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Invoice Factoring is a Great Opportunity for Your Business to Grow

By Alex Martin Subscribe to RSS | August 14th 2012 | Views:

Businessmen are ambitious and always want to grow to great heights; unfortunately some of them lack liquid cash for this. One popular method of tackling this issue is through invoice factoring. This is an attractive type of financing by which a lending company provides you cash for your invoices.

The Actual Working of Factoring

Factoring refers to a transaction when a business agrees to sell its invoices to a ‘factor’ or third party in exchange for immediate cash which they can use to expand their business. This working capital proves useful but the invoices are sold for a lesser value. When the company assumes control over the invoices, a percentage of it, 70-90% is advanced to you and they will pay for the invoices. After they receive all the money, the balance receivable value will be settled with you after deducting the factor’s charges and fees. The discount on the fee depends on how old invoices are. Invoices older than 3 months are not accepted by most factors. When you plan to have a contract with a factor, the clients have to be notified of the arrangement.

Benefits of Invoice Factoring

There are several benefits of selling invoice to a factor. The most important advantage is the flexibility; the amount of money a business can borrow increases with sales. This gives an edge over banks and other lending institutions. Cash-flow is vital to any business especially for a new business, as only with sufficient funds can you become competitive. Secondly, in this type of financing, other than invoices, no other collateral is required to receive the funds.

Unlike loans, you don’t have to wait for weeks or months. Moreover, there is no botheration of accumulating bad debt as the borrowed money is secured by the accounts receivables. You can focus on your business as there is no responsibility of any credit control. You can continue to offer payments options to your clients and your employees can be paid without any delay. You will be in a better financial position because now you are able to bring in added profitable business. The net margins also increase.

Invoice Discounting

Discounting using invoices is another way of receiving money against invoices. This permits you to continue to keep control over the sales ledger. This type of financing is generally not available to cash traders or retailers. Businesses that supply services or products to other big businesses on credit can only avail of this finance. It permits you to flexibly raise your working capital which improves the cash flow. The discounter will usually want to check on your business and review the finances before he provides the funds. Regular checks by discounters are normally conducted in order to find out if your business plans are effective. They will be informed online of the details of invoices. Only after such a thorough check will funds be provided.

Alex Martin - About Author:

1st Americanfactoring provide the best solutions of Invoice Factoring in Nevada, United State. Get the best invoicing solution a part from the standard terms and conditions best invoice factoring institution in USA.

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