Traditional and single invoice finance has to be the saviors in a world full of cash flow needs and difficult financing options. They’re definite lifesavers if you ask us and here’s why.
In an invoice factoring arrangement there are three main characters or parties: the company selling its receivables, the customer who owes the company and to whom the receivables are attributed to and the financing agent called the factor.
In this scenario, the company sells its right to collect against the receivable by virtue of its sales invoice to the factor in exchange for immediate cash which is to be received before the customer pays their dues. The factor shall bear the burdens of collection and provide an amount that is equivalent to about 80-95% of the invoice’s total value with the remainder being held up until the customer pays in full at the maturity date of the invoice. It is only then when the balance is forwarded to the company less the fees agreed upon.
There are many reasons as to why these two methods are widely used and below are only some of them.
- It’s relatively fast. – Ever heard of a loan or similar other financing medium that releases cash in a matter of a day? No of course not. Well not until invoice factoring. Most providers can approve and release the cash in as fast as twenty four hours.
- There are lesser requirements to deal with. – It’s less of a hassle because of the far lesser amount of requirements to submit during the application process.
- It’s no form of debt. – Wait what? Yes, you’ve read that right. Factoring creates zero debt because it is not one. It also does not bear all the other strings attached to one such as interests and penalty fees.
- It injects immediate cash into the system. – With the swift process, it enables the immediate injection of resources into the cash flow thereby strengthening the working capital as it does. This is great in terms of liquidity purposes and frees up any locked in cash within invoices.
- Even struggling entities can use it. – Really? Yes really. This is because traditional and single invoice finance providers bank on the customer’s creditworthiness and not on the company’s. After all, it’s the customer who has a debt in this situation as evidenced by the sales invoice.
Learn more at this site: http://workingcapitalpartners.com