Understanding Accounts Receivables Financing

Having liquidity - funds to pay suppliers, employees and normal business expenses is critical to the success of a company. However, obtaining business financing has always been a challenging proposition for entrepreneurs. And given the current credit environment, obtaining a business loan is very difficult. Banks and corporate finance are only lending to large corporate enterprise customers who have considerable resources.

Liquidity problems are very common for companies that sell to other companies. In business to business environment, it is common to offer 30 to 60 days to pay a bill, especially if the client is a large company. This creates a major cash flow problem, since it is necessary to spend money to repair the client and then expect to be paid.

There is an alternative. Suppose you could get 80% of the payment immediately after delivery of the product / service, with the remainder after 30 to 60 days. I would like to help your business? I would like to provide the necessary cash flow to pay the rent, employees and suppliers? A more important question is, will you feel comfortable taking on new business if you knew you would pay in a hurry?

Receivables factoring can provide the solution. The proposal is simple. You can get an advance of 80% on their bills as soon as work is completed. You receive the remaining 20%, minus a small fee, once the bill is fully paid.

One of the great advantages of claims factoring is that it is easy to obtain. The most important requirement for qualification is that they are reliable business customers. Apart from that your company must be free of constraints and judgments. Generally, the set up process takes about a week and after that you can get the funding within one business day to submit a request.

Factoring rates vary and will be based on the quality of your customers and the amount of funding is needed. Generally the monthly costs will be between 1.5% and 3% depending on these variables. As a general rule, factoring can work well if the profit margins are at least 15%.

Receivables factoring provides an ideal solution for a specific problem - the gap generated between the billing for services and receiving payment. If you have clients that take up to 60 days to pay, and you need funding to cover business expenses, factoring is a good alternative to traditional business loans .......