• 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.