Financing receivables can be an excellent way for businessmen to raise capital for the company. Most business owners understand the importance of having good cash flow. Without enough money coming in, it is difficult for companies to pay their bills or keep walking.
However, creating capital and keeping the liquid value can sometimes be difficult. If, for example, a service provider invoices its customers, it can take between 30 and 90 days before they get paid for work they have already completed.
Most businesses that do not have enough capital to pay their bills will be forced to take a bank loan or credit. The same applies to companies interested in expanding or growing. Unfortunately, bank financing is not possible for everyone. For a trader who does not have stellar credit, already has too much debt or runs his business very long, it might be very difficult (if not impossible) to get a loan. When this is the case, there are often very few options.
Fortunately there is an option that is available to most service providers. It’s called receivable financing. It allows companies to get the money they need, but without qualifying it as a loan and taking on more debt.
How it works?
Instead, a borrowing company can sell its receivables at a discount price, often between 70% and 90%, to a factoring company. This company will pay cash for invoices and then collect them from corporate customers. The same conditions that the customer originally agreed to will be applied to those adopted by the factor. After the factor receives money for bills, one will return them to the company that originally owned them. The factor then charges a fee, usually between 1.5% and 3.5%.
Businesses pay only, as above, between 1.5% and 3.5% for the luxury of being able to use the money from factor. It is generally cheaper than a business loan. Factoring allows companies to work with customers and carry out orders that they could not afford. Receivable financing can be very beneficial to businesses. It allows them to get money the right way without any hassle or risk of bank financing.
You can apply for receivable financing through our company.