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| Accounts Receivable Financing/Factoring The process of transacting accounts receivable in the secondary market it allows businesses to collect the money they are owed immediately by accepting an invoice from a third party.
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When a business factors an invoice, the process occurs as follows:
The factor, or funding source, advances a certain percentage of
the invoice amount.
The factor will hold back the percentage left as "reserve" until the
invoice is paid.
The factor assumes the right to receive payment on the invoice.
When the factor receives payment it will then rebate the "reserve"
amount to the business less the factoring fee.
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Why do businesses factor their receivables?
To make payroll.
To pay taxes
To expand. Added cash flow allows a business to take on larger
jobs or add locations.
To take advantage of vendor cash discounts.
To relieve the burden of accounts receivable administration, or
collections.
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Factoring is not a loan
Therefore, a business does not
Increase its debt to create cash flow!
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Factoring is one of the world's oldest methods of finance. According to historians factoring goes back to Roman civilization, when merchants used it to settle their trade debts. Today, factoring volume alone is over $100 billion per year.
Don't be left behind - Accelerate your cash flow today.
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