Accounts receivable factoring is one of the most flexible and immediate financing solutions available to small and medium size business owners to obtain immediate working capital to meet its current financial obligations and accommodate other business needs which can be utilized to purchase inventory and equipment as well as freeing up cash flow to bid on new contracts.
Accounts receivable factoring enables a business to reduce the amount of cash balances outstanding it has with its clients which enables the business to have more cash on hand which allows the business to put to use the cash into investment which spurs the company’s growth.
A great deal of business have cash flow structure that vary greatly. Many business experience seasonal productivity where some months are extremely busy where some months are the opposite. Regardless of the seasonality of the business, even when a business is undergoing its unproductive months, the business is still required to meet payroll, overhead and other business expenses.
Because of this fact, many companies must maintain a cash balance on hand to meet these obligations and utilize Accounts receivable factoring to sell these outstanding invoices for cash rather than waiting 30, 60, 90 business days to receive their cash for services and products rendered.
Accounts receivable factoring varies greatly from traditional financing because the most important factor in funding is always the credit worthiness of the debtor. In contrast, the fundamental emphasis in a traditional bank lending funding relationship is always on the creditworthiness and financial history of the borrower, not that of the business clients.
The greatest value of Accounts receivable factoring is that it provides business owners the ability to turn the business around and generate higher profits and margins. It also allows the business to bid on opportunities and generate new business that otherwise would have had to be turned down because it did not have the cash on hand to meet the inventory, service and product needs.
As banks continue to be highly restrictive in their lending underwriting, Accounts receivable factoring will enable small and medium size business owners obtain the cash flow they need to grow their business and finance their growth and prosperity.
Today many factoring companies continue to advance funds to small and medium size business whose clients are more credit worthy organizations and contract with Government. While the vast majority of accounts receivable factoring firms never take possession of the goods and services their factoring clients sell, sold, factors offer a host of financial advice when advancing funds.
Accounts receivable factoring firms provide key services to their clients: detailed information on the creditworthiness of the clients whose accounts they will factor, reports on the collection of the invoice, as well as making the actual collection calls for the service and products rendered.