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Expand Your Business The Business Factoring Way

Jul 9, 2008
Factoring is defined as a practice where you sell your receivables at a discount before they are due. Earlier, the term factoring was associated with industries such as garments. These days most of the factoring companies are willing to buy receivables from any industry. This has resolved many issues such as reduced time in receiving due amounts from clients.

Invoice factoring companies help you with immediate funds. It especially benefits smaller companies who cannot afford to wait for such a long time. The process of business factoring is quite simple you don't have to wait for months. The funding transaction takes place within 3 to 5 working days. With less paper work and very little underwriting, business factoring makes owners quite happy and satisfied as they get the funds within few days after completion of few formalities. Thus, factoring companies have become the viable source of providing monetary benefits to many businesses.

Sometimes it so happens that you don't have substantial cash reserve, few owners try to get bank loans. But sometimes that also doesn't help. Bank Loans are difficult to get as they need a lot of paper work done and most of the banks ask for a profit return statement of about three years. Usually, new entrepreneurs face this constraint. That's when they resort to factoring. Factor financing helps you eliminate your long time wait and provides you with ready cash for the invoices within a short period of time.

Now let's see how business factoring works and helps you in expanding business.

Factoring companies usually buy your accounts receivables or freight bills at a discount and provide you with a lump sum amount. Consequently the company sells the accounts receivables at a lower value to get quick cash and don't have to wait for 30 to 45 days. Once you deliver the product and get an invoice, factoring company can get you money within 24 hours thus helping you speed up your cash flow. This money can definitely increase your working capital, helps you pay bills and taxes and can avail discounts by making early payments.

Usually a factoring company pays 80 percent of the invoice value immediately and then they issue the remaining amount once your client pays the amount, deducting a small amount as factoring fee. The factoring fee is determined on the basis of credit worthiness of the customer, the invoice number, size and the volume of factoring. The structure of the factoring fees may vary but the rate usually ranges from 3 to 5 % of the invoice value. The financing fees may fluctuate according to the credit worthiness and the performance of individual receivables.

Thus, the emergence of invoice factoring has given the business owners a better option for smooth running of the cash flow in the company without waiting for their clients who usually take 30 to 60 days to release payments.

So go for business factoring today to achieve tremendous growth, help in management of cash flow, and deliver working capital of the business.
About the Author
If you need a reputable Freight Bill Factoring Company then check out Phoenix Capital Group. They have been named one of the fastest growing companies by Entrepreneur Magazine . Check out their rates on their website at http://www.phoenixcapitalgroup.com
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