It took quite some time for the whole principle of factoring to become acceptable business practice. You were seen as a struggling company if you adopted this method of payment, but now it is seen as a perfectly acceptable way to stabilize your cash flow. A great many small and medium-sized enterprises are practicing accounts receivable factoring as a way of dealing with their larger clients who insist on longer payment terms.

There are three parties involved in any commitment, they are the seller, the debtor, and the factoring company. Once an invoice has been factored the responsibility to collect the debt is laid at the door of the factor, as the seller has received their money. However, the amount of money received by the seller has been reduced by an agreed charge.

At no point during the transaction is the seller\’s credit worthiness taken into account. All the factoring company requires is details of the accounts receivable. In fact, the whole process can be seen as taking an advance payment, without the need for the company to offer any form of security.

This process can be seen as one of the quickest ways of raising money for a company. There is no need for any lengthy credit checks to be completed in order to secure the payment. Because of this the seller has a continual cash flow, which could be needed to keep them in business, without the concern of when, or whether, their client is going to pay their invoice.

If a company does not conform to all the requirements that a bank needs in order to be considered for a loan, this is a great way to stabilize their finances. If the company is able to get a loan from a bank or other financial institution, they will have to to offer some collateral in case they cannot fulfill their repayments. When a factor is used, no such collateral is required.

Another benefit of this system as far as the seller is concerned, is that there is no risk involved for them. This is transferred to the factoring company, who have more experience in collecting what is owed. Because the process reduces any risk to the selling company, and makes them seem more stable, and reliable, to potential clients.

When an agreement has been finalized, it is only for a one-off transaction. The process is quick and simple, the accounts receivable are transferred to the factors, and the agreed sum of money is transferred to the business. At that point the whole process is over as far as the company is concerned, therefore it is a quick and easy way for the business to raise money without any contractual obligations.

Whether you are looking to raise money quickly in order to make a successful bid for an up-and-coming contract, or to fulfill immediate obligations, this can easily be achieved using this method. The factoring companies are not concerned with what you use the money for, and if you use it to pay outstanding debts this could improve your credit rating. An improved credit rating could help you finance future company expansion, therefore the whole process of accounts receivable factoring is well worth investigating.

Unique financing solutions including accounts receivable and factoring be customized to your business\’ needs. Contact Accutrac Capital Solutions today to get started!

Accutrac Capital Solutions offers factoring and accounts receivable solutions to help business structure their financing.
http://www.accutraccapital.com/

Author Bio: Unique financing solutions including accounts receivable and factoring be customized to your business\’ needs. Contact Accutrac Capital Solutions today to get started!

Category: Business
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