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Financing With Accounts Receivables Factoring

Are you searching for a different way to bring about the money you need to keep the company flowing in the right direction? When you end up having some cash flow problems, you have to really work on making sure that you know what your position is and what you can do before you are looking at serious concerns like bankruptcy and actually losing your business. One option that you might be able to consider is to look at using accounts receivables factoring. What is accounts receivables factoring and how will it be able to give you a stronger financial position?

Your business needs to be able to know how much money you have coming in and going out. This allows you to see what the breakeven point is along with other things. You need to be able to look at what you need to in order to talk to lenders about getting the money you need for you business. You also need to know how much money you can use in order to be able to look at using accounts receivables factoring for not only collection needs but to help you in buying new equipment and other things as well. It's a great option that you can use for immediate cash and it could even become a long-term solution for your business if you don't want to deal with the collection aspect and you find that this really does work better.

When you use accounts receivables factoring you will end up taking your outstanding invoices and selling them for a discount to a lender that will pay you for them. In most cases you will collect about 80% of the total invoice amount from the lender now and then in about a month you will get another 10% or more. It's all based on the amount of money that needs to be collected and if the customers are actually able to pay. The "factor" is the financial firm that will give you the money. They have the biggest influence over everything with the process as they set the rate, they get you the money, and they determine if you will stay on as a client based on how easy it way to gather the money from your customers.

Why use factoring when you really are just giving up money? Since you are losing 10% of your invoice sum you may be thinking "why is this a good thing?" The reason for that is simple, you have money now! Customers often drag their feet when it comes to making payments on any loans and things that they have. When they borrow and only pay the minimum or they don't even pay, you are stuck dealing with the frustration of having to call them all the time and asking them to pay. It's annoying and it is a process that is time consuming. You can easily avoid this process by turning the invoices over to the factoring firm. They give you the money, you don't deal with phone calls, and it's a win-win for everyone!

The nice part is that it really is a faster way to grow the business with your own money. You aren't taking out loans, you are using money that is promised to you already. Instead of waiting, you are getting the money in a few days versus when the customer decides they want to pay. This will allow you to invest money back into the company in other ways such as buying equipment or hiring new employees. It's a great option for any business that would like to become successful without needing to use credit cards and loans.

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