Credit Card Factoring

Credit policy refers to the combination of decisions pertaining to variables such as credit standards, credit terms and collection. Credit standards constitute the various criteria on the basis of which the customers, to whom credit is to be granted, are evaluated by the firm. Credit terms contain the terms and conditions of extending the credit facility. They include, duration of credit, terms of payment, delivery schedule, discounts etc. Collection efforts comprise the steps taken by the firm in order to collect the book debts from the customers.

There are different types of credit policies being followed by factoring companies. A firm may either follow a tight credit policy or a liberal credit policy. A firm is said to be following a tight credit policy where it sells on credit on a highly selective basis only to those customers with proven credit-worthiness and are financially strong. A firm following a liberal credit policy sells on credit to customers on liberal terms and standards. Credit is granted even for longer periods to those customers whose credit-worthiness and financial soundness are well known.

A tight credit policy means rejection or refusal of certain types of accounts whose credit-worthiness is doubtful. This results in loss of sales and consequently loss of revenues. When the firm loosens its credit policy, two types of administration costs are incurred viz., the cost of credit investigation and supervision and the collection costs. An immediate consequence of liberal credit policy is the accumulation of bad debts, where the firm is unable to collect the debts. This happens because the firm tends to sell even to such customers with relatively less credit standing. In modern days, the credit policy is used as an effective marketing tool capable of boosting the sales volume of the firm. This may be used to maintain the market share, especially in a declining market. Credit policy helps to retain old customers and create new customers by luring them away from competitors.

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

International Factoring - How to Finance your Frowing Export Sales

Are you selling goods or services internationally? Learn how to finance your growing sales.

Selling your goods internationally can be extremely rewarding and challenging at the same time. When you start exporting goods, you truly open your company to a world of possibilities, including the possibility of big financial rewards. At the same time, you expose yourself to some of the challenges of international commerce.

Many international transactions are settled using bank or corporate letters of credit, which means you can rest assured that you will be paid on time. However, many of your clients will insist that you give them payment terms. This means you may need to wait 30, 60 or even 90 days before you get paid. And if your company is growing, waiting to get paid can be very tough.

Going to the bank for a business loan may or may not work. Most banks only give business loans to businesses that have a great past history. But this is of little use to businesses that have a short history but a bright future.

A better option is to consider factoring your invoices, which eliminates the 30 day wait that it takes to get paid. Export factoring (or international factoring as it is also known) can be a very useful tool for new and growing businesses.

Factoring is a form of financing, where a factoring company advances you a substantial portion on your invoices. The factoring company waits to get paid, while you get immediate use of the funds. This eliminates the cash flow issues that happen when you extend terms.

Export factoring is a factoring specialty. Actually, very few factoring companies offer international export factoring, so when talking to companies be sure to be specific and ask if they offer this type of factoring.

Many factoring companies also offer purchase order financing. This factoring product extension provides you with financing to fulfill purchase orders. Purchase order financing gives you the necessary funding to pay your suppliers, using the purchase order as collateral.

If your company is growing and selling goods offshore, be sure to look into factoring and purchase order funding as valuable financing tools to help you grow.

 

We are trade financing experts and can provide you with international factoring, export factoring and invoice factoring financing. For a quote, call Marco Terry at (866) 730 1922.

Invoice Factoring Financing for Small Businesses

Do you sell products or services to commercial or government customers? If you do, then you must be very familiar with having to wait 30, 40 or even 60 days to get paid by your clients.

Most large businesses can afford to wait. Unfortunately, few small business owners can afford to wait - and worse - most small business owners do not take into account that they will have to wait to get paid when they first start their businesses.

But what if you can't afford to wait 60 days to get paid? The best solution is to factor your invoices.

Factoring is a financial tool (similar to a line of credit) that eliminates waiting to get paid by your clients. Factoring financing provides you with money for your invoices, usually 24 hours after you submit them. It provides you with the necessary cash to pay rent, expenses and take on new opportunities.

