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Factoring Newsletter Dated: |
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To Factor or Not to Factor?
Marty Milan
The purchasing of accounts receivable
(invoices) is generally known as factoring.
Businesses can sell their invoices to
companies known as factors. Although not all
businesses are familiar with factoring,
historians claim that factoring dates back
to the ancient Roman civilization making it
one of the world’s oldest methods of
finance.
In the past, merchants used factoring to
settle their trade debts among each other.
Fast forward to today’s businesses profiles
and it is apparent that factoring is still a
very viable business tool for businesses all
types and sizes. Can factoring work for your
business? Consider the following
benefits:
- Factoring provides a company with a
continuous working capital, thus increasing
their cash flow.
- Factoring has no limits, offers quick
results and it’s accessible as well as
flexible.
- Factoring stimulates growth and can
finance expansion without debt.
- Factoring can increase production and
sales.
- Factoring is not a lending service,
rather it is thought of as a discounted
purchase.
Factors do not normally charge interest,
they simply buy the businesses invoices at a
discount and collect a fee. Do not confuse
the purchasing of invoices as a loan. Many
small to mid-size companies that apply for a
bank loan are usually turned down. Banks
consider the amount of assets that a
business has in order to secure the loan;
Therefore, banks normally require a great
deal of collateral from a business before
they are approved for a loan. If and when a
loan is approved, it may only be a small
percentage of the businesses total accounts
receivable.
Factors are different, they are not
subject to the same guidelines and
regulations that banks are. Factors look at
the credit worthiness of the business’s
customers, not the credit of the business
itself. The purchasing of accounts
receivable never creates a debt to the
business it simply gives them the
opportunity to access their future money
immediately.
You have permission to publish this
article in its entirety; However, the byline
(resource box) must be left intact.
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About the Author:
Marty Milan works with businesses to help
them learn how they can access their future
money now. Aside from factoring, you can
read on various topics such as Lawsuit
Funding, Structured Settlements, Selling
Your Notes and more at: www.cashflowaccess.com
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