Small and medium businesses are the backbone of economic progress in all nations. Employment opportunities, entrepreneurship, and current technology application are roles of SMEs in any economy. However, finance is the major problem for the start and maintenance of these enterprises. Below are some financial services options for the success of the small and medium businesses.
Factoring is not a loan but purchase of invoices (single or selected). Filling out and submitting an application form to a particular factoring company is the onset of the entire process. The company evaluates customer’s credit worthiness as well as the solidity of the risk and gives an advance on approval to that particular invoice. At this point, the financing company takes over the account handling and even communicates directly with the customers to pick their statements. If the customer fails to pay any bill then the funding company will act accordingly as it is the collection body.
Types of factoring transactions :
Recourse and Non- recourse advance are the famous factoring transactions even though there are others. With recourse advance, you are answerable to the financing company if the customer fails to pay his/her bills while with non-recourse advance you will not pay anything if a customer fails to complete his/her payments. The financing companies charge more (interest rate and fee) for non-recourse advance than the recourse advance because of greater risks.
Merits of factoring
Cash flow improvement, ready cash for your needs without relying on credit weight, and perfect customer relationship are some of the advantages of factoring.
Examples of factoring companies and their contacts
Orion Business Capital, Bibby Financial Services (BFS), and CBAC are some of the famous factoring companies worldwide. Dial 877-210-9748, 0800-919-592 0r 01-877-769-1469 to contact IFG, BFS, and CBAC respectively.
Accounts receivable financing
Several small and medium businesses that offer credit facilities always experience extreme financial shortages that can even lead to their closure. Accounts receivable financing provides you with a regular cash flow to avoid such risks. Conversion of credit sales into immediate cash is the main work of this financial service.
We admit that some small and medium business financial services have many requirements but this is not the case for accounts receivable financing. The financial capability of your credit sale customers is the only major requirement to get started with the factoring companies. Both products and services companies accept receivable financing but invoice is necessary as it binds and acts as a proof of receivable amounts. The amount of cash the small and medium businesses qualify for in accounts receivable financing depend highly on the age of the invoice. Current invoices from buyers with strong financial capability attract more funds from the companies as it lessens the risk they take up than the old invoices and less financial capable customers.
Advantages of accounts receivable financing
A shorter application period, faster fund release, little underwriting, and lower monthly rate charges are some of the advantages that make account receivable financing standout amidst other small business financing services.