Is Factoring Right For Your Business?

March 22nd, 2010 by admin

A few years ago getting commercial line of credit from a bank was a breeze. Today during a recession the lending rules have changed and borrowing money from a bank became very difficult, especially for a new, small business for which cash flow is vital. When your loan application is denied, you can look into other options. There is an alternative to a commercial loan called business factoring or accounts receivable factoring. There aren’t as many rules here as in the loan industry, so it is much easier to set up and your business can have access to cash in a matter of a few days.

Factoring company or bank will buy your outstanding accounts receivable at a discount. It will collect money from your customers at face value of the invoices. Invoices that are over ninety days old generally do not get financed because of the high risk that they will not be collected. Many companies go into business factoring for more reasons than just obtaining cash. They also don’t have to worry about calling the customers and collecting the past due funds but focus on their product or service.

As with any business arrangement, there are pros and cons. The pros being fast access to cash, no worries about collecting payments. A successful relationship with the factoring company can result in more favorable loan terms in the future. However, the fees that factoring companies charge are usually higher than bank rates on a commercial loan or a line of credit. Over the course of a year this can add up to quite a bit. You have to make sure the business can stand this additional expense. Compare this to the cost of hiring employees or a company that would handle your receivables.

Also, look at different options, research alternatives and calculate the costs. Make an informed decision. If you decide that business factoring is the only option for you, locate companies and research them thoroughly, compare the fees. One of the top factoring companies with integrity, expertise and experince is Orange Commercial Credit. It was founded by Anthony Kinninger who’s been helping companies to increase the cash flow, profits and strengthen client relationships. The company has been in business for almost two decades. The staff will answer your questions, will give you a sound financial advice on credit, collections and growth management.

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