receivable financing is a concept where receivables or
invoices are sold for immediate cash. Accounts receivable
financing fees may vary from one factoring company to
another factoring company and from client to client. They
are determined by a combination of your customer base
creditworthiness, average payment cycle, invoice size
and factoring volume.
Accounts receivables financing provides over 100 billion
dollars to industry each year. In fact, it is an old financial
service used by multi-billion dollar corporations that
is now available to smaller sized businesses to which
banks are reluctant to lend funds. Accounts receivables
financing is the best way to fill the tremendous void
that banks have created.
Accounts receivables financing is selling accounts receivables
(invoices), representing money due from the customers
to a factoring company, at a discount from face value
so that it does not have to wait the normal 30-45 days
for its accounts receivable to be paid. In short, Accounts
receivables financing helps a company speed up its cash
flow, thereby enabling it to more readily pay its current
obligations and grow.
Many new and growing companies have trouble obtaining
traditional bank financing due to their length of time
in business, profitability or financial strength. Factoring
company allows these companies to convert their accounts
receivable into instant cash. Once you have delivered
your product or service and generated an approved invoice,
you can get your money in as little as 24 hrs. Through
accounts receivables financing a factoring company can
help a company stay current with its vendors and other
financial obligations such as payroll and taxes.
Other types of financing generally require two years in
business and showing a profit. With accounts receivables
financing you do not have this limitation. Young, growing
companies or those with tax liens and even bankruptcy
can still qualify for accounts receivable purchasing lines.