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Benefits of Hiring a Business Factoring Company for Your Business

Aug 15, 2008
If you have just started a business or if your business requires you to sell your products on a credit basis, then you could face regular cash-flow problems. You could face problems in paying your employees, your suppliers and would not be able to pick up any juicy deals that offer high cash or quantity discounts.

A bank loan could alleviate this problem, but if your business is new and if you do not have any collateral to offer to your bank, then the chances to get that elusive loan would get even slimmer. Anyway, you will still need to pay interest on that loan and this would be in the form of monthly installments, which could contribute negatively to your stress levels. A loan that could only be dependent on your sales and one that would not require any monthly repayments could be highly beneficial to your business. Enter business factoring -a flexible system that provides loans based on your sales and does not require any monthly repayment schedules, since the factoring fees are already deducted before you receive your money.

This beneficial financial tool works, when you tie-up with an efficient business factoring company. Such a company would 'buy' your credit invoices and remit the invoice amount into your bank account minus their factoring fee. This fee could be anywhere between 1.5% to 5% of the invoice value and depends on various factors, such as the credibility of your clients according to your factoring company, the credit period extended to them by you, and the amount of business that you can provide to your factoring company.

The immediate benefit that you would receive once you enter this arrangement is that you would get instant cash against your credit invoices. This would result in an improved cash flow and you could use this ready-money to meet your business expenses, pay your suppliers and employees on time and even put into action any expansion plans that might have been lingering in your mind.

If you have entered into a non-recourse arrangement of finance with your factoring company, then again you could have an added benefit of letting the factoring company take over your receivables. This means that you would only need to issue your credit invoice and then sell it to your factoring company. The company would then assume responsibility of that invoice and would follow up with the client to collect the payment on the due date. This method would be slightly costlier, but the benefits could provide relief from running after your clients for payment collections.

You could also divert your collection staff to other departments and could thus concentrate on increasing sales, instead of pursuing your clients to collect your dues. However, you would need to make sure that your factoring company has staff that are courteous, while talking to your clients and are able to collect the invoice amount from your clients without upsetting them due to any reason.

Thus, there are multiple benefits to business factoring. In addition to providing you with instant cash and even taking over your receivables department, business factoring is programmed to grow along with your business. By tying up with the right business factoring company, you can accelerate the pace of your growth, since you will have the required cash-at-hand to propel your business in the fast lane.
About the Author
Freight Factoring Company Phoenix Capital group is a one stop transportation services company. Freight Shipments and related Factor Growth has increased in the USA as shown. To learn more or to start your Freight Factoring visit: http://www.phoenixcapitalgroup.com
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