|
|
US Government Now in Accounts Receivable Factoring Business
It makes you wonder what the President will not do to stimulate the economy.
As seen in today's NY Times (03/19/2009):
DETROIT " The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.
The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.
So what does this mean for the industry? Until the details are rolled out is hard to say specifically, but the announcement to get into the Accounts Receivable Factoring business is the latest installment of how far the US Government will go to get the economy back on track.
A few days ago I stated that Accounts Receivable Factoring is going to be a major part of the new economy and this turns out to be right on track, but a little sooner than I expected.
For those of you that are not familiar with Accounts Receivable Factoring it is essentially a Line of Credit for Businesses that use the Invoices that are outstanding as security for the advances received by the company which generated the Invoices.
Most Factoring facilities will advance from 80% up to 90% of the outstanding invoice face value. The cash injection can be used for what ever the company needs the money for " payroll, supplies, inventory whatever. Once the end customer pays the invoice then the reserve will be paid to the company that factored the invoice less the finance fee.
The Factoring fee is typically between 2% and 4% per month. It can be less and can be more, this is just a guideline.
A counterpart to the Accounts Receivable Financing is Purchase Order Finance. This is essentially Factoring or borrowing against future orders. There are strict guidelines to how this works, but if you sell a product that you purchase in finished condition and then sell it to a third party you may be a candidate for Purchase Order Finance.
This option works best for distributors but Accounts Receivable Factoring can work for companies in nearly any sector. If your company needs financing like this, the best option is to speak to a Professional Commercial Finance Broker because they will be up on all the trends and latest programs available through the various lender channels.
Best of all, in most cases the services of a Professional Commercial Finance Broker will not cost you a fee because the Broker will be compensated by the lender for them preparing the deal for them so it really is in your best interest.
|
 |
Please Rate: |
|
Rating: |
 Processing ... |
(Average: Not rated) |
| Views: | 43 | |
|
| More Articles from Ethics | | |
| Top Articles in Ethics | | |
|