Invoice factoring is an ideal tool for cash intensive businesses such as trucking, staffing, business services, medical offices and IT. It works as follows:

1. You deliver a product or a service and generate an invoice
2. You submit the invoice to your client and send a copy to the factoring company
3. The factoring company advances you up to 85% of your invoice
4. The remaining 15% is held as a reserve to cover charge backs and credits
5. Once your client pays the factor, the transaction is settled and the reserve is rebated (less a small fee)

And how much does factoring cost? It varies on your business volume, how long your clients take to pay and their credit worthiness. Most factors will charge a fee of anywhere between 1% and 2.3% for every 10 days that an invoice is outstanding. However, fees vary and can usually be customized to fit your needs.

The biggest difference between invoice factoring financing and a bank loan is that factoring is easy to obtain. Since the factor is financing your invoices, their biggest concern is that you do business with strong credit worthy businesses. This means that factoring is available to small and new businesses, provided that you have good clients. And as opposed to a bank, a factoring company will not ask you for endless financial reports and three years worth of audited financials.

About Commercial Capital LLC

Interested in factoring your invoices? We can provide you with a factoring and small business factoring financing. Call Marco Terry at (866) 730 1922 for a quote. Need more info? Go here to get factoring resources, freight bill factoring resources

Factoring. Cash Without Borrowing

How to Increase Cash Flow Without Borrowing

Cash flow is one of the main reasons businesses fail. At one time or another, every business, even successful ones, have experienced poor cash flow. Cash flow does not have to be a problem any more. Do not be fooled -- banks are not the only places you can get funding. Other solutions are available and you do not have to borrow.

What is Factoring?

One solution is called factoring. Factoring is the process of selling accounts receivable to an investor rather than waiting to collect the money from the customer.

Oh, the Irony…

Factoring has an ironic distinction: It is the financial backbone of many of America's most successful businesses. Why is this ironic? Because factoring is not taught in business colleges, is seldom mentioned in business plans and is relatively unknown to the majority of American business people. Yet it is a financial process that frees up billions of dollars every year, enabling thousands of businesses to grow and prosper.

Factoring has been around for thousands of years. Factors are investors who pay cash for the right to receive the future payments on your invoices.

An unpaid receivable or invoice has value. It is a debt your customer has agreed to pay in the near future.

Factoring Principals

Although factoring deals exclusively with business-to-business transactions, a large percentage of the retail business uses a factoring principal. MasterCard, Visa, and American Express all use a form of factoring in their retail transactions. Using the purest definition of the word, these large consumer finance companies are really just large factors of consumer paper.

Think about it: You make a purchase at Sears and charge it to your MasterCard. The store gets paid almost immediately, even though you do not make payment until you are ready. For this service, the credit card company charges Sears a fee (typical fees range from two to four percent of the sale).

The Benefits

Factoring can offer many benefits to cash-hungry companies. Rather than wait 30, 60, 90 days or longer for payment on a product or service that has already been delivered, a business can factor (sell) its receivables for cash at a small discount off the amount of the invoice.

Payroll, marketing efforts, and working capital are just a few of the business needs that can be met with this instant cash.

Factoring provides the means for a manufacturer to replenish inventory and make more products to sell: There is no longer a need to wait for earlier sales to be paid. Factoring is not just a cash management tool for manufacturers: Almost any type of business can benefit from factoring.

Generally, a business that extends credit will have 10 to 20 percent of its annual sales tied up in accounts receivable at any given time. Think for a moment about how much money is tied up in 60 days' worth of invoices: You cannot pay the power bill or this week's payroll with a customer's invoice, but you can sell that invoice for the cash to meet those obligations.

Factoring is a fast and easy process. The factor buys the invoice at a discount, usually a few percentage points less than the face value of the invoice.

The Drawbacks

People consider the discount a small cost of doing business. A four-percent discount for a 30-day invoice is common. Compared with the problem of not having cash when you need it to operate, the four-percent discount is negligible. Look at the factor's discount as though your business had offered the customer a discount for paying cash. It works out the same.

Companies consider the discount the same way they treat a sales price: It is simply the cost of generating cash flow, much like discounting merchandise is the cost of generating sales.

