When your business is looking to expand, look into accounts receivable factoring as a way to free up capital. Factoring is a time-worn method of gaining quick cash to reinvest. It’s an easy way to keep your business one step ahead of the competition.
Factoring is the process of selling outstanding invoices to an outside company. The price is usually slightly less than the full amount of the debt. The average amount paid is about 75 to 90 percent. The factor company then collects the debt for you and pays you the remainder, minus a small percentage.
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Offering credit to your customers often causes financial problems if customers aren’t paying their debt. Accounts receivable factoring saves you the stress of waiting for payment. By selling your accounts receivable to a third party, you will be able to keep your business profitable.
When you give out credit to your customers, your gracious and profitable gesture of financial faith is often a double-edged sword. Customers love being able to buy things on credit, but if their payments are deliquent, you’ll find yourself in a financial mess.
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