To Factor or Not to Factor? By: Marty Milan
The purchasing of accounts receivable (invoices) is
generally known as factoring. Businesses can sell their
invoices to companies known as factors. Although not all
business are familiar with factoring, historians claim that
factoring dates back to the ancient Roman civilization
making it one of the world's oldest methods of finance.
In the past, merchants used factoring to settle their trade
debts among each other. Fast forward to today's businesses
profiles and it is apparent that factoring is still a very
viable business tool for businesses all types and sizes. Can
factoring work for your business? Consider the following
benefits:
-Factoring provides a company with a continuous working
capital, thus increasing their cash flow. -Factoring has no
limits, offers quick results and it's accessible as well as
flexible.
-Factoring stimulates growth and can finance expansion
without debt. -Factoring can increase production and
sales. -Factoring is not a lending service, rather it is
thought of as a discounted purchase.
Factors do not normally charge interest, they simply buy the
businesses invoices at a discount and collect a fee. Do not
confuse the purchasing of invoices as a loan. Many small to
mid-size companies that apply for a bank loan are usually
turned down. Banks consider the amount of assets that a
business has in order to secure the loan; Therefore, banks
normally require a great deal of collateral from a business
before they are approved for a loan. If and when a loan is
approved, it may only be a small percentage of the
businesses total accounts receivable.
Factors are different, they are not subject to the same
guidelines and regulations that banks are. Factors look at
the credit worthiness of the business's customers, not the
credit of the business itself. The purchasing of accounts
receivable never creates a debt to the business it simply
gives them the opportunity to access their future money
immediately.
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However, the byline (resource box) must be left intact.
Marty Milan works with businesses to help them learn how
they can access their future money now. Aside from
factoring, you can read on various topics such as Lawsuit
Funding, Structured Settlements, Selling Your Notes and more
at: www.cashflowaccess.com
