A business can sometimes find itself facing financial difficulties due to a lack of operating capital. This can be occasioned by having most of its income tied up in unpaid invoices. Sometimes invoices can take up to six months before they get paid, making the business suffer in the process. For these businesses to stay afloat, they have to turn to other sources of funding like factoring in order to finance their operations as they wait to get paid. This enables them to continue with normal day-to-day operations like buying materials, paying bills, and paying salaries of employees. Small businesses can really benefit from these factoring services since they may not have enough money to finance operations as they wait for their clients to pay them. The financial institutions that provide the funds for these businesses usually buy up those unpaid invoices at discounted rates. This is what is referred to as invoice factoring, and the businesses are able to get ready cash to finance their operations. The bank or financial institution will then get its money back when the invoices eventually get paid. In the end, the lender gets to make some profit on top of the money they Read more »

Export factoring brings together two businesses in order to exchange the unpaid invoices of one for a monetary payment from the other. This special transaction occurs when a company finds itself in need of cash but only has unpaid invoices instead of a cash reserve. An export factor will buy the accounts receivable that are invoiced to foreign buyers at a discount rate. This is a specialized form of invoice finance which places cash immediately into the hands of the invoice seller. This may seem like a deal with negative consequences for the company that is selling its invoices. After all if the company held onto its invoices then it would receive more money rather than the discount that the factoring business will give it. However this view of things is short-sighted. When a company runs into a problem with its cash flow there are many subsequent consequences that people not directly involved in the business may not notice. A business may have many unpaid accounts receivable that are due to be paid in the future. On paper this looks very good for the business. This means that they are generating income and doing good business. However the fact remains Read more »

Over the years, factoring has become essential for most businesses. As this service has grown in leaps and bounds, so has the market for brokers that offer both advisory services as well as introductory services. Using a broker could be a good idea for companies that have no idea how to go about this process. This is due to the fact that a broker would know the ins and outs of the market. In addition to this, a broker would explain the industry jargon making it easier for you to understand what exactly goes on. Enlisting the services of a broker also ensures that you get to know exactly how the facility works as well as what benefits you stand to gain and the pitfalls that you may come across. All this shows how beneficial it would be to enlist their services. However, what do you need to know so that you have ensured you have picked the right factoring broker for your business? The first thing that a business should expect from their broker is that they will receive impartial advice from them. Brokers tend to be paid by the lenders depending on a basis of success. Thus, you Read more »