1. Factoring Companies Offer Services on the Value of Receivables
Factoring companies help many small and mid-sized businesses to improve the cash flow in their
businesses. They can do this by trading their account receivables. This is, in fact, a very successful
financial system that helps the businessmen get relieved of the financial problem immediately. Many
people still have some misconception regarding factoring and they confuse it with loans. The basic
difference in factoring is that there are three parties involved unlike loans where there is deal between
two parties only.
Factoring Companies
The loans are given to the company on the basis of the company's credit history whereas factoring is
based on the receivables and their value. However, there are certain points that are taken into
consideration and then determined whether the industry or the company is a good candidate of
factoring or not. Many companies do not have an idea that they are already good candidate. However,
there are certain rules and conditions that have to be applied. It may vary from one company to another
and you should learn about all this before you finalize the deal.
Usually a factoring company pays 75 or 80% of the value of the invoice to the company and the rest of
the amount they pay after the money is recovered from the buyer. They deduct their fees and charges
from that amount and then pay the rest of the money. Usually the credit is for 90 days as maximum
limit. It also depends on the factoring company and their flexibility.
With massive use of Internet, the factoring company can be accessed right from the comforts of your
home or office. You can even solve the financial problem of your company even when you are traveling
or you are on some tour. When you are in business, you need to have some alternative financial
arrangement also and so factoring companies are in great demand these days. If the company is finding
any kind of problem and there is shortage of fund within the company, there can be finances arranged if
you know a good factoring company. You can get the problem solved within few hours only.