Business Finance Solutions

Archive for the ‘Accounts Receivable Finance’ Category

The lack of financial resources can lead to problems for any company, from mom & pop businesses to sizable, well-known establishments. Slow paying customers are not endemic to any specific stratum; they are found throughout industry. Incentives available for faster repayment aren’t always effective and can result in severe cash flow problems. Often, a company may not be free to purchase their own supplies or modernize as there is only adequate money for day-to-day operations.

An accepted strategy to increase cash flow has been to implement a policy of invoice factoring. This is a process involving three parties, the company possessing the receivable, the company still to pay the receivable and the factoring agent. Factoring makes it possible for companies to carry a desired funds reserve. The premise of factoring is very simple. A past-due invoice is sold to the factoring company, who then advances a percentage of its worth to their customer, while retaining a reserve. The factor then awaits payment from the business owing the receivable. When it is satisfied, the factor subtracts their fee, and pays the remainder to the business selling the receivable. A majority of companies who use a factoring business sell their invoices on a daily basis or every week.

Factoring companies will vary a bit in terms of the advance rates and fees they charge. These differences typically result from differences in concentration, monthly volume, credit rating of the debtor and days outstanding on the receivable. Underwriting a factoring contract is less invasive compared to traditional lending institutions and is generally processed more quickly.

A great benefit provided by factoring companies is that they do not require the Seller to identify the way the funds received will be utilized. The application process of conventional bank financing, besides being complicated and time-consuming, demands that the Seller discloses how the funds will be dispersed.

The programs employed by factoring companies guarantee that funds are made readily available to their clients very swiftly, normally in just a few days. Factoring is considered primarily as bridge or short-term financing. Once their their immediate cash flow issues have been resolved, many companies will return to their operations with traditional credit.

American Receivable offers factoring services for small- to mid-sized companies nationwide. If you’re experiencing cash flow difficulties becuase of slow paying customers, call us at 1-800-297-6652 to discuss how accounts receivable factoring can help.

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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