The Main Reason Why Enterprises Need Business Receivable Factoring
by Connor G. Schiffman
Factoring is a concept used in modern business ventures to refer to the action of selling receivable accounts to third party companies who have commercial interests at hand. This is a swifter way for enterprises to acquire finances as compared to the normal payments made by their customers during any transaction activity. This is the reason why knowledge regarding business receivable factoring is important.
A factor is an enterprise that offers quick money to another enterprise and this procedure is championed by very many attributes. These characteristics depend on the recipient of the funds allocated in terms of their ability to pay back the money they owe. For instance, stipulated amount of time and payment rates are normally issued to the recipients.
Factoring payment modes are categorized into two. Firstly, a third party may receive their cash in lump some together with interests accumulated. In this occasion, money is paid back in its totality to the lenders. The second approach is via clients who purchase services and commodities from enterprises. This indirect approach deducts the funds at a specific rate until all the money is repaid.
Factoring funds must not be confused with bank loans at all times because of restrictions dictated by each financial source. These restrictions have higher impacts on bank loans and thus firms are compelled to meet certain conditions. This type of strictness lacks in the factoring process because lenders only require customer invoices for them to disburse funds.
Invoices are very essential in any business process for they depict the amount of money paid by customers after they have received certain goods and services. Most companies use invoices as a tool to regain their money from lending endeavors.
Receivable factoring in business usually takes place within twenty four hours thus a very effective way of raising urgent cash. Cash flows in an enterprise can be amended in the long run and this usually translates to maximum profit making. This financial tool however is invisible on balance sheets because typically, it lacks the typical debt resemblance.
This financial activity began several decades ago as trade was at its budding stages from all around the world. Its need rose as urbanization was taking place because during this phase, more profit oriented enterprises were being built. Increasing consumer needs driven by their tastes and preferences also necessitated this need.
As shown above, the economic system is like a food chain comprising of producers and consumers that have to depend on one another for survival. The producers in this context provide commodities and services as consumers purchase them.
Connor G. Schiffman has 27 years of experience in commercial lending including factoring, asset based lending, and banking. Connor helps readers manuver through all the account receivable options providing practical and useful knowledge to better understand all your lending options. If you want to learn more about <a href="http://www.receivablefactoring.net/factoring-company/">Best Factoring Company</a> he recommends you check out <a href="http://www.receivablefactoring.net/">www.receivablefactoring.net</a>.
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New Unique Article!
Title: The Main Reason Why Enterprises Need Business Receivable Factoring
Author: Connor G. Schiffman
Email: rafael.e.zabala@gmail.com
Keywords: invoice factoring service,invoice factoring broker,debt factoring companies,factoring and invoice discounting,trucking factoring compies,invoice lending,factoring freight,best factoring company,working capital company,capital business funding
Word Count: 429
Category: Finance
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