Accounts receivable factoring for small business can convert payments on terms to cash on delivery, aiding small businesses in their effort to pay for health care costs for employees.
A recent survey's results have been released revealing that 17 percent of small businesses currently do not offer health coverage due to the red tape and high costs. Successful health reform could yield some serious benefits for small businesses in the United States. The research also revealed that 78% of those small businesses who do not offer health coverage would like to offer it to employees. Source: U.S. Public Interest Group (USPIRG).
Here's how accounts receivable financing could assist small business owners with being able to afford health care coverage for their employees.
Business owners usually have accounts receivables ranging from 30 to 60 to 90 days out. So, rather than waiting for these accounts to be paid, small businesses can convert payments on terms to cash on delivery faster, and then they can apply these funds to health care costs.
Research also reveals that small business owners who do make the sacrifices necessary to provide health care think that it is a smart business strategy to increase the productivity of their employees.
Accounts receivable fnancing benefits businesses that do not get paid for 30 to 60 or 90 days by advancing up to 90 percent against invoices. Factors look at the creditworthiness of their client's customers. Funds are often provided in 24 hours, and a commission fee is involved.
Today, single invice factoring, also known as spot factoring, has become popular, as factors do not expect to buy 100 percent of a company's receivables.
Factoring has become a highly effective cash management tool today, with the recent economic downturn. It is most often small businesses that experience cash flow problems during a recession, and many employers find it difficult to meet payroll, buy supplies, let alone pay benefits and Workers Compensation. Invioce factoring allows small businesses to obtain funds based on the money they know will be paid by their customers.
Factoring is not the same as a traditional bank loan. Rather it is the purchase of financial assets, or accounts receivables. Bank loans involve two parties, while factoring involves three. A banks bases its decisions on a company's creditworthiness, whereas factoring is based on the value of the company's receivables.
Most factors' professional rates are competitive because each client's circumstances vary, which may have an impact on the fees.
Factoring has been around for more than 4,000 years.
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Kristin Gabriel is a writer who works with The Interface Financial Group (IFG), North America's largest alternative funding source for small business. The company provides short-term financial resources including
invoice factoring, serving clients in more than 30 industries in the United States, Canada, Australia and New Zealand. IFG offers expertise in
factoring, accounting, finance, law, marketing and banking.
