Invoice Factoring Services Keep Cash Flowing for Businesses Large and Small
Oliver Feakins is an administrator of Factoring Force at http://www.factoringforce.com, a resource and information center about invoice factoring services.
There are many bright and aggressive entrepreneurs that have excellent ideas and great products but lack the necessary funding to move to the next level. Sales may be good but delays in payments from customers can basically put a stranglehold on growth and may even jeopardize survival. The logical approach for a company in a situation like this would be to apply for a loan or set up a line-of-credit. But, in today’s financial market, credit is tight. Only the most credit-worthy companies can get a commercial loan and even many of them are having difficulties. Factoring services have provided the means for businesses with aspirations for growth the means to do just that, even in a bad economy.
In a new business, nothing is more satisfying or motivating than “making the sale.” You or your sales team has taken your product or service into the marketplace and achieved success in gaining acceptance when they receive a commitment to purchase. That is validation and provides incentive to move on to the next prospect with optimism and enthusiasm.
But there is often a long road between “making the sale” and “the check is in the mail.”
Every company declares a sale as an asset on its balance sheet in the form of accounts receivable. It is an anticipated sum of money which will eventually end up in the company’s bank account. The operative word here is “eventually” because you can’t spend a balance sheet entry. A company needs the cash in-hand. And for many small businesses, the time it takes for a balance sheet item to turn into spendable revenue can cause serious relative to growth and solvency.
That is where receivables factoring services come in. Receivables factoring, or invoice factoring, is the practice of providing funding to a company in exchange for the opportunity to collect these receivables. A factoring service essentially buys the receivables from a company and provides the company with much needed cash based on the anticipated revenue from these receivables. The cash is usually presented in two segments. Initially, the company will receive up to about 85% of the value of the invoices. Once the factoring service has collected on the invoice, the balance of the value is forwarded less a small percentage that the factor holds as payment for this service. This could range anywhere from 1% to 5% of the total.
The benefits of invoice factoring to a small business or a startup company are substantial. Instead of making a sale and having to wait anywhere from 30 to 120 days or longer to collect on the sale, a company can receive a significant portion of the transaction value right up front. This allows a company, in many cases, to meet payroll, pay for supplies or raw materials or make a necessary investment to grow their business.
Factoring services have become a potent solution for companies with the right stuff to thrive, even when it takes too long for a client to put his check in the mail.
Most of the services reviewed by this website are available or may be accessed from Australia (see 