There are different options available for maintain positive working capital. This especially true when growing a company and exploring its financing options. With accounts receivable factoring you can improve your cash flow quickly. This financing alternative is not novel. It has a long history of use which reflects its utility through the ages.

There are different types of such arrangements. Some vary treatment of the credit risk assumption and customer notification. These products provide a quick prepayment option. They enable flexibility and allow a business to increase its working capital and improve cashflows by selling unpaid invoices to a third party.

If it involves the purchase of accounts receivable with the factor bearing the risk of a customer or debtor failing to pay, it is a without-recourse or non-recourse agreement. When the client carries the risk of nonpayment, the arrangement is a recourse agreement. In many cases, agreements provide for accounts to be purchased on both a non-recourse and recourse basis depending on the credit worthiness of the debtors or customers.

One of the forms involves selling your invoices to a third party, the factor, in this business relationship. This third party will process the invoices and allow you to draw funds against the money owed to your business. Essentially, businesses will receive financing, debt collection and accounts management services. Businesses are able to improve cashflows. But, the service can also be used to reduce administration overheads.

Invoice discounting is a related way of using your invoices as collateral to drawing money against it. In this form, the business retains control over the administration of its sales processing. In addition to providing financial relief, this service provides support services and credit insurance. Collectively, these two mechanisms are often referred to as factoring. But, they are separate products.

Typically a factor will agree to an immediate advance of over 80 per cent of the approved invoices. The balance is paid when the customer pays total amount due. The initial payment is usually made available within 24 hours. This is a major advantage of this method of finance. It provides a significant boost to cash flow in a short space of time. For businesses that are short of working capital, this is its prime value.

If an invoice is not paid, responsibility for the amount due will depend on the type of agreement. In recourse factoring, liability is the business, in the non-recourse form the factor takes on the responsibility. There are generally two elements to the cost associated with this financing tool. A fee is charged when the invoice is received. There is also an additional discount charge. This works is calculated against the balance of funds.

Prices are usually competitive as there are many companies providing this service. The service benefits financial planning and frees up time for small companies to focus on matters unrelated to administration of accounts. A factor provides useful information about the credit standing of customers. It can help in negotiation of better terms with suppliers. But like all financing methods accounts receivable factoring has a downside also. The reason it continues to flourish is because of the benefits it delivers.

Accutrac Capital Solutions offers accounts receivable factoring and revocable letter of credit solutions to help business structure their financing.

Accutrac Capital Solutions offers accounts receivable factoring and revocable letter of credit solutions to help business structure their financing.contact http://www.accutraccapital.com/ for detail.

Author Bio: Accutrac Capital Solutions offers accounts receivable factoring and revocable letter of credit solutions to help business structure their financing.

Category: Business
Keywords: Finance, business, investment, funding, capital, credit, factoring, solutions, services, banking