Factoring is a cash flow tool used by a variety of businesses, not just those who are small or struggling. Many companies factor to reduce the overhead of their own accounting department. Others use factoring to generate cash, which can be used to expand marketing efforts and increase production.

Why Factoring Appeals to the Start-Up

Factoring is especially appealing to young and rapidly growing companies. Since the process shortens their business cycle, these businesses can grow faster. The ability to make more products to sell while waiting for invoices to be paid is largely eliminated. Such businesses usually net much more profit with factoring than without, even when the discount is considered.

Factoring vs. Bank Loans

So, why not simply go over to the friendly banker for a loan to alleviate cash flow problems? A loan can be difficult if not impossible to receive, especially for a young, high-growth operation, because bankers are not expected to decrease lending restrictions soon. The relationships between businesses and their bankers are not as strong or as dependable as they used to be.

The impact of a loan is much different than that of the factoring process on a business. A loan places a debt on your business balance sheet, which costs you interest. By contrast, factoring puts money in the bank without the creation of any obligation. Frequently, the factoring discount will be less than the current loan interest rate.

Loans are largely dependent on the borrower's financial soundness, whereas factoring is more interested in the soundness of the client's customers and not the client's business itself. This is a real plus for new businesses without established track records.

There are many situations where factoring can help a business meet its cash flow needs. It provides a continuing source of operating capital without incurring debt, which can result in growth opportunities that dramatically increase the bottom line. Virtually any business can benefit from factoring as part of its overall operating philosophy.

Every good businessperson must understand the concept and benefits of factoring in order to operate as profitably as possible. The following chart can help you understand the differences between factoring and other sources of funding.

For more information on factoring and other non-traditional ways to obtain funding, contact Fred Coutts at (206) 364-9613 or Fred@FredCoutts.com. Please visit my website at http://www.fredcoutts.com/index3.htm for more information on powerful funding programs without going through a bank

Fred Coutts, CPA, CMA. All Rights Reserved.

Since 1980, Fred Coutts has been crafting powerful cash flow solutions for businesses and individuals alike, from entreptreneurs to "Fortune 500" companies. He has built a solid foundation of financial and operational experience through many executive roles, including those as CFO and Controller. Fred is well versed and experienced in finance, accounting, and business operations.

Over the years Fred has developed relationships with funding connections nationwide, both traditional and non-traditional sources to help you meet your cash flow needs.

Professional Certifications:

---Certified in Public Accounting(CPA)

---Certified in Management Accounting(CMA)

Online Invoice Factoring

Online invoice factoring helps business establishment dealing with factoring companies to keep track of the cash flow. It provides the status of the invoices and details about debtors. Financial position of the companies in regard with invoices can be obtained through online invoice factoring.

The information provided through online invoice factoring is highly accurate and lets companies to have a smooth relationship with factoring firm. Real time information about receivables can be highly useful for those companies that are expanding their business. The software used is user friendly and most factoring companies are able to meet the specific needs of their clients. Most invoice factoring companies also provide online help. This often gives immediate answers to certain specific question, which saves time and improves volume of transactions.

Invoice factoring balances, payment history for factored invoices, report on debtors and receivables, credit balance, answering specific queries and real time invoice entry are some of the common features of online invoice factoring. Certain online invoice factoring allows report generation. Through online invoice factoring considerable amount of time can be saved. Money, time, and resources spent on mail, phone calls, faxing and physical meeting can be fully avoided using online invoice factoring. Quick and efficient transfer of data between factoring companies and business establishments can be highly helpful for maintaining smooth cash flow and in taking vital business decisions.

Business establishments can take quotes from different invoice factoring companies through the online quotes. Some factoring companies also let companies to start business with them online. Although, all criteria involved in the deal need to be met, it saves time. Online signing and paperless accounts saves both time and money. Hunting for papers, maintenance of them and cross verifying can be totally avoided through online invoice factoring. Automated payment reminder system is an online invoice factoring feature used by factoring companies to remind clients regarding overdue bills.

Invoice Factoring provides detailed information on Invoice Factoring, Invoice Factoring Companies, Invoice Factoring Discounting, Invoice Factoring Rates and more. Invoice Factoring is affiliated with Loan Factoring.