How to Use Factoring for Cash Flow
Companies facing a cash-flow squeeze and slow-paying customers often sell their invoices or accounts receivable to specialized companies called factors. The factor advances most of the invoice amount — usually 70% to 90% — after checking out the credit-worthiness of the billed customer. When the bill is paid, the factor remits the balance, minus a transaction (or factoring) fee.
Companies that use factoring like it because they get money quickly rather than waiting the usual 30 or 60 days for payment. After sending an invoice to a factoring firm, a business can have money in its hands within 24 to 48 hours.
Some businesses use factoring to get started. Whereas banks focus
But the service can be costly — several percentage points more than a conventional lender. It was once a controversial source of financing because of its ties to financially fragile companies in the garment industry. A related commonly held impression is that a company uses a factor because it isn’t credit-worthy enough to deal with a bank.
source: wsj
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Google Makes Fading Homepage A Little Less Confusing For Unaware Searchers
Monster Round For HomeAway: $250 Million, At An Absurd Valuation
Internet Marketing and Direct Sales ,The Perfect Combination
Comments
No comments yet.
Leave a comment