March 16th, 2008 | 
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Peter Emerson asked:
As an owner of a company, you may have felt frustrated because your cash is tied up in fixed inventories and so you don’t have enough cash flow to energize your business. And keeping track of the invoices and the slow payments may distract you from the more pressing needs of your business.
You approach a bank for a loan, but don’t get it. Then, in this scenario, the best option for you is to approach an Accounts Receivable Factoring or Financing Company. An Accounts Receivable Factoring Company will purchase your Accounts Receivable, such as invoices, at a discounted rate. This means that it will purchase them for less than the face value of the invoices. The seller company gets the cash, and the responsibility of collecting the money due becomes that of the Factoring Company. The Factoring Company collects the cash at the face value of the invoices, and thereby makes profits.
Apart from the Accounts Receivable Factoring Companies, there are also the Accounts Receivable Financing Companies, which function a bit differently from the Accounts Receivable Factoring Companies.
These Financing Companies offer loans by taking the invoices as collateral. This means that they don’t really purchase the invoices. They just issue loans against them. This also means that the responsibility of cash collection lies with the business company, not with the Financing Company.
Both Accounts Receivable Factoring Companies and Financing Companies charge additional fees for their services. But the fees involved with the Factoring Companies are more than those from Financing Companies. This is because the responsibility of cash collection is also with the Factoring Company.
Business Receivable Funding
As an owner of a company, you may have felt frustrated because your cash is tied up in fixed inventories and so you don’t have enough cash flow to energize your business. And keeping track of the invoices and the slow payments may distract you from the more pressing needs of your business.
You approach a bank for a loan, but don’t get it. Then, in this scenario, the best option for you is to approach an Accounts Receivable Factoring or Financing Company. An Accounts Receivable Factoring Company will purchase your Accounts Receivable, such as invoices, at a discounted rate. This means that it will purchase them for less than the face value of the invoices. The seller company gets the cash, and the responsibility of collecting the money due becomes that of the Factoring Company. The Factoring Company collects the cash at the face value of the invoices, and thereby makes profits.
Apart from the Accounts Receivable Factoring Companies, there are also the Accounts Receivable Financing Companies, which function a bit differently from the Accounts Receivable Factoring Companies.
These Financing Companies offer loans by taking the invoices as collateral. This means that they don’t really purchase the invoices. They just issue loans against them. This also means that the responsibility of cash collection lies with the business company, not with the Financing Company.
Both Accounts Receivable Factoring Companies and Financing Companies charge additional fees for their services. But the fees involved with the Factoring Companies are more than those from Financing Companies. This is because the responsibility of cash collection is also with the Factoring Company.
Business Receivable Funding
About Wade Henderson
Wade Henderson: Domestic and International Business Finance since 1995 specializing in challenge situations. "We prefer to find a way to get your loan done as opposed to finding a reason to turn it down.” Connect with me on Google+
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