To Factor or Not to Factor?
The purchasing of accounts receivable (invoices) is generally known as factoring. Businesses can sell their invoices to companies known as factors. Although not all businesses are familiar with factoring, historians claim that factoring dates back to the ancient Roman civilization making it one of the world’s oldest methods of finance.
In the past, merchants used factoring to settle their trade debts among each other. Fast forward to today’s businesses profiles and it is apparent that factoring is still a very viable business tool for businesses of all types and sizes. Can factoring work for your business? Consider the following benefits:
Factoring provides a company with a continuous working capital, thus increasing their cash flow.
Factoring has no limits, offers quick results, and it’s accessible as well as flexible.
Factoring stimulates growth and can finance expansion without debt.
Factoring can increase production and sales.
Factoring is not a lending service, rather it is thought of as a discounted purchase.
Factors do not normally charge interest, they simply buy the businesses invoices at a discount and collect a fee. Do not confuse the purchasing of invoices as a loan. Many small to mid-size companies that apply for a bank loan are usually turned down. Banks consider the amount of assets that a business has to secure the loan; Therefore, banks normally require a great deal of collateral from a business before they are approved for a loan. If and when a loan is approved, it may … Read the rest