition.

Factoring is a financial tool that will allow you to obtain cash advances by capitalising your invoices, while at the same time easing your workload.

By Freelance writer sponsored by http://www.Ltsbcf.co.uk/ . LloydsTSB Commercial Finance provides business solutions such as term loans & factoring: http://www.Ltsbcf.co.uk/factoring/ . Please link to this site when using this article.

FACTORING: What's In It for You?

Factoring or Accounts Receivable Financing is a tool for providing working capital and cash flow to businesses of all sizes and in all industries. It is especially useful for startups and for small, minority, women-owned and / or disadvantaged companies. There are many reasons why Factoring should be considered. Below I have highlighted some of the benefits.

QUALIFYING: If you're a start up or already have significant debt, you can still qualify for this financing. Funding is based on the financial strength of your customers. SPEED: the initial application process is fast, usually within a week. Then, as you generate and submit your invoices, CA$H is deposited into your bank account in 24 to 48 hours. PREDICTABLE: You have access to a steady, predictable cash flow. Invoices can be submitted daily. CONTROL: No longer do your customers determine your cash flow. No longer are you held hostage to the whims of your customers. And you are freed of credit term abuses. UNLIMITED: Virtually unlimited funds are available. We try to match you up with a factor / funding source that can handle current and future growth. But, in the unlikely event that you do exceed the capabilities of the funding company, Noble Finance$ will assist in converting your account so that you have uninterrupted cash flow. COST SAVINGS: Factoring clients have the ability to take advantage of early payment discounts from their suppliers. Additional savings are made when you can take advantage of volume discounts. These savings can significantly offset the factoring expenses. GOODWILL: Paying suppliers on time improves vendor relations and fosters good will. Suppliers are incented to provide better and more timely goods and services. This is a win-win situation. Vendors are better able to survive and support your expansion and growth. GROWTH: Factoring provides the working capital you need to fund business fund growth in general and to fund new lines of products or services, in particular. DIFFERENTIATION: Without concerns about cash flow, you can attract more business by offering better terms on your invoices. Most companies negotiate on price to win business in a competitive market. Factoring allows you to negotiate with terms instead of, or in addition to price. SCALABLE: Your funding grows as your business grows. No need to re-apply for a new or increased loan or line of credit. PEACE OF MIND: Get freedom from worry about how to meet payroll and pay tax obligations. You'll have sufficient working capital to eliminate these concerns. COLLECTIONS: The factor handles the collections. This frees up time spent on collections. Factoring clients generally have faster payments, since customers tend to pay financial entities faster than they pay other corporations. FLEXIBLE: No obligations, no minimums, and no maximums. You can control some of the factoring fees by waiting to submit invoices.

Noble Finances: Accelerating Cash Flow. Sandra Noble, CPIM, MBA, DCFS, CDP is president of Noble Finances, which is a division of Noble & Associates Consulting, Inc. Noble Finances helps companies Turn their Accounts Receivables into CA$H Now! See http://www.GetCashFromReceivables.com/

Loan Factoring

Factoring of receivables is an arrangement whereby a company sells its accounts receivables to another company (banks and other institutions) that specializes in buying them and obtains the necessary financial accommodation. It is the most popular method of short-term financing in the US. Factoring offers the following advantages: relief to manufacturers and sellers from the bother of collection of book debts, saving in time and man-power required for debt collection, and last but not the least, adequate and better source of financing.

The factoring institutions render the following functions: Credit recording- that involves maintenance of debtor?s ledgers, collection schedules etc. Secondly, there is Credit administration that includes the collection of debts. Thirdly, there is credit financing, whereby the factor advances money against receivables. Finally, there is finance and business information wherein advices are given to customers on current trends and challenges.

Commercial paper is an important money market instrument, which is in the form of unsecured promissory notes issued by firms to raise short-term funds. Certain conditions are to be satisfied before the issue of commercial paper. Permission should also be obtained from the credit rating agencies. Commercial papers are issued for a period ranging from 3 months to 6 months. Commercial paper offers alternative source of raising short-term finance, helpful in times of tight bank credit and is a cheaper source of finance.

Term loans are those loans that are extended for a specific period ranging from 1 to 15 years. Medium term loans are extended for a period of 5 years and long-term loans are granted for a period of 15 years. Term loans are granted for establishment, renovation, expansion and modernization of industrial units as well as meeting the requirements of core working capital and for repayment of bonds and preference shares. Term loans are usually secured. They have either a fixed or a floating charge against the assets of the company. They are granted on the basis of a formal agreement, which contains the terms, and a condition of providing loans.

Factoring provides detailed information on factoring, credit card factoring, loan factoring, invoice factoring and more. Factoring is affliated with Invoice Factoring Discounting.