Should You Consider Accounts Receivable Factoring In Maintaining Your Business’ Stability?
Customers who do not pay promptly are as inevitable as death, taxes and the Los Angeles Clippers missing the NBA playoffs. It may sound like a good while, but 30 to 60 days is standard as far as making commercial payments are concerned. These days, that might actually be too modest an estimate for most. So what options have you if you do not like waiting for two, maybe even three or four months for payment?
The first instinct of most owners is to up and run to the bank and apply for a business loan. Not surprisingly, few business owners get business loans. Unless your business is a venerable pillar in your industry, your chances of qualifying for a business loan with most banks would be very slim at best. And if your company is relatively new or coming back from a slump, your chances become even slimmer of qualifying.
Fortunately, there is such a thing as accounts receivable factoring if you are having it “up to here”, pardon the colloquialism, with waiting two months or more to receive payment. This eliminates the long and often inconvenient waiting for your payment to come in. You would then have the money you need to pay for other expenses, such as payroll, payment for suppliers and other miscellaneous business expenses.
So what is factoring and how does it work? Simple!
You send the invoice to your client once your work is all done. You also send a copy to the accounts receivable factoring company.
The financing company advances you 70% to 90% of the invoice (a small reserve is held to handle disputes, etc.)
You get the funds in 24 hours
The reserve would then be paid back as a rebate, net of a small fee, once the customer has paid up to the financing company.
You do not need to make cockamamie excuses to staff members and suppliers alike – with accounts receivable factoring, you can make those payments promptly and receive invoice payment promptly. Within a day of submitting the invoices, chances are the money would be available to you.
Accounts receivable factoring is easy to qualify for. All it takes is about a business week and you have an account set up. You need not be in the business for a considerable period of time – all you need is invoices from customers or clients with good credit worthiness. There is no sharper tool in the business tool shed than factoring, provided you regularly do business with government entities or commercial giants.
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