Sunday, August 31, 2014

What is Factoring and How Can It Help Your Business?

Factoring might be called a flexible form of financing that is a situation where one business sells its accounts receivable, called invoices, to a 3rd party, which is a factoring firm, for a discount in exchange for immediate cash.

This is not a loan, but rather the purchase of a financial asset, the "receivable".

Factoring firms base their primary credit decision on the credit worthiness of the party obligated to pay the invoice, not you, the client. In this manner, factors can provide needed funding to small and mid-size businesses that are normally overlooked by banks and other financiers.

The value of the invoice purchases is based on the business’ receivables and not primarily on the business’ credit worthiness, a key point to financing options available to your business and your success.

A once well known bakery in Illinois where I was a traffic manager in the 80's used factoring after they landed the K-Mart account which had 2200+ stores at the time. K-Mart was very slow in paying the invoices which was a financial strain on our company, so we employed factoring and resolved the situation quickly!

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