?Once considered a short-term method of relief for cash-strapped businesses, accounts
receivable factoring services have become an increasingly popular method of
long-term small business financing in recent years. The prevalence of factoring has
many entrepreneurs wondering, What exactly IS accounts receivable factoring and
what can an accounts receivable factoring company do for my business?
Accounts receivable factoring services are an efficient, cost-effective, accessible
method of small business financing. Sometimes referred to as invoice factoring
services, or simply, factoring services, these small business funding options are
offered by accounts receivable factoring companies around the country and online.
The process of factoring receivables is actually rather simple and involves three
parties: the accounts receivable factoring company (or factor), the small business (the
factors client), and the debtor (the small business customer). The factor purchases the
small business outstanding receivables (invoices) at a slight discount, providing
funding within days. The factor then bills the small business customer directly, and
the customer pays the accounts receivable factoring company. Additionally, because
factoring approvals are based on the debtors creditworthiness and the value of the
invoices associated with that debtor, companies that do not qualify for new small
business loans due to bad credit (personal or business) or lack of collateral are much
more likely to qualify for accounts receivable factoring services.
Beyond providing fast access to working capital, a reliable accounts receivable
factoring company can actually help its clients save money, improve business credit,
and streamline processes. First, having almost immediate access to payments that
customers would take 30 to 90 days to remit makes budgeting and planning easier,
allowing business owners to take advantage of such money-savers as early-payment
discounts from their own vendors and enabling them to make better purchasing and
hiring decisions. As well, because the factoring company will typically provide
electronic invoicing and payment options for their clients, small businesses are spared
the significant resource and personnel expenses of printing and mailing invoices and
processing payments. Plus, these environmentally sound practices are a great selling
point with many customers. Lastly, invoice factoring companies have access to
advanced credit-screening tools, which they use to assist their clients in making better,
safer decisions when it comes to extending customers credit.
For more information on accounts receivable factoring, contact the experts at Fast
A/R Funding. You can find them online at , email them at email@example.com, or
call their toll-free, 24-hour customer service line at 1.888.833.2286.