At present, small businesses do not have to suffer from their own triumphs. Factoring services are also known as accounts receivable factoring, and no matter what you decide to call it, these services can provide many small businesses with their own bailout plan to get through these tough times. Good thing that with President Obama's Small Business Administration's America's Recovery Capital (ARC) program, many small entrepreneurs who are undergoing "immediate hardship" can apply for a loan amounting to a maximum of $35,000. The terms include no payments for the first year, and no interest, however not everyone is eligible for ARC.
With accounts receivable factoring or financing, however, small businesses are given access to short-term working capital by transforming their accounts receivables into immediate cash. This is definitely helpful for those who are experiencing hardships due to the economic situation - hardly ever making payroll, paying new supplies. Several Fortune 500 corporations haven't experienced as many problems surviving as small businesses, but it is particularly challenging for one or two-year old businesses that are in the heavy growth stages.
In most cases, small businesses don't get paid for delivered products until after 30, 60, or 90 days. And it's in this very instance that small businesses can take advantage from accounts receivable financing. After checking the creditworthiness of a client's customers, factoring companies could then forward funds in as little time as 24 hours. The company does not expect to buy 100 percent of a company's receivables, and there are no minimum or maximum sales volume requirements.
The idea of accounts receivable factoring is very popular in the construction industry - where the usual problems of meeting payroll, buying supplies and paying benefits crop up regularly. With factoring, small business owners can expect to have their receivables turned into immediate cash.
What separates invoice factoring from bank loans as well as SBA-backed ARC loans is the fact that the former involves 3 parties, and the latter, two. Banks base their decisions on a company's credit worthiness, whereas factoring is based on the face value of the receivables. Factoring isn't a loan - it's the acquisition of a financial asset, or the receivable.
What makes factoring companies more convenient is the fact that they pay in as little as twenty-four hours after ascertaining the client's customers credit worthiness. There are no minimum/maximum sales volume requisites and they don't expect to buy 100% of the company's receivables. Rates are also competitive - and are extremely dependent on the client's special situation. The program allows choices of invoices to be factored, enabling customers to keep most of their money, while spending the minimum fees to guarantee sufficient cash flow.
The idea of factoring has been present for over 4,000 years now. Factors start the single invoice factoring process with due diligence that usually takes one to two business days. Once completed, the client is at liberty to offer invoices to IFG for purchase. Upon receipt of invoices, the factor checks the credit of the debtor named on the invoice and ascertains that the sale represented has been satisfactorily delivered. Once this is okay, the debtor is advised of the purchase by the factoring company and the client receives their cash. The transaction is completed when, at the end of the credit cycle, the debtor pays its dues to the factoring company.
In the end, the difference is that if a small entrepreneur gets involved with a government ARC loan, the money have to be paid back at some point. With accounts receivable financing, however, small businesses are prevented from availing of a loan since they are given the chance to transform their receivables into immediate cash.
For more information about accounts receivable factoring, contact The Interface Financial Group (IFG) at 877.210.9748.
No comments:
Post a Comment