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To
Factor or Not to Factor?
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by: Marty
Milan
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By: Marty Milan
The purchasing of accounts receivable (invoices) is generally known as
factoring. Businesses can sell their invoices to companies known as
factors. Although not all business are familiar with factoring,
historians claim that factoring dates back to the ancient Roman
civilization making it one of the world’s oldest methods of
finance.
In the past, merchants used factoring to settle their trade debts among
each other. Fast forward to today’s businesses profiles and
it is apparent that factoring is still a very viable business tool for
businesses all types and sizes. Can factoring work for your business?
Consider the following benefits:
-Factoring provides a company with a continuous working capital, thus
increasing their cash flow.
-Factoring has no limits, offers quick results and it’s
accessible as well as flexible.
-Factoring stimulates growth and can finance expansion without debt.
-Factoring can increase production and sales.
-Factoring is not a lending service, rather it is thought of as a
discounted purchase.
Factors do not normally charge interest, they simply buy the businesses
invoices at a discount and collect a fee. Do not confuse the purchasing
of invoices as a loan. Many small to mid-size companies that apply for
a bank loan are usually turned down. Banks consider the amount of
assets that a business has in order to secure the loan; Therefore,
banks normally require a great deal of collateral from a business
before they are approved for a loan. If and when a loan is approved, it
may only be a small percentage
of the businesses total accounts receivable.
Factors are different, they are not subject to the same guidelines and
regulations that banks are. Factors look at the credit worthiness of
the business’s customers, not the credit of the business
itself. The purchasing of accounts receivable never creates a debt to
the business it simply gives them the opportunity to access their
future money immediately.
About the author:
You have permission to publish this article in its entirety; However,
the byline (resource box) must be left intact.
Marty Milan works with businesses to help them learn how they can
access their future money now. Aside from factoring, you can read on
various topics such as Lawsuit Funding, Structured Settlements, Selling
Your Notes and more at www.cashflowaccess.com
mailto:cashflowaccess@aol.com
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