Article: The Facts on Factoring: How to Increase Cash Flow Without Borrowing

Cash flow is one of the main reasons businesses fail. At one time or another, every business,
even successful ones, have experienced poor cash flow. Cash flow does not have to be a problem any more.
Do not be fooled -- banks are not the only places you can get funding. Other solutions are available and you do not have to borrow.
One solution is called invoice factoring.

What is Factoring?

Factoring is the process of selling accounts receivable
to an investor rather than waiting to collect the money from the customer.

Oh, the Irony… Factoring has an ironic distinction: It is the financial backbone of many
of America's most successful businesses. Why is this ironic? Because invoice factoring is not
taught in business colleges, is seldom mentioned in business plans and is relatively
unknown to the majority of American business people. Yet it is a financial process
that frees up billions of dollars every year, enabling thousands of businesses to grow and prosper.

Factoring invoices has been around for thousands of years. Factoring companies are investors
who pay cash for the right to receive the future payments on your invoices.
An unpaid receivable or invoice has value. It is a debt your customer
has agreed to pay in the near future.

Factoring Principals
Although account receivable factoring deals exclusively with business-to-business transactions,
a large percentage of the retail business uses a factoring principal. MasterCard, Visa, and American
Express all use a form of factoring in their retail transactions. Using the purest definition of the word,
these large consumer finance companies are really just large factors of consumer paper.

Think about it: You make a purchase at Sears and charge it to your MasterCard.
The store gets paid almost immediately, even though you do not make payment until you are ready.
For this service, the credit card company charges Sears a fee (typical fees range from two to four percent of the sale).

The Benefits Factoring can offer many benefits to cash-hungry companies.
Rather than wait 30, 60, 90 days or longer for payment on a product or service that
has already been delivered, a business can factor (sell) its receivables for cash at a small
discount off the amount of the invoice.

Payroll, marketing efforts, and working capital are just a few of the business
needs that can be met with this instant cash.

Factoring invoices provides the means for a manufacturer to replenish inventory and
make more products to sell: There is no longer a need to wait for earlier sales to be paid.
Factoring is not just a cash management tool for manufacturers:
Almost any type of business can benefit from factoring.

Generally, a business that extends credit will have 10 to 20 percent of its annual sales
tied up in accounts receivable at any given time. Think for a moment about how much
money is tied up in 60 days' worth of invoices: You cannot pay the power bill or this
week's payroll with a customer's invoice, but you can sell that
invoice for the cash to meet those obligations.

Factoring receivables is a fast and easy process. The factor buys the invoice at a discount,
usually a few percentage points less than the face value of the invoice.

The Drawbacks
People consider the receivable factoring discount a small cost of doing business.
A four-percent discount for a 30-day invoice is common. Compared with the problem of not
having cash when you need it to operate, the four-percent discount is negligible. Look at the invoice factoring company's 
discount as though your business had offered the customer a discount for paying cash. It works out the same.

Companies consider the discount the same way they treat a sales price: It is simply the
cost of generating cash flow, much like discounting merchandise is the cost of generating sales.

Receivable factoring is a cash flow tool used by a variety of businesses, not just those who are small or struggling.
Many companies factor to reduce the overhead of their own accounting department. Others use factoring to
generate cash, which can be used to expand marketing efforts and increase production.

Why Invoice Factoring Appeals to the Start-Ups
Factoring is especially appealing to young and rapidly growing companies.
Since the process shortens their business cycle, these businesses can grow faster.
The ability to make more products to sell while waiting for invoices to be paid is largely eliminated.
Such businesses usually net much more profit with factoring than without, even when the discount is considered.

Factoring vs. Bank Loans
So, why not simply go over to the friendly banker for a loan to alleviate
cash flow problems? A loan can be difficult if not impossible to receive, especially for a young, high-growth operation,
because bankers are not expected to decrease lending restrictions soon.
The relationships between businesses and their bankers are not as strong or as dependable as they used to be.

The impact of a loan is much different than that of the factoring process on a business.
A loan places a debt on your business balance sheet, which costs you interest.
By contrast, factoring puts money in the bank without the creation of any obligation.
Frequently, the factoring discount will be less than the current loan interest rate.

Loans are largely dependent on the borrower's financial soundness, whereas factoring is more
interested in the soundness of the client's customers and not the client's business itself.
This is a real plus for new businesses without established track records.

There are many situations where factoring can help a business meet its cash flow needs.
It provides a continuing source of operating capital without incurring debt, which can result
in growth opportunities that dramatically increase the bottom line. Virtually any business
can benefit from factoring as part of its overall operating philosophy.

Every good businessperson must understand the concept and benefits of invoice factoring
in order to operate as profitably as possible.

 

 

 

 

Factoring Account Receivables Services
For All Industries And All Company Sizes


Business Services Companies
Trucking and Transportation Companies
Government Contractors Suppliers
Security Companies Guard Agencies

Staffing Temporary Employment Agencies

 

Contact our accounts receivable factoring specialists at:

Toll Free:  888-266-0197

Online Invoice Facoring Request Form

Factoring Articles

How To Increase Your Cash Flow With Invoice Factoring


Comparing Invoice Factoring To Bank Loans

Company Information    
Invoice Factoring Frequently Asked Questions
Contact us

Our Factoring Company Locations
Invoice Factoring Testimonials


Discover Why Business Chooses Us

OCF INVOICE FACTORING COMPANY
 - Providing factoring services nationwide
 - Over 70 years of factoring company experience
 - Up to 97% Advance Rates


Why Invoice Factoring is Necessary

In recent years, an increasing number of businesses have discovered
that invoice factoring can combat the ups and downs of unpredictable cash flow cycles.

