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 Sell Your Accounts Receivable
Factoring is the sale of accounts receivable (invoices) at a small discount---for immediate cash. A factor is a specialized type of finance company that provides cash to other companies by purchasing their receivables.
With the slow economy, many account debtors are taking longer to pay. This locks up more of your precious cash into accounts receivable. Why not free up some of that money? Instead of waiting weeks or months for your customers to pay, you can sell some of those invoices to us for immediate cash. Since factoring is not a loan, no debt is created along with an obligation to make a monthly payment. Why go further into debt--borrowing money long-term--for what is essentially a short-term cash flow problem? Need more cash? Sell more receivables. When your cash flow improves, sell fewer invoices or none at all.
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B2B or B2G
Factors are only interested in purchasing B2B (business to business) or B2G (business to government) receivables. Invoices to retail consumers are not eligible. The invoices must be for products or services that have already been delivered. The invoices must be verifiable, undisputed, and to creditworthy customers that are very likely to pay within 90 days. Factors will only purchase receivables that haven’t had a lien placed on them previously by another party. Factors have no interest in purchasing delinquent debt. Collecting bad debt is a job for a collection agency, not a factor.
Although we advance cash on a routine basis, factoring is not a loan. The money is simply the proceeds from the sale of one of your current assets (commercial invoices), at a discounted price. You do not incur any debt when you factor your receivables.
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History of Factoring
Since the credit crisis, it's harder than ever to qualify for a bank loan. Thus, more companies are turning to factors and asset-based lenders as viable alternatives. According to the Commercial Finance Association, before the recession hit, something on the order of $150 billion worth of receivables were being factored annually in the United States. Factoring is well known in Europe and its use is expanding throughout the rest of the world. Although factoring dates back many centuries, historically its use was confined to just a few industries (textiles primarily) and mostly to larger companies. Thanks to modern computers and the internet, factoring is now available to a wide variety of industries and small businesses.
To find out whether your business qualifies for a flexible, debt-free line of credit based exclusively on your A/R, give us a call today at 541-484-7044.
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