Thursday, July 14, 2011

How Does Factoring Work?

If you need to improve your business cash flow, a bank may be your first port of call. Increasingly, however, banks have strict lending policies that may be difficult to meet. Many businesses are now turning to alternative sources of finance. It really does not mean that finance is not good for example - is a popular choice as factoring.

Factoring your invoices to a factoring company, selling the company at face value, less their fee buys them from you. You have to do to get quick cash is not the borrower.The fee works out to be comparable to an ordinary bank loan, so from a financial point of view there is no harm here.

The process begins when you sell your service or product to a customer and raise an invoice. Invoices to factor, you send a copy of the invoice factoring company, the factor sends you a percentage of the invoice amount, called the advance. This is the first of two payments you receive an invoice factoring.

The next step in the process when the customer pays the invoice. Factoring fees paid after you stop factor called the book sends.

This resort is known as factoring.

Alternative non-recourse factoring, the factor is taking on bad debt risk. It is more expensive, but that means you never pay factor for the advance. You, however, bad debt being paid for the period before interest payments.




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