Traditional sources of business financing are not always ideal for all the needs that avail on the ground. Every now and then business has to turn to alternative providers of finance for a host of reasons. Establishments such as Accounts receivable funding corporations have increasingly positioned themselves as being more intimate with the intricate needs of business.
What Is Accounts Receivable Funding?
Accounts receivable financing involves the use of receivables/invoices by a company to secure financing. These receivables which are essentially money owed to it by customers, is utilized as a form of collateral in securing the funding. At the end of the day, the amount of finance that the business receives is equal to the discounted value of the total sum of the invoices. During the factoring process, the older the invoices/receivables the less the money that can be accessed.
How Does It Work?
* The process is basically a finance exchange between two entities. Your business receives funding now at the cost of giving up its rights to outstanding payments from clients.
* The amount of cash that is extended by the finance company or factor approaches around 80% of the total value represented by the invoices.
* The factor takes over the duty and right to collect the money owed to the business as represented in the invoices.
* There is a need to have clients that have a reputation for honoring their debts for a business to get easy access to this form of financing.
What Are Its Benefits?
* Accounts receivable funding corporations help businesses free-up capital that is tied up in invoices.
* The risk associated with the invoices is inherited by the factor and this enables your business to devote its energies to pertinent issues.
* The requirements for obtaining this sort of financing are not so stringent as is typical with conventional loans.
* The processing time is extremely fast which enables businesses to have quick access to much required financing.
* The transaction is a once off deal that does not require any repayments.
* No consideration is made of the business’ credit rating.
More information can be acquired from the publication titled Asset based financing a transactional guide which can be found online.
What Is Accounts Receivable Funding?
Accounts receivable financing involves the use of receivables/invoices by a company to secure financing. These receivables which are essentially money owed to it by customers, is utilized as a form of collateral in securing the funding. At the end of the day, the amount of finance that the business receives is equal to the discounted value of the total sum of the invoices. During the factoring process, the older the invoices/receivables the less the money that can be accessed.
* The process is basically a finance exchange between two entities. Your business receives funding now at the cost of giving up its rights to outstanding payments from clients.
* The amount of cash that is extended by the finance company or factor approaches around 80% of the total value represented by the invoices.
* The factor takes over the duty and right to collect the money owed to the business as represented in the invoices.
* There is a need to have clients that have a reputation for honoring their debts for a business to get easy access to this form of financing.
What Are Its Benefits?
* Accounts receivable funding corporations help businesses free-up capital that is tied up in invoices.
* The risk associated with the invoices is inherited by the factor and this enables your business to devote its energies to pertinent issues.
* The requirements for obtaining this sort of financing are not so stringent as is typical with conventional loans.
* The processing time is extremely fast which enables businesses to have quick access to much required financing.
* The transaction is a once off deal that does not require any repayments.
* No consideration is made of the business’ credit rating.
More information can be acquired from the publication titled Asset based financing a transactional guide which can be found online.
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