• May 20

    invoice finance for businessInvoice finance is a method used by businesses in which they draw out funds or cash from their customer invoices and receivables even before they are actually paid for. This has been a common tool used by any companies and has also been proven to be advantageous in numerous circumstances.

    There are two types of invoice finance. The first is called factoring while the second is referred to as discounting. The two bring about similar benefits but are treated differently as the first is considered a sale while the latter a loan.

    Factoring is where the business sells its invoices to a third party. Such party provides an advance which is typically 80% to 95% of the value of the receivables. It then proceeds to collect from the owing customers. Once full collection is attained it then forwards the remaining balance to the business seller less any fees.

    Discounting is where the business gets a percentage of the receivables’ value from a third party with the receivables used as collateral. The business proceeds to collect from its owing customers and once payment has been completed they will then repay the financing party for the advance they have provided plus any fees agreed upon.

    Invoice finance is used for many purposes and reasons which includes but are not limited to the following:

    • A NEED TO INJECT CASH INTO THE SYSTEM – When companies need to improve their cash flow, this is one of the best solutions there are. It significantly improves the inflows versus the outflows of the entity.
    • ABSENCE OF A LOAN – It is not a secret that loans are not easy to acquire. Invoice financing on the contrary is rather easy as it does not require a lot and would not even require you to submit your financial statements. The reason is because the provider of such service does not lobby on the capability of the selling company to pay but rather on its owing customers.
    • LESSENING OF BAD DEBTS – They also help lessen the amount of bad debts and the expenses or losses that go along with them. The risks will be borne by the financing party but one should remember that this is not applicable to every invoice finance transaction. It has to be stipulated and contained in agreement.
    • EMERGENCY EXPENDITURES – Because invoice finance can be acquired and received in twenty four hours or less they are useful for emergency expenditures of the company and there is no available cash at the ready or fi there are they have been limited for use in other corporate endeavors.

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  • Apr 15

    Single invoice discounting facilities are financial institutions that provide funds to businesses who are considering other means of funding projects and raising capital other than loans. It is a type of receivables financing that draws up funds by freeing up locked resources in unpaid customer invoices.

    Like many financing methods it has its advantages and disadvantages all depending on factors such as corporate industry from among others. To help you determine and weigh the pros and cons here, below is a list to acquaint you.

    financingStarting off we have the advantages:

    1. It is a relatively fast method to obtain cash. Some facilities allow for twenty four hour fund availability if you could provide the documents needed.
    2. The necessary documents are not as burdensome as opposed to when applying for a loan in a bank.
    3. It does not levy on the company’s capacity to pay and thus will not necessarily require you to submit your financial statements.
    4. It levies instead on the owing customers’ capacity to pay what is due them should the time of payment comes.
    5. It hastens up the realization of cash by freeing up locked up ones in customer invoices.
    6. It helps improve your cash flows. When sales are good it does not necessarily mean that cash is going in. Remember sales can either be on cash or on credit. Those sales on credit can be hastened up and turned to cash quickly.
    7. It converts your accounts receivable into cash making your balance sheet more attractive to investors.
    8. It is not a loan although it has its benefits so you can breathe a sigh of relief as your debts will not rise up.
    9. It is a onetime transaction and so you will not be bound on monthly regular fees. You only pay as you use the service.

    Now on to the disadvantages:

    1. If you are not careful you might get the said service from the wrong facility with untrained staff that will irritate your customers by constant calls, emails and unruly messages asking and reminding them to pay their due.
    2. In a with recourse arrangement, you will be required to buy back any unpaid invoices from the single invoice discounting facility. Therefore the risks of bad debts are shouldered by you. Fortunately if you want to avoid this, you should consider a non-recourse arrangement.
  • Nov 15

    As a business owner, you have probably heard about different types of finance such as those based on equity, assets, receivables etcetera. Now, when you want to take things up a higher notch and on a global scale then you would have to consider export finance. What is it then?

    export financeExport finance enables companies to bring their products and services abroad and in all other parts of the globe. Being able to do so is considered a big step and a goal achievement for most if not all entrepreneurs. Besides, the ultimate goal of going into business is profits, growth and expansion and broadening your horizons on a global scale is definitely part of these goals. At the same time, putting your products and services on a bigger and global market comes not only with profits and opportunities. There too arise costs, expenditures and various other risks. In terms of risks, these need a lot of careful analysis, research and study to determine whether such venture is indeed promising and effective. When you talk about the costs, there are a lot to consider in this department. To name a few there are taxes, duties and the shipping of raw materials and finished goods. All these have to fit in your business plan and budget otherwise an export venture may be turned down by your board of directors.

