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Everything you need to know about
Accounts Receivable Factoring

 

Benefits of AR Factoring

There are many reasons why accounts receivable factoring is desirable, but the main reason is the quick receipt of cash.  You receive payments, discounted, without having to wait for customers to pay their invoice.  You no longer function as a bank for your customers.

You can use this money to keep up with expenses, stay current with taxes, make capital improvements or take advantage of new business opportunities.  You can enjoy bulk purchase discounts or ‘early payment’ discounts, and earlier payment can improve your credit rating.  Or use it to grow your company.  In the current financial crisis, a steady stream of ‘early’ money can make the difference between a company’s failure and survival.

Factoring can also provide significant cost reduction, since you no longer have to maintain a permanent credit and collection staff.  These functions, and others, are handled by the Factor.  In many cases, your Factor will provide you with customer credit information which allows you to be more selective when selling your goods or services.

Factoring allows you to plan better because you can regulate cash flow.  It is, or can be, a function of sales.  You know how much cash will be available on a continuing basis, without waiting for customer payments. 

And it will improve your financial statements if that's a concern -  reducing receivables and increasing cash.

Accounts receivable factoring  allows you to focus on running your business, rather than worrying about customer payments and cash flow.

Next: Compare factoring to traditional bank loans...