Factoring Financing Articles

The last decade has been a boom for security agencies. As the security consciousness of the nation has increased, so has the demand for companies that provide security personnel. Private security guards are now guarding airports, large companies, infrastructure concerns and many public places. In summary, these have been financially rewarding times for companies in this business.

At the same time, managing growth has been very challenging for the company owners. Security guard agencies have heavy payroll responsibilities. They must be able to pay their guards on time, every time. The problem is that most of their commercial clients pay their invoices in net 30 to net 60 days. The problem is simple, owners have to meet weekly (or bi-weekly) payroll, but clients pay in 30 to 60 days. So, unless the company has a substantial cash reserve to handle payroll in the interim, it will run into problems. The solution is to get business financing.

For small businesses, getting business financing is easier said than done. Getting a business loan is very difficult in this environment. And anyways, business loans are not necessarily the solution to this problem. Why? Generally, business loans are best suited for buying assets and then paying them down over a number of years. A better solution, and one that eliminates the payment timing problem, is to get and advance against your invoices. This provides the funds you need to cover payroll and operate your business.

How do you get an advance on your invoices? There is a product called invoice factoring that does just that. It provides advances in your slow paying invoices. The proposition is simple. The factoring company advances you funds against your invoices and then gets paid once your client pays the invoice. What separates factoring companies from other solutions is that they provide funding against the business credit of your client. This means that a small company (or a startup) can usually get funded based on the strength of their client. Although the credit worthiness of your client is the most important requirement, it’s not the only one. To qualify for factoring, your company must have not liens, judgments and have owners with a good track record.

Invoice factoring has been gaining popularity as a source of working capital for companies. Despite its growing popularity a multi billion dollar industry, factoring is not very well known and is not considered as a mainstream financing tool in the USA.

This site contains a number of articles about factoring and is a resource for anyone considering using factoring for your company. Please be sure to read the terms and conditions of this site. Also, please not that this site is for informational purposes only and does not give any legal or financial advice. Please consult a qualified professional if you require legal or financial advice.

Products:
Invoice Factoring
Business Loan Alternatives

Industries:
Resellers and Wholesalers
Staffing
Freight and Transportation
Oil and Gas
Medical
Construction

What is Factoring?

Invoice factoring is a business financing tool which provides working capital to companies. Most companies that engage in commercial sales need to wait 3o to 60 days to get their invoices paid. This can create cash flow problems if a company is growing, a startup or just not well capitalized. Invoice factoring provides an advance payment for slow paying invoices. This provides business owners with working capital to run and grow their businesses without having to wait for their clients to pay.

What are the Benefits of Factoring Invoices?

Factoring invoices can help businesses improve their cash flow by providing working capital to pay:

1. Suppliers
2. Employees
3. Business Expenses

However, the biggest advantage of factoring your invoices is that it eliminates the uncertainty of waiting to get paid. It provides predictable cash flow and places companies on a better financial position.

Most companies that have commercial sales will qualify for factoring, provided their clients have good credit, their invoicing practices are good and their invoices are free of liens and encumbrances.

How it Works: Quick Summary

Invoice factoring is fairly straight forward and can be used by most companies. Here is how it works:

1. You deliver your product or complete your work.
2. You send an invoice to your client
3. When you need working capital, you send the invoice to the factoring company for financing
4. The factoring company advances you about 80% of the invoice – this is your first payment
5. Once your client pays the invoice, you get the remaining 20%, minus the factoring fee

What is a Factoring Company?

A factoring company is a type of financial services company, which specializes in providing working capital to businesses.

This web site is authored by Marco Terry, who holds all copyrights.