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Tips on Making Your Working Capital Grow

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Published: 12Jan2010
Word count: 515
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A business, regardless of how big or small it is, faces lots of challenges along the way. Oftentimes, it is about the financial aspect of the business. Having access to a steady financial source is very difficult to achieve. Although you think you have done enough to save on expenses, still, there will be times that you'll experience financial difficulties.

That is why it is important that you know what to do during tough times. Have you heard of accounts receivables factoring? Would you like to know what factoring is and how it can help you? What can you do to make your working capital grow?

Accounts Receivables Factoring - Why Be Interested? Accounts Receivables Factoring is a business financing method where a business owner sells his/her accounts receivables or invoices to a third party lender (also called a factor). The business owner will be given the instant cash by the lender or the factoring company. In return, the lender gets to take over the collection of the business owner's accounts receivables.

To explain further, let us say you have an invoice worth $1,000. When you sell this invoice to a factoring company, you will be given 80% cash from the total value of the invoice you sold.

The factoring company will then send your customer a notice that his/her debt is now payable to your factoring lender. In the event that your customer has completed his/her payments, then the other 20% will be given to you.

Account receivables factoring is a recognized business financing strategy. Most businesses have used this method of factoring. Some entrepreneurs that failed to reach or submit the requirements of traditional loans or bank loans found accounts receivables factoring as another ideal solution. Will Your Customers Agree?

Most consumers are already familiar with how a factoring works since it has been used by most businesses, big or small. But if your customers are not aware of this kind of business financing strategy, your factoring company or lender will send them a detailed letter of explanation on how receivables factoring is done. The letter will also assure the client that the whole process is very safe and legal.

Can factoring really raise your working capital? Because the cash is given to you by your factoring company, you can already use it to purchase new machine or equipments, hire new staffs, launch and advertise new products or projects, etc. If unexpectected expenses arise, you can be sure that you won't have problems dealing with it since you can have the funds available on time.

The approval of your application can only take a few minutes and you can get the money within 24 hours. That is how fast, quick and easy the approval and processing is when applying for account receivables factoring.

Secured loans require a property or an asset as collateral whereas in account receivables factoring, you only need to submit your invoices. Always keep in mind that if you have good to excellent credit, you can negotiate for a lower interest rates and best deals from your factoring lenders.

Irish Taylor is a business loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to working capital, SBA loans and new business loans.

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