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Factor Your Way to Success with Business Factoring

Aug 15, 2008
For your business to succeed even with a lot of credit clients, you will require a steady inflow of cash at regular intervals in order to meet your daily expenses and fund your expansion plans. This will especially be tough if you are a start-up business or if you are yet to break even in your business.

Most businesses would initially try and arrange a bank loan to tide over the cash-flow problem. But banks have rigid rules that require to be met. They also need sufficient collateral to safeguard their end in case you fail to pay back the loan. Your audited financial statements will also have to be submitted and if you are a start-up company or if you have not yet started registering profits, then you might as well kiss that loan goodbye. If you do manage to lay your hands on the loan, your joy could be short-lived since you will need to repay the loan along with interest in the form of monthly installments.

Another method of arranging finance is by tying up with a business factoring company. This method provides flexible financing since it does not require any collateral or repayment through installments. In this mode of financing, a business factoring company will 'buy' off your credit invoice from you. They will then proceed to wire you the invoice amount minus their factoring fee, which could be 1.5% to 5% of the invoice value. This percentage would depend on the credit period that you have extended to your clients, the credibility of your client as decided by the factoring company and the total value of business that you can provide to your factoring company. This essentially means that you get immediate cash even against your credit invoices.

This could right away improve your cash flow and could help you to meet your business expenses comfortably. You could pay your suppliers and employees on time, take on larger projects and even go in for bulk purchases in order to get a higher discount on your purchases. You could also expand your business without any financial restraints. Your reputation in your market might also get enhanced if you pay your suppliers on time. You would also have a choice in deciding the method of factoring. If you decide to go in for recourse factoring, then the responsibility of collecting the payment would lie with you.

However, if you decide to use the non-recourse arrangement with the factoring company, then the factoring company would assume the responsibility of collecting the payment from your clients. This feature could be very useful in freeing up your collection staff and they could then be diverted towards other duties. Thus, business factoring could not only provide you with instant cash against credit sales but could also free you from the burden of running after your clients for your payments. Since business factoring provides finance against your pending invoices, this process has the potential to grow along with your business.

Therefore, business factoring can prove to be a boon for your business since it provides you with ready cash when you need it the most, and that too without the hassles of lengthy repayment schedules. By utilizing the money sensibly, you can surely factor your way to success with business factoring.
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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