March 2nd, 2008 | 
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RW Goldberg asked:
One of the most frustrating aspects of owning a business is trying to ensure that the business does not come to a screeching halt by virtue of a lack of money. A lack of money, or more precisely cash flow, if we wish to use the proper jargon terminology to describe this very concept, is like a car that has run out of gas: the business and the car cannot move, or indeed, do anything at all.
With that in mind then it is incumbent that the business owner takes all necessary steps to ensure that such a situation does not arise, otherwise, the consequences that may arise from this are severe indeed, and may ultimately result in the untimely downfall of the business as a whole. The business owner can rely upon commercial lenders to ensure that they achieve the requisite results, specifically, a business loan can be taken to help remedy the cash flow problems the business is currently enduring.
Unfortunately, the reliance upon a loan is a short term fix at best, and it is a remedy that will actually bring plenty of problems and risks of its own. For example, a bank loan must be repaid according to the narrowly defined terms set down by the lender. Failure to comply with these terms will ultimately result in the borrower incurring the wrath of the lender who may decide that they will simply forfeit the loan and demand its immediate repayment.
If the borrower is unable to keep up with the terms of the loan, then the lender will step in and seize the assets of the business in the recovery of the debt owed. This can be catastrophic for the business as assets of key value are snatched up. In addition, the damage to the reputation of the business is also of concern and may ultimately result in the company struggling to acquire new investors.
For these reasons then, sale of accounts receivable is one form of business financing that maybe a more appropriate business financing strategy for the business owner who is short of cash and needs it in a short space of time indeed. The manner in which sale of accounts receivable is fairly simplistic and is as follows.
A client company will sell its currently outstanding invoices to a sale of accounts receivable company (also commonly referred to as a factoring agency) who will assume full and total control and responsibility of the collection process from the customer who owes the money. The factoring agency wires an upfront sum of money directly to the client company upon receipt of the invoices.
Please note that if you decide to opt for recourse based factoring, you will be able to secure far more flexible and generous terms, including (but not limited to!) discounts, lower rates of fees, increased turnaround speeds, additional services which are provided gratis, and increased support from the factoring company as a whole.
Indeed, you may find that by using this type of factoring you end up saving more money in the long run.
Receivables Factoring Companies
One of the most frustrating aspects of owning a business is trying to ensure that the business does not come to a screeching halt by virtue of a lack of money. A lack of money, or more precisely cash flow, if we wish to use the proper jargon terminology to describe this very concept, is like a car that has run out of gas: the business and the car cannot move, or indeed, do anything at all.
With that in mind then it is incumbent that the business owner takes all necessary steps to ensure that such a situation does not arise, otherwise, the consequences that may arise from this are severe indeed, and may ultimately result in the untimely downfall of the business as a whole. The business owner can rely upon commercial lenders to ensure that they achieve the requisite results, specifically, a business loan can be taken to help remedy the cash flow problems the business is currently enduring.
Unfortunately, the reliance upon a loan is a short term fix at best, and it is a remedy that will actually bring plenty of problems and risks of its own. For example, a bank loan must be repaid according to the narrowly defined terms set down by the lender. Failure to comply with these terms will ultimately result in the borrower incurring the wrath of the lender who may decide that they will simply forfeit the loan and demand its immediate repayment.
If the borrower is unable to keep up with the terms of the loan, then the lender will step in and seize the assets of the business in the recovery of the debt owed. This can be catastrophic for the business as assets of key value are snatched up. In addition, the damage to the reputation of the business is also of concern and may ultimately result in the company struggling to acquire new investors.
For these reasons then, sale of accounts receivable is one form of business financing that maybe a more appropriate business financing strategy for the business owner who is short of cash and needs it in a short space of time indeed. The manner in which sale of accounts receivable is fairly simplistic and is as follows.
A client company will sell its currently outstanding invoices to a sale of accounts receivable company (also commonly referred to as a factoring agency) who will assume full and total control and responsibility of the collection process from the customer who owes the money. The factoring agency wires an upfront sum of money directly to the client company upon receipt of the invoices.
Please note that if you decide to opt for recourse based factoring, you will be able to secure far more flexible and generous terms, including (but not limited to!) discounts, lower rates of fees, increased turnaround speeds, additional services which are provided gratis, and increased support from the factoring company as a whole.
Indeed, you may find that by using this type of factoring you end up saving more money in the long run.
Receivables Factoring Companies
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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