Factoring is Not Always About Cash Flow Problems, For Many It's About Growth

Even though Factoring is an extremely common business practice in Europe, many American business people have never heard of it or used it. Factoring has been practiced for centuries; the Romans sold promissory notes at a discount and the Pilgrims journeys to America were financed by advances from a Factor who provided the funds to pay for the journey. The Pilgrims repaid the money with earnings from America. The word "factor" comes from Latin, the language of Rome. It means "to do" or "to make."

Even the United State Congress acknowledges and supports factoring with the passing of the Assignment of Claims Act, (31 U.S.C.3727) which states that ?Contractor or its assignee may assign its rights to receive payment due as a result of performance? to a financing institution. This is the assignment of invoices, know as factoring.

Factoring is the selling of your accounts receivables for cash versus waiting 30, 60 or 90 days, to be paid by your customers. Its a flexible financial tool that when used properly can help increase a companies growth without incurring new or additional debt.

Factoring is not always about cash flow problems, for many its about growth with a reliable foundation. Factoring has allowed thousands of small businesses to bid on and wind contracts worth millions of dollar in the Government and Corporate sector

Industries that use Factoring as a normal course of business are Temporary Employment Agencies, Distributors, Manufacturers, Government Contractors, Freight Companies (BOL) and Importers for the Purchase Order Funding. It does not matter if the business is a start-up, high-growth business, under-capitalized, or companies with cash flow problems. Most factoring companies do not even require financial statements; something like the ?no docs? real estate loans!

Factoring differs from the banks mainly because, a bank makes credit decisions based upon a company?s financial history, cash flow and collateral. Factoring bases its decision on the credit-worthiness of your clients. Because factoring is not a loan, no liability appears on your balance sheet.

Factoring can take as little as 48 hours and take up to 3 to 4 weeks for Government Contracts. The good part is, once you have your factoring in place, it takes only a couple of days, or less, to wire monies into your business account once the Factoring company has received your invoices.

Factoring companies do not leave your growth up to chance. They actively participate in screening new vendors for your company as well as collecting your invoices and handling accounts receivables that relate to them. And IRS subsidizes the cost of this because all cost involved with factoring is tax deductible.

Cassandra Ingraham is a Tax Accountant in the San Francisco Bay Area. She can be found at http://www.taxeswilltravel.com providing Formal Introductions to Lenders for Accounts Receivable Funding (Factoring) and Purchase Order Funding.

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.

Achieving Cash Flow Management Through Accounts Receivable Factoring

Accounts receivable factoring is another mode of receivables management and working capital funding to eventually increase the cash flow. Accounts receivable factoring involves buying and selling of accounts receivables in order to obtain immediate cash or working capital.

Accounts receivable factoring helps in acquiring cash for the product or the services rendered. It results in immediate cash inflow without creating any debt or transferring the business ownership. Accounts receivables are the most values assets for any company. It is one of the mode for increasing sales and expanding business. The payment is done of the 80% of the invoice value. The 20% of the value is kept as reserved and is paid after deducting the fee once the amount on the invoice is due.

This practice if accounts receivable factoring is most suitable for small and medium business owners. Due to accounts receivable factoring small and medium business owners are able to generate cash and avoid the debt trap. It also helps in representing string financial status and avoids interest on any loans if otherwise taken.

Accounts receivable factoring also results in increased working capital as receivables are conditional on customer's creditworthiness and not the business owners. It helps to avoid loan repayment, transferring business equity, engaging the assets, and also avoid yearly loan review process. For a small business owner accounts receivable factoring represents gaining working capital without overtaking any debt or loan. It is also a mode to increase sales without any repayment tensions for any loans etc. Thus business is able to meet demands and the circle keeps on auto-rotating as accounts receivable factoring increases sales and increased sales asks for more money to complete more orders.

Accounts receivable factoring also provides relief from non-paying clients or slow paying clients. It generates more sales due to increased orders. It also offers flexible funding program to help heighten the sales graph and take vendor discounts due to availability of cash.

This practice of accounts receivable factoring generates cash to fund the payrolls and taxes due. The funds thus generated also help to increase the inventory or buy new equipments, tools, etc to flourish the business.

The availability of cash helps small business owners to negotiate for discounts from their vendors and suppliers. It also helps to reduce book keeping, depositing checks, monitoring collection process, and preparing reports for collections. Brokers or agencies also provide their services for accounts receivable factoring. They help the business owners to manage their collections, payments, generating more cash and managing their cash inflow process.

Henry Byers, Business Factoring advisor - focusing on Factoring Services and Accounts Receivable Factoring

Guide to Small Business Factoring

Factoring is becoming a popular yet not so well known tool in the arena of small business. It is an important way of keeping cash flowing through the business when invoices are delayed or accounts receivable are higher than the money in hand. Basically factoring helps you get cash for your business without having that time delay from the time you issue an invoice. They also provide you with collection services and sales ledgers that can be helpful as well. If you are a small business owner, then you should consider this guide to small business factoring as a way to fund your business month to month.

