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Who Is Eligible For Accounts Receivable Factoring?

Aug 17, 2007
Finding a factoring company is not all that difficult, but many people do not know what a factoring company actually does or provides. If you are in business for yourself, chances are good, you should really understand the concept behind a factoring company providing a cash advance via an invoice factoring service.

What exactly does accounts receivable factoring mean to you and your business? Well, it translates into money today for promised money tomorrow. Nonetheless, factoring is not a loan as in a home loan or a car loan. Instead, factoring means you get money today for the money you should be getting tomorrow. Factoring, in essence, is a cash advance more similar to a payday cash advance than a loan.

Many businesses need cash today for the equity of invoices they may hold now. With invoice factoring, the business owner sells his or her commercial invoices today for the money needed now rather than later. This has many benefits, such as:

- providing a small or medium business with a more workable, immediate cast flow;
- allowing a small or medium business to meet expenditures such as payroll and taxes;
- offering a small or medium business the opportunity to purchase additional contracts and materials needed to make more business;
- and finally, small or medium business will find accounts receivable factoring means less debt.

As is obvious, factoring definitely has some advantages, but not everyone will qualify for invoice factoring. Certain types of businesses are more able to get those factoring needs met, such as:

- temporary placement providers;
- cable and/or satellite television contractors;
- business in Chapter 11bankruptcy;
- contractors such as defense;
- nursing registries;
- and finally, many bodyguard services.

While many factoring companies will offer different factoring services, this accounts receivable factoring is most commonly available to the types of companies listed above. If you think you may qualify for an invoice factoring the best way to decide whether or not you qualify is to find a reputable factoring company in your area or try searching via the Internet.

Factoring companies purchase the invoices, but what does the factoring company get for its time and effort? Factoring companies purchase your invoices at a reduced rate. There is another benefit to offering accounts receivable factoring by the factoring company - the business does not have to worry about collecting the debt should the debtor default or renig on the promise of cash later. Of course, no one wants to think debtors will not live up to their end of the deal, but when the inevitable does happen, an invoice factoring provider is a good partner to have on your side.

There are many types of businesses that qualify for an accounts receivable factoring service, and factoring providers thoroughly enjoy purchasing invoices. There is money to be made. This is a copasetic relationship where both benefit from each other. Additionally, many small businesses need money now not later, and sometimes, debtors do not pay what is promised. With a good factoring company, the small business will find they have a partner is collecting that debt without additional costs to the small business.
About the Author
Troy Degarnham is the author and webmaster of http://www.accounts-receivable-financing.info, an informative website about Accounts Receivable Factoring. Extensive help and tips on invoice factoring, factoring companies, assets, small business, medical factoring, non recourse and other factoring financial services.
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