Factoring is a great video marketing business to create working capital without taking a loan from a bank. In its simplest form, Factoring is a financing tool. If you are a business that provides a service or sells a product, then invoices a client only top wait months to be paid then Factoring might be a great tool for you to grow your business or simply assist you in meeting financial obligations without taking out a loan from a bank or lender.
Factor your receivables
Factoring allows you to better utilize an asset you already have on your books, your Receivables. Unlike a bank loan where you are borrowing money you do not have, with Factoring, you are borrowing from yourself and leveraging an asset you own. The receivables are yours! Factoring companies buy your receivables at a discount, meaning they take on your credit risk. They will advance you 75-90 % of the receivable and if you would like to outsource the collection process, you can by letting the Factoring company collect the full Receivable for you.
Benefits of factoring
The benefits are broad and very beneficial to a business. Factoring allows you to obtain cash quickly, within 24 hours of invoicing. It affords you the opportunity to outsource your collections if you choose to which should reduce your administration cost. Perhaps most importantly, factoring protects you from the credit risk inherent in your client base. Once a Factoring company purchases a receivable from you, the risk of collecting that invoice is not yours anymore, it is the Factoring companies.
Factoring is not for free
Of course this is not done for free. Factoring companies make money by charging you interest on the amount they have advanced you on the receivable. Generally 2-4 %. The interest rates on this are dependent on the size of the receivable and the quality of the credit, IE your client. Unlike a loan, Factoring companies are more concerned with your clients credit rather than yours. Your credit only comes into play to determine that morally and ethically your are a good person to do business with.
The return you receive is higher than the interest you pay
If you think the interest rate is too high, consider this. What return would you get on your money by receiving it today rather than 45 days from now? For most businesses, the return they receive is much greater than the interest they pay the Factoring company. The benefits are very clear. Why not exploiter the option with a free consultation. Call us today and we will review your goals and determine the best option for money you get is yours to do with as you like. Whether it is to meet payroll, purchase more supplies or expand your business, Factoring could be a great tool for you to accomplish your business goals. Call us today and we will review your goals and determine the best option for you, all for FREE.