    Now, for those companies who are willing to take the risks to earn their place at the global market, export financing can surely help especially regarding your need of financial resources.

    One option is those loans provided to companies for the purpose of transporting or bringing their products abroad. There are terms to it that both parties, especially the borrower, must uphold otherwise the lender will have the right to demand the full amount owed and ask for it to be payed at once. These are often secured with collateral the amount of which depends on the loan granted.

    Another option is by using an overseas factoring house. This firm or company will purchase the products at a discount that is below the invoice’s value. They will then sell these to prospective buyers who are either the ultimate consumer or a reseller at a mark up.

    Export finance is one good way for businesses to fund their global projects and ventures. After all, risks have to be taken to gain profits.

  • Oct 14

    single-invoice-discountingSingle invoice factoring is a popular option for businesses, small and established alike, which are seeking for a means to fund projects and increase working capital, to inject cash and improve cash flow or to lessen the risk of any bad debts to occur or add up. Although getting your invoice factored is around ninety five percent easier as compared to applying for a traditional loan, there are requirements needed for you to qualify. Read up and know if this option can work for you.

    1. Delivered goods and rendered services

    Factors will only agree to advance the value of your chosen receivable only after you have rendered the service or delivered the products to your customer. You must first be able to satisfy your obligation to your clients as the inability to do so will also cause the default or absence in payment from your clients.

    2. Organized financial documents

    Especially when it comes to invoices and receivables, you must keep everything in a systematic and organized manner.  No random and messy piles of papers should be scattered all over the place. It is also important that you have and are practicing strong and efficient controls when it comes to releasing invoices and managing your receivables.

    3. Client credit history not business credit score

    It is important that your client actually pays or has a good credit history. Do they take too long to pay or don’t they pay at all? Unlike traditional loans where the financial institution will look into your credit score, financial standing and require collateral, factoring will greatly require that your customers have a good credit history meaning that they pay within the given or agreed upon period.

    4. Ability of clients to pay

    Apart from checking how early or late they pay, your factor will also look into the financial capacity of your customer. Can they actually pay their dues or will they ultimately lead to bad debts? Do know that there is recourse and a non recourse in factoring. In the former you are required to buy back any unpaid invoice while with the latter, the financial institution will bear all the risk of non collection.

    5. A clean slate

    Lastly but also importantly, you have to have a clean slate. That is, you must be clear of any legal issues such as taxes. Single invoice factoring providers may not dwell much on whether you are a small company, an established business or one who is suffering losses. That is not their problem as they will not be affected by it as your client’s ability to pay are their key to collection not you. However, these firms will not transact with companies who are or may face serious legal issues due to noncompliance to rules and regulations.

  • Oct 9

    Bank loans, single invoice discounting and business factoring are three of the most common funding methods obtained by entrepreneurs and businessmen in the corporate world today. Each one has an advantage to them depending on the situation, the gravity and hastiness of the need and the ability to pay back what is borrowed or given in return.

    business factoringOf the three, business factoring has seen to be growing at a large rate nowadays. The reason for such is because businesses are somewhat shying away from obtaining debt. Bank loans obviously are while invoice discounting involves a loan too as it is the invoices which are used as collateral for the advance received. With factoring, what the company does is sell their receivables which have been locked up in their respective invoices. The financing institution called a factor will then provide for their value in part. They will then collect from your customers and after which will forward to you any balance remaining less the fees involved. To help you understand the concept better, below are the four (4) characteristics to business factoring.

    1. It is an off balance sheet financing method. Here, your balance sheet is not adversely affected to the point that it appears less appealing to both the board members and investors. This is because once invoices have been factored, the value of the receivables are transferred as cash. Unlike in bank loans, cash does increase but your liabilities go up as well.
    2. It involves fees and not interests. Because it is in no way a loan or even close to it, no interest expenses are involved. What the company pays for instead are the management or operating fees which are to be deducted from the value of the receivables forwarded to you.
    3. The period often lasts from ninety (90) to one hundred and fifty (150) days and in other instances more than that depending on the factoring firm. This will usually involve a credit investigation not on you but on your customers. The factor will look into whether or not they have the ability to pay what is due them.
    4. Leverages on the financial strength of your customers. Business factoring leverages not on your financial standing but that of your customers. The reason for such is because the factor will not collect from you but on your customers. The burden of payment lies in them so you are freed of any liability whatsoever.

