Factoring In Atlanta Offers Businesses Resources During Tough Times
When times are tough, factoring companies are a resource many small businesses rely on.
When you factor invoices, it's not a loan that you have to pay back or that accumulates interest over time. That's the brilliance of factoring. It's not a loan, but an advances on your company's account receivables.
This makes it the perfect vehicle for start ups or existing businesses that need a little cash, but don't want to take out an expensive and time consuming loan. When you factor, there is no long-term commitment or complicated repayment plans.
You factor when you want, with the invoices you want. Businesses factor cash when they need it, such as during the holidays when it may be more difficult to collect account receivables.
Why Factoring Has Existed For Thousands Of Years
Factoring has existed for thousands of years. It is used by major companies, particularly retailers. They use it to stock store shelves and advance funds on seasonal merchandise before it's sold. Retailers such as Wal-Mart and Kohl's now offer factoring programs to their suppliers.
Factoring is used by major companies such as Dunkin Donuts and major retailers.
Here's how the factoring process works:
A company is waiting on a large customer to pay its invoice. It has waited 30, 60 or 90 days and needs the money to fund payroll and other expenses.
Invoice discounting offers a solution to companies who need cash fast. Companies no longer have to tap their lines of credit or apply for a bank loan. A company sells their invoices for much needed cash at a discount. Everyone is happy: The company doesn't have to chase their client for the cash and the company gets quick cash.
The factoring company purchases the rights of the unpaid invoices, usually at a discount. The invoice factoring company provides the company with cash, often in a matter of a couple of days.
There is a small factoring fee, but amounts depend on the industry, monthly volume, the credit of customers and how fast invoices turn.
The Advantages Of Factoring
It's easy to see why factoring has existed for thousands of years. As a customer, you no longer have to "collect" your account receivables. That's left up to the factoring company, who are the legal owner of the invoice. Your client doesn't cut a check to you, but rather the invoice factoring company. You take a hands-off approach and can now focus on the work you do for your clients, not the debt they owe.
Companies who use invoice factoring don't have to fill out any loan applications. And there is no credit check. It's not your credit the invoice factoring company is considering, it's the credit rating of your account receivables.
Overall, clients with good credit ratings and payment histories are preferred, since the factoring company extends the advance with the understanding that they will be paid back by your client.
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