A factoring company is a great resort for businesses that have cash flow problems because of their clients who do not make immediate payments.
The factoring company is often confused with a loan lending company, but it is not so. The factoring company involves a business transaction where they buy the invoice or the accounts receivable from an organization at a discounted price and provides immediate funds to them in return of the receivables. Factor Company then keeps the invoice with them, takes the payment from the client and returns the balance to the organization after charging their fee.
Factoring company is also known as accounts receivable factoring company, invoice financingcompany, accounts receivable financingcompany, receivables factoringcompany, invoice discountingcompany, debtor financingcompany, and invoice factoring company.
Factoring is a great solution for companies who want immediate cash to run their business smoothly without waiting for the funds. The factoring enables an organization to smoothly run their business without interruption due to the lack of working capital. The company can get cash whenever they need it. Factoring is a great option to generate immediate money and there is no need to take a bank loan.
To sum up the advantages of the best factoring company, here are some pointers for you:
- It improves a company’s cash flow immediately when the funds of that organization are tied up due to the slow-paying clients.
- Validates the creditworthiness and credit history of the clients.
- Helps to collect money from the clients
- If you are a startup, the factoring company can become your savior
- Respond to our emergency needs in critical situations
The account factoring is used by many industries like advertising, trucking, manufacturing, staffing, distributors, IT, security, technology, hospitals, consulting, food, logistics, import, etc.
The factoring companies can offer you two types of factoring. One is the recourse factoring and the other is the non-recourse factoring. In non-recourse factoring, if the customer does not pay the invoice to the factoring company, the factor company will bear. In a recourse factoring, your business will have to make all the payments even if your client does not pay you.
The charges or the fee of the factoring company will depend on the type of factoring, amount of finance, and the worthiness of bills. Normally the factoring companies charge a feeranging from 1.2% to 3.5% every month.