Account receivable factoring is the easiest and best way to acquire funding for your company. Furthermore, this is a financial method in which a business owner sells accounts receivables at a discount to a third-party funding source, also called factor, to raise capital. Most companies prefer this method because it allows you to convert a large portion of your accounts receivable into cash very quickly.
Factoring works by doing a financial exchange between two companies - the factor company and the company in need of cash. In this financial scenario, accounts receivable is the most important collateral. Your account receivable will then be converted to cash very quickly.
The factor company will then purchase it and pays 75-80% of the face value immediately and forwards the remainder (less the discount) when your customer pays. There are a lot of benefits from using account receivable factoring in acquiring working business capital for your company. First is its fast and easy money access. It is fast as compared to having a traditional bank loan.
Second, this method allows company to access needed funds without taking on a new debt. Since this method focus on the principle that it is extending credit not to their clients to their clients customers, companies who had outstanding credit balance could avail of this option. Additionally, account receivable factoring doesn't require that a company has been in business long, nor do they need to have good credit.
Another advantage of availing factoring is the fact that they focus mainly on the credit quality of company they finance. As long as your company has clients with good credit and outstanding invoices, then accounts receivable financing is a viable commercial financing option for you. Additionally, factoring finance is more appropriate if your company has large debts pending and requires cash to continue operations. It is also more favorable if cash is required urgently as the process is somewhat faster.
Factoring works by doing a financial exchange between two companies - the factor company and the company in need of cash. In this financial scenario, accounts receivable is the most important collateral. Your account receivable will then be converted to cash very quickly.
The factor company will then purchase it and pays 75-80% of the face value immediately and forwards the remainder (less the discount) when your customer pays. There are a lot of benefits from using account receivable factoring in acquiring working business capital for your company. First is its fast and easy money access. It is fast as compared to having a traditional bank loan.
Second, this method allows company to access needed funds without taking on a new debt. Since this method focus on the principle that it is extending credit not to their clients to their clients customers, companies who had outstanding credit balance could avail of this option. Additionally, account receivable factoring doesn't require that a company has been in business long, nor do they need to have good credit.
Another advantage of availing factoring is the fact that they focus mainly on the credit quality of company they finance. As long as your company has clients with good credit and outstanding invoices, then accounts receivable financing is a viable commercial financing option for you. Additionally, factoring finance is more appropriate if your company has large debts pending and requires cash to continue operations. It is also more favorable if cash is required urgently as the process is somewhat faster.
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