The Power Of Factoring – Purchasing Account Receivables At Discounts

Posted on November 10, 2008
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Suppose you need immediate money either for some personal of business purpose, although your payments are due, but you can’t get them immediately, then what to do? We understand all this is very common but these situations are not very easy to handle, and can be extremely stressful and frustrating.

Money is something when you need it badly it always seems out of reach for most of us. Similarly, it can happen to big and small businesses alike. Fort example, our needs can range from the pressing, such as paying bills or salaries to gradual or long-term, such as funding a child’s education or business expansion.

Although, there are payments owed to you or your business but there is no way to immediately access them. You have your own reputation in the market, so you cannot wait for a long time. You need to pay your lenders, your customers, paying salaries to your staff and other sundry expenses. In these situations you usually try explore every possible opportunity, such as asking your friends, trying to find a way out with your bank, but in case they are unable to help you will feel stressed and frustrated.

There seems to be no easy solution. But, here comes—factoring, that means when a company either purchases your accounts receivable or loans funds you against your accounts receivable. This is called factoring which can be very helpful to meet your emergencies and help improve your company’s liquidity.

In summary, factoring is a financial term, which means the process of purchasing commercial accounts receivable or invoices from a business at a discount. So, we can also say that factoring is the practice of selling invoices to a factor or agent in return for immediate cash.

That means a factor or agent or factoring house purchases the receivables at discounts and then paying the business a certain percentage of the receivables face value. The factor collects payment for the invoices and accepts any credit risk attached to them. So it is one of the most common methods by which businesses obtain cash for receivables with due dates in the future.

There are many banks, financial institutions and independent lenders who do factoring. Search the web or ask some financial planner, CPA or an attorney in your area for more details.

Rakesh Sharma “Jack” is a renowned copywriter, article writer and SEO expert based in India. He has written dozens of ebooks/how-to guides, hundreds of special reports and when it comes to small articles there can be a very few writers who have touch an unimaginary figure of 8000 articles. He frequently writes on real estate, finance, mortgage, debt consolidation and debt management along with other general topics of interest or as per the clients’ requirements. To know more about him and to use his services, visit: www.egzone.info.

If you wish to discuss some topic of your interest, visit his blog: www.egzone.info/blog.

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