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Protect Your Business Insurance Using Accounts Receivable Factoring

By Kristin Gabriel

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Published: 30Oct2011
Word count: 516
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Money is tight, however, you still know you need to protect your business with the right kinds of insurance. Regardless of the state of your businesses cash flow, it is essential to make sure your premiums are paid on time because maintaining insurance is crucial. But you first you need to determine which kinds of insurance you need.

Casualty insurance insures against loss or damage to your business. This type of insurance is often packaged along with property insurance. Property insurance will insure you against damage to the location of your business and its contents. like furniture or computers and equipment. It can also insures the property of others in your control when the loss occurs and can be for a specific risk. This is somewhat like a fire insurance policy that insures only against a fire loss at that location.

Next is liability insurance which will insure your company against the legal liability imposed against your business in the case of negligence of employees or the business, and it protects you against any judgments that might be incurred in potential lawsuits.

Then there is commercial auto insurance, covering the vehicles most often used by your business and the property damage to those vehicles or damage caused by them.

Here is one you may not know -- business interruption insurance, which insures against loss or damage to the cash flow and profit of your company. Here's how it works: if equipment or property is damaged, causing a disruption your normal f business, this type of insurance provides income during the interim period.

Last, we have all probably herard about workers' comp insurance which insures your employees against on-the-job injuries. Requirements vary state to state, but employers must pay in to the state system.

Now you need to determine which type of insurance is right for your business, and making timely payments on your policies is going to always be crucial. Why? Because defaulted payments result in canceled policies. This means your business is exposed to potential loss. But some months making these payments can be difficult. If you find yourself short on cash with insurance payments due, consider factoring receivables and your open invoices for an immediate influx of cash.

Accounts receivable factoring is a practice wherein a business sells its accounts receivable invoices to a third party at a discount in exchange for immediate cash with which to finance continued business. It is a method used by businesses to cover short-term cash needs during periods in which these needs exceed cash flow. Factoring services is not a bank loan; it's not the business' credit that's up for inspection but rather the debtor's (i.e., the party named on the invoice) and there's nothing to repay. Once popular in early merchant banking activities, invoice factoring is experiencing a resurgence in popularity as many small businesses struggle with economic recovery today.

Kristin Gabriel writes for The Interface Financial Group (IFG). The factoring services company provides short-term financial resources serving clients in more than 30 industries. IFG offers expertise in construction factoring, accounting, finance, law, marketing and banking.

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