  • Oct 4

    MP900341910Are you onto a new project or maybe you’re looking into expanding your product line? Do you have to pay an already existing obligation or do you have to fund equipment acquisition? Are you setting up an overseas branch or are expanding locally? Whatever it is that you have your eyes set upon, your corporate ventures will always need and involve some sort of financial funding. Three of the most common methods employed by many businessmen are bank loans, single invoice discounting and business factoring. All these three provide for your needed funds but they are unique such that they have different requirements and terms all to their own. Read up below to gain some insights and ideas regarding these three and decide which one would and might fit your needs.

    BANK LOANS:

    This is the type that is often employed if one is in need of a big amount of capital. This can be either short term or long term with a period from a matter of moths up to ten years all of which are subject to monthly repayments (or depending on the credit terms) as well as interests.

    Here, the bank will require some sort of collateral as a security against your borrowings which may include but are not limited to corporate assets, personal properties and investments.

    INVOICE DISCOUNTING:

    This one on the other hand is a short term financing method often used to better a company’s working capital and cash flows. Here, a business may draw money against one’s invoices even before such have been paid by owing customers.

    This transaction will involve the borrowing of a percentage of the value of one’s sales ledger from a discounting firm and using the invoices as collateral. In basic sense, it is like getting a loan only you are not adding up to your debt thereby not increasing the liabilities portion of your balance sheet. The reason for such is because you are instead decreasing your receivables to increase cash.

    BUSINESS FACTORING:

    Factoring is always confused with discounting and vice versa. This is because they provide the same effects and they actually have more similarities than differences. The only varying aspect is the fact that business factoring is not a loan. It is a sale.

    Here, the company sells the right to collect against one’s invoices to a third party called a factor who in turn will give the value of the invoices in advance. Such is limited to a certain pre-agreed percentage. The remaining balance (less any fees) will only be forwarded right after the factor has fully collected from your customers. Business factoring when compared to bank loans are simpler and faster as the funds can be made available within 24 hours.

    If you need a factoring company click here.

  • Sep 30

    spot-factoringOne of the many dilemmas that companies face is how to obtain financial resources. A simple way to say it would be how can your business get cash fast? One of the major drawbacks and pitfalls that most businesses encounter is the long wait before a big check from a certain client is paid. Yes your accounts receivables may be assets but they cannot be spent. At least not yet up until your client pays what they owe you. One good option or means to hasten your long receivables to raise funds or cash is with the use of single invoice factoring whether spot, traditional, recourse or non recourse. How then can you get your invoice factored? Here are some tips to help you raise your needed cash fast, easy, simple and less costly.

    • Do your business well if not best.

    First and foremost you have to create quality and value through the products or services that you offer. Of course you cannot expect loyal and numerous customers if you have nothing to offer in the first place. Without customers, there are no receivables therefore there is nothing to factor at all.

    • See to it that your accounts receivables are of value.

    It is not enough that you have receivables and invoices. They have to be of value too. Meaning, they are not likely to lead to non collection and bad debts. Although the absence of such is completely inevitable you should see to it that at least eighty percent of your factored invoices will be paid by the clients who owe you.

    • Screen out customers to whom you extend credit to.

    In relation to the previous one, screen out your customers and determine who has good credit history and who are always delayed and who those that default in payment are. It would be best to extend credit only to a select few who fulfils their obligations.

    • Get to researching and establish a good standing with your chosen factor.

    It is also a must for you to go all out and research for the best factoring company to suit and complement your needs. There is a lot who offer this type of funding scheme and all of them have different services, fees and expertise.

    • Decide the type of factoring you would want to subject your invoices to.

    To finally get your invoice factored, you have to choose a type. Recourse requires you to buy back any uncollected invoice. This is the cheapest kind. If you want the factor to bear all the risk in case a client defaults in payment, there is the Non Recourse. For those whose receivables are often long, you may wish to subject all of them to the Traditional type but if you want to factor just one then we have Single Invoice or Spot.