How does factoring work? It is easy and yet complicated all at the same time. The factor will generally manage your sales ledger for you while also providing you with colletion services for all outstanding invoices. Typically you will be loaned 80% to 90% of the total amount of the invoice. You will generally receive the money within 24 hours of agreeing to the services of the factor.

Factoring for a small business does cost money, though. Usually there are a couple of different costs you have to consider. A service chare will usually cover the management of your sales and collections. The other charge is a percentage of sales factored as well as an interest charge of some sort on the cash advance the factor is giving you. The interest rates, obviously, will depend on your company’s credit, the credit of the invoiced companies, and the institution you factor through.

No guide to small business factoring would be complete without telling you want to look for in a factoring company. Obviously you should look for a stable financial institution that will be able to support the business. You should also look for good terms and a company you are comfortable working with since there will be plenty of interaction. Finally, you may want to consider a company that will give you internet access to your accounts. You can easily track the ledger, sales, collections, and your factored amounts that way.

It is also important to understand that no two factoring companies are completely alike. While much of what this guide to small business factoring has explained is typical, there are exceptions to most every situation. The best thing you can do for your business with regards to factoring is research the companies you are considering. Think about what you need and what you want and what everyone is offering you.

A guide to small business factoring can never be complete. There are too many ins and outs when it comes to almost any financial transaction. There are also a number of variables involved like current interest rates, your credit rating, reliability of your invoiced companies, and many other things as well. Before you ever agree to a factoring relationship, make sure you understand all terms as well as how long the contract is for and what renewal terms are. Protect yourself and do your homework and you can use factoring as a way to keep your cash flowing.

Stu Pearson has an interest in Finance & Business and Small Business Factoring, for more FREE information and articles please visit Small Business Factoring Resources

What is Factoring Financing?

Do you have clients that take 30, 50 or 60 days to pay their invoices? Although having slow paying clients is expected in today’s business environment, they make managing cash flow a very difficult task. Paying suppliers, salaries and rent becomes a challenge.

However, there is a way to solve this problem. The solution involves factoring your invoices.

Factoring is a financing tool that allows you to get your invoices paid in as little as 2 days. It provides your company with the necessary capital to operate the business, pay suppliers and grow. However, factoring is not a business loan. Rather, factoring involves selling your invoices at a discount for immediate cash. The factoring company waits to get paid, while you get immediate use of the funds.

Factoring can easily be integrated to any business and works as follows:

 

1. You deliver goods or services and invoice for them
2. You sell the invoice to the factor. They give you the first installment of 70% to 90% of your invoice. This is called the advance.
3. You get immediate funds to run your business
4. Once the customer pays the factoring company, you get the second installment (of 10% to 30%) and are charged a small fee for the transaction. This is called the rebate

 

Although factoring costs vary and are based on transaction size and timing, the average cost of a transaction is usually between 1.5% to 3% of the invoice per month.

One major advantage of factoring is that it is easier to obtain than a business loan. Furthermore, the factoring line can be set up in about a week, and the biggest requirement for approval is that do you business with credit worthy clients.

Commercial Capital LLC
Are you looking for factoring financing? Commercial Capital is a factoring company that can provide you with a competitive factoring quote. For information, call Marco Terry at (866) 730 1922.

Structured Settlement Factoring

Have you received a structured settlement recently? A structured settlement can be a good thing if you have been a victim of malfeasance, have been severely injured or can no longer physically work. Structured settlements will help you pay bills. But what do you do if you have a structured settlement, which is coming your way and you really have decided that you might prefer to have the cash instead? Well, if this is the case you are in luck because there are companies, which will buy your structured settlement for a discounted price?

This is similar to factoring which is used in businesses, which need to maintain their cash flows. They can sell accounts receivables to another company as an investment and get the money that is owed to them in advance. For instance let’s say a company, which does janitorial services for a government agency, which are notoriously slow to pay and that government agency owes them $30,000 for services already completed? A factoring company will buy that check which is in the mail so to speak for $25,500 and give the money to the company now. You may say well that is 15% of the $30,000; yes it is, but if a small business does not get the money in time they could go out of business because the government is so slow to pay on their contract. Going out of business is not a good thing and if it happens all the money invested and time to build the business is out the window.

Let us say you have a structured settlement and you cash out of the deal using the same type of company? They will get the structured settlement money each month istead of you, but you will have all the money up front minus a 10-15% discount on the total money you would have received. You can then use this money for whatever you want. Such as investing, buying a house or buying new car, plasma TV and other things humans want to make them happy. You see?

"Lance Winslow" - Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/. Lance is a guest writer for Our Spokane Magazine in Spokane, Washington