More importantly, factoring companies are providing the business community
with a viable source of working capital when conventional business financing is not always an option.
 

People consider the
invoice factoring
discount a small cost of doing
business. A two-three-percent factoring
discount for a 30-day invoice is common. Compared with the problem
of not having cash when you need it to operate, the receivable credit line
discount is negligible.
Look at the invoice factoring company collecting the  discount as though your business had
offered the customer a
discount for paying cash. It works out the same.


How Invoice Factoring Works


Setting up a
factoring relationship is quick and easy in comparison
to other forms of business financing.  Applications simply call for basic
company information and a customer list.  Years of profitability are not
required which makes invoice factoring an option for startups generating accounts receivables.
 It is possible that funding can occur in as little as a couple of
days after the invoice factoring company receives your application and invoices.

Benefits of Factoring Invoices

Factoring invoices can offer many benefits to cash-hungry companies.
Rather than wait 30, 60, 90 days or longer for payment on a
product or service that has already been delivered, a business
can factor (sell) its receivables for cash at a small discount
off the amount of the invoice.

Payroll, marketing efforts, and working capital are
just a few of the business needs that can be met with this instant cash from factoring.

Factoring invoices provides the means for a manufacturer to
replenish inventory and make more products to sell:
There is no longer a need to wait for earlier sales to be paid.
Factoring is not just a cash management tool for manufacturers:
Almost any type of business can benefit from factoring.

 

Why Receivable Factoring
Appeals to the Start-Ups

Factoring is especially appealing to young and rapidly growing companies. Since the invoice factoring process shortens their business cash flow cycle, these businesses can grow faster. The ability to make more products to sell while waiting for invoices to be paid is largely eliminated. Such businesses usually net much more profit with receivables factoring than without, even when the discount is considered.

Receivable Factoring Company vs. Bank Loans

Factoring has been around for thousands of years. Factoring companies  pay cash for the right to receive the future payments on your receivables and invoices. An unpaid accounts receivable or invoice has value. It is a  debt your customer has agreed to pay in the near future.

So, why not simply go over to the friendly
banker for an account receivable loan to alleviate cash flow problems? A small business loan can be difficult if not impossible to receive, especially for a young, high-growth operation, because small business money bankers are not expected to decrease lending restrictions soon. The relationships between businesses and their small business bankers are not as strong or as dependable as they used to be.
 

Account Receivable Factoring Frequently Asked Questions

Unlike The Others, You Actually Make Money With Our Account Receivable Factoring Rates

 


OUR PROVEN INVOICE FACTORING PROGRAMS
HELP BOOST YOUR CASH PROFITS

Contact our account receivable factoring specialists at:

Toll Free:  888-266-0197

On-Line Factoring
Request Form




Partial List Of Industries That We Provide Factoring
Factoring Staffing company
Factoring Building Products Distributor
Factoring Manufacturing company
Factoring Maintenance Service
Factoring Service Providers
Financing for small and medium sized service companies
such as commercial suppliers, technology consultants
and janitorial companies,etc.

Factoring Metalized coating
Factoring Auto Parts company
Factoring Powder Coating
Factoring Cable Contractors
Factoring Utility Construction company
Factoring Machine Shop
Factoring Oil and Gas Industry
Factoring Trucking company
Financing for trucking companies,
freight brokers and commercial transportation companies

Factoring Freight Forwarding company
Factoring Healthcare Staffing company
Factoring Government Contracts
Financing for companies that provide services and products
to state and federal government agencies

Factoring Distributors
Factoring Freight & Trucking
Factoring Manufacturers
Factoring Medical Practitioners
Factoring Security Guards
Financing for companies that provide security guards
to commercial, industrial and government sites

Factoring Temp Staffing Agencies
Financing for staffing and temporary employment
in the business and medical services field

And Many More


More Links to Help You Find Information

accounts receivable loansinvoice factoring| factoring services
| factoring business| bank factoringmedical receivable factoring
| financing trucking

We are currently providing account receivable factoring services nationwide including the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho State, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.


Just Some of The Industries That we Provide Invoice Factoring Services
Freight Factoring |  Government Contract Factoring | Medical Staffing Factoring
|
Temp Staffing Factoring | Oil & Gas Industry Factoring

 


Staffing invoice factoring company
Building Products Distributor cash flow factoring
Building Products Waterproofing Distributor account factoring
Manufacturing account receivable  factoring
Maintenance Service receivable factoring
Machine Knives invoice factoring company

Custom Auto Body for Emergency and accounts receivable factoring company
Municipality Vehicles  factoring  loan
Parts and Installations business factoring
Metalized coating invoice factoring company
Auto Parts accounts factoring company
Powder Coating invoice factoring
Utility Construction receivables factoring
Machine Shop invoice factoring company
Trucking invoice factoring company
Trucking - Refrigerated Freight  factoring
Trucking - Dry Freight truck factoring
Trucking - Over the Road freight  factoring company
Security Services account receivable financing
Commercial & Industrial Refrigeration invoice factoring



You Can Learn More About Factoring Services Here

How To Switch Invoice Factoring Companies

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