invoice factoring
Kris Koonar asked:
The nature of your business might be such that you might be required to provide a credit period ranging from 30 to 60 days for most of your clients. Such an arrangement could help increase your sales, but would end up putting a lot of pressure on your cash flow, thereby restricting your ability to meet your expenses, pay your employees and suppliers on time and this constriction might also put a spoke on your expansion plans.
You could try to get a bank loan, in order to tide over your cash flow crisis, but it would be very difficult to meet the requirements of the bank, in order to secure the loan. You would also need to pay interest on that loan. Your collateral could also be in danger, if you default on your loan repayment schedule. On the other hand, business factoring companies could provide you with a flexible solution to your cash flow problems. They will buy your credit invoices and provide you with the invoice amount after deducting their factoring fees, which could range from 1.5% to 5% or the invoice value. They might also retain an additional 5% to 10% of the invoice value that would be paid to you after your client has paid the dues on the due date. This could provide you with regular cash inputs that could help maintain your cash flow in a positive state.
In addition to providing you with instant cash, there is one more important service that the business factoring company could provide. If you choose the non-recourse method of factoring, then the factoring company could assume the entire risk and responsibility of collecting the payment from your clients, subject to some conditions.
Thus, once you sell a particular invoice to your factoring company and receive your deducted amount, then your factoring company would turn into your collection department and arrange to follow up that invoice with the particular client, until the payment has been collected. This effectively means that if you get into a non-recourse arrangement with your factoring company, then you can just dismantle your collection department and redirect them to another department. This will also free up your mind to concentrate more on strengthening other departments such as sales. Thus, you can outsource your entire receivables department by tying up with an efficient factoring company.
You will need to inform your clients regarding this arrangement and also ensure that the factoring company has tactful and polite staff that would not rub shoulders with your clients in the wrong way, in their haste to get back your payments. This could negatively affect your relations with your clients otherwise, where you have so painfully cultivated your association with them over the years. If your factoring company manages to equal or even better your collection services, then you could truly benefit from this win-win situation. Your mind too could become stress-free, as you would not have to spend sleepless nights worrying about errant clients running away with your money. By outsourcing your receivables department, you would not only be streamlining your collection department, but also free your mind and time from this energy-zapping department.
Thus, along with regular cash injections, your factoring company can also take your receivables department off your hands and this could help you to focus all your energies on taking your business to a higher level.
For Commercial Finance Loans – Factoring Loans * Equipment Financing * Purchase Order Finance * Commercial Mortgage – IMM Financial has been in the Commercial Finance Business serving companies just like yours for over 14 years. Put our experience to work for you. We are the Cashflow Specialists.
The nature of your business might be such that you might be required to provide a credit period ranging from 30 to 60 days for most of your clients. Such an arrangement could help increase your sales, but would end up putting a lot of pressure on your cash flow, thereby restricting your ability to meet your expenses, pay your employees and suppliers on time and this constriction might also put a spoke on your expansion plans.
You could try to get a bank loan, in order to tide over your cash flow crisis, but it would be very difficult to meet the requirements of the bank, in order to secure the loan. You would also need to pay interest on that loan. Your collateral could also be in danger, if you default on your loan repayment schedule. On the other hand, business factoring companies could provide you with a flexible solution to your cash flow problems. They will buy your credit invoices and provide you with the invoice amount after deducting their factoring fees, which could range from 1.5% to 5% or the invoice value. They might also retain an additional 5% to 10% of the invoice value that would be paid to you after your client has paid the dues on the due date. This could provide you with regular cash inputs that could help maintain your cash flow in a positive state.
In addition to providing you with instant cash, there is one more important service that the business factoring company could provide. If you choose the non-recourse method of factoring, then the factoring company could assume the entire risk and responsibility of collecting the payment from your clients, subject to some conditions.
Thus, once you sell a particular invoice to your factoring company and receive your deducted amount, then your factoring company would turn into your collection department and arrange to follow up that invoice with the particular client, until the payment has been collected. This effectively means that if you get into a non-recourse arrangement with your factoring company, then you can just dismantle your collection department and redirect them to another department. This will also free up your mind to concentrate more on strengthening other departments such as sales. Thus, you can outsource your entire receivables department by tying up with an efficient factoring company.
You will need to inform your clients regarding this arrangement and also ensure that the factoring company has tactful and polite staff that would not rub shoulders with your clients in the wrong way, in their haste to get back your payments. This could negatively affect your relations with your clients otherwise, where you have so painfully cultivated your association with them over the years. If your factoring company manages to equal or even better your collection services, then you could truly benefit from this win-win situation. Your mind too could become stress-free, as you would not have to spend sleepless nights worrying about errant clients running away with your money. By outsourcing your receivables department, you would not only be streamlining your collection department, but also free your mind and time from this energy-zapping department.
Thus, along with regular cash injections, your factoring company can also take your receivables department off your hands and this could help you to focus all your energies on taking your business to a higher level.
For Commercial Finance Loans – Factoring Loans * Equipment Financing * Purchase Order Finance * Commercial Mortgage – IMM Financial has been in the Commercial Finance Business serving companies just like yours for over 14 years. Put our experience to work for you. We are the Cashflow Specialists.
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