Accounts Receivables Factoring

Finding adequate and steady funding to finance a business start up plan can be frustrating and difficult. Most entrepreneurs exhaust the traditional methods of finance by visiting a bank, filling out loan application after loan application, and applying for business lines of credit. If you've gone through the same motions but have yet to secure funding for your company, you still have an option: accounts receivables factoring.

When you hire an accounts receivables factoring company to supply you with the cash needed to fund your company, you are selling your receivables-the invoices you sent to clients on shipped and accepted product. In place of the sale of your unpaid invoices, you receive cash from the factoring company for a portion of the invoice total which often exceeds 50%. When the invoices are paid to the factor, frequently within 30 days, you receive the rest of the money from the invoices, less a small fee for their services. For companies that need money right now, factoring offers quick and easy financing within a very short period of time.

How company growth affects factoring
When a business uses a factor for financing, the business owner sometimes assumes that factoring is just a temporary solution that they will outgrow with time. While some businesses outgrow their factor or the need for one altogether, accounts receivables factoring doesn't have to be seen as a temporary solution to a temporary problem. Large, established companies use factoring as a way to guarantee their cash flow, just as small companies use them.

Once your company is established and has a good credit history, you would likely be able to apply for and receive a line of credit at a bank as well. Even though this is the case for many growing companies, choosing to stay working with a factor is still a viable option. First, there is little paperwork involved in continuing your relationship. Switching your financing over to a bank will involve endless paperwork.

Furthermore, some fast-growing companies who have gone the bank route and received a line of credit find themselves outgrowing it as their sales increase and their business grows. With accounts receivables factoring, you don't ever have to worry about that happening because the money you receive from the factor is closely connected to your company's sales.

What happens if an invoice isn't paid?
One of the main issues new clients have when they contemplate factoring is what happens if one of your customers doesn't pay their invoice. Are you responsible for this loss or is your factor responsible? This all depends on the type of agreement you entered into with the accounts receivables factoring company.

If you have a non-recourse agreement, it means that your factor will manage the loss themselves and you do not have to worry about any customers reneging on payment. On the other hand, a recourse agreement means the opposite-if a client of yours doesn't pay their invoice, your company will have to repay the factoring company for the money they are out.

To have all of your questions answered, please call Factoring Associates today. A representative will be able to provide you with the information you need to be assured of our company's success with factoring.

Start today by contacting us here or on our toll-free number. Or apply here and get the accounts receivable funding process going today!

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