Factoring Companies - Small Business Budgeting Part 2. - When?

Factoring Invoice - The importance of budgeting regardless of how small your business is.  Part 1 - Why create a budget?  It's not just the numbers!

One of the questions that often comes up with clients, prospective clients and referral sources is whether a factoring company is purchasing accounts receivable by providing a factoring facility or if they are making a secured loan with the accounts receivable as collateral.  The truth is that you will get a different answer depending on who you ask and the details of the factoring facility in question.  

Before we get too far into this discussion let me make it clear that I am not a lawyer and that this blog posting is informational only and is not a substitute for legal advice from a lawyer who specializes in these types of transactions. My staff and I have worked with some great lawyers to whom we can refer you if that is of interest (make a comment to me and I will send you the information).   

Article 1: An Overview of Small Business Credit and Collections. This is a first in a series of blog postings from our online invoice factoring  firm.  If you like this articles please follow us on facebook or twitter (see follow buttons on the right).

If you are a student looking for information on factoring as it relates to math this is not for you.  

This is article is written for the business owner who has heard the term before but doesn't have a real idea what invoice factoring for business is.

Wikipedia defines factoring as the following:

"Factoring is a financial transaction whereby a business job sells its accounts receivable (i.e.,invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business. Factoring differs from a bank loan in three main ways. First, the emphasis is on the value of the receivables (essentially a financial asset), not the firm’s credit worthiness. Secondly, factoring is not a loan – it is the purchase of a financial asset (the receivable). Finally, a bank loan involves two parties whereas factoring involves three."

Ok, now that we got that out of the way.  We can talk about how factoring can help in the real small business world.  As defined above factoring companies buy invoices from small business for cash the business can use today, instead of waiting for their customer to pay in 30,60 or 90 days.    

There are a few important things that everyone needs to know about factoring before they start.

1. A factor will require that your customers pay the factor directly when the invoice becomes due

2. In most circumstances your business, and you personally will be liable for the advances the factor made to your firm if the invoices aren't collectible

3. A factor will typically file a lien against your business to secure the advances they have made

4. You will pay a fee for the factor service that usually tied to the time it takes your customers to pay.  The longer it takes, the more it costs

5. A Factoring company will typically advance you 80% of the value of your invoices

6. Factors will only finance business to business sales.  Sorry, consumer obligations probably wont qualify

7. Your invoices will have to be labeled as due and payable to the factor at the factoring companies address

This is only a basic description of factoring.  At