invoice factoringIt does not matter what type of company you are referring to, when a business experiences fast increases in sales the outcome is usually the same ” liquidity issues. What I am referring to here is imagine a distribution company, who generally sells about $250,000 of product in a year, then it finally gets the big account they have been working on for 9 months and the first order that comes in is for $600,000 worth of product over the next 3 months. The terms of sale to the customer are net 60 and their terms with the suppliers are net 30.
Accounts Receivable Factoring Accounts Receivable Financing
Inventory must be produced and shipped to fill these mushrooming orders even though incoming cash reflects sales from the previous few months, when revenues were significantly lower. The situation is much the same with fast-growing service companies, which typically face a shortage of personnel to provide the required services as their sales explode to higher levels.
Numerous remedies exist for businesses experiencing a cash flow crunch, including various forms of debt and equity financing. However, the current slowdown has made banks increasingly reluctant to fund loan proposals that are not airtight, while equity funding, with the loss of control involved in shared ownership of a business, is not suitable for every company.
The most growth of any type of financing right now geared towards the assistance with cash flow is the selling of a company’s Accounts Receivables which is called Accounts Receivable Factoring. Regardless of the fact that AR Factoring has been around for literally hundreds of year, it is still not a wide spread concept and even many bankers have not even heard of the concept. This type of funding generally will fund with 24 to 48 hours after an invoice is raised to a creditworthy customer regardless of the fact that the Invoice Factoring Company will have to wait up to 60 or 90 days to get paid.
The Accounts Receivable Financing Company will generally remit the initial amount up to 90% of the Invoice face value and then submit the balance of the reserve once the customer pays the invoice, less the small service fee for use of funds. The money that is advanced can be used for any purpose the company sees fit ” payroll, inventory, fuel, or maintenance what ever they need the money for.
Small Business Factoring Receivable Financing
There are many alternatives to bank financing today, do your homework in finding the best option for your situation and keep an open mind. Banks are not always the best answer and they certainly are not the only answer. Financial brokers today have a vast array of products to fit most circumstances and the best ones are up to date with the latest trends and options so they can place your financing with the best product on the market. Most Commercial Finance Brokers have access to funds for Accounts Receivable Financing, Export Factoring, Purchase Order Finance, Commercial Equipment Loans and Commercial Real Estate Mortgages.
Wade Henderson is a recognized Expert in Business Finance with over 14 years Experience in the Commercial Lending Field and a strong reputation for getting the deal done. Visit IMMFinancial.com to put his experience to work for you.
Factoring Loan * Invoice Factoring * A R Factoring * Small Business Factoring
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