Many people seem to regard business financial assistance as a last resort financing option for businesses on the brink of failure. While this may have been true in the past, in recent years, such financial solutions have been widely considered as a major source of working capital for many thriving and successful business across the world today.
Banks today have come to recognize that debtor’s books, in the form of unpaid and overdue payables, can be the most accessible asset of a company. Today, factoring is now considered a viable source of funding across different industries, and a practical solution for businesses that are looking to improve their cash flow. If you think you can benefit from such a solution, you should look into finding a reliable provider with an established reputation.
What are your options?
Traditional factoring – with this option, a factoring company, will take ownership of your debtors and control your debtors book. However, there may be debtors who could have been excluded in the list may be because sale contract was not found to be strong enough, or the debt could be old. Once all outstanding debts are summed up, the factoring company will take a certain percentage of the total amount available to the business, in the form of a credit line.
In return for the credit line, the factoring company will take over the administration, ownership of the accounts payable and the responsibility of debt collection. Most factoring contracts typically involve a minimum period of two years.
Invoice discounting – this financing solution is much like factoring, although, in this case, the factoring company allows the company to retain its control over its clients and the collection of outstanding debts. However, companies will be required to provide detailed monthly reports for the invoice discounting company to evaluate and verify the accuracy of the returns. Audits may be conducted from time to time and, in some cases, certain invoice discounting companies impose penalties for any discrepancies found.
What solution is ideal for your business?
Many companies go to experts to seek advice as to which solution is most appropriate for their business. There are also factors such as the cost, administration, the control of customer relationships as well as the availability of facilities that you need to consider. If you are not quite sure which solution is ideal for your business, contact a reputable company for solid, relevant and expert financial and business advice on the business financial assistance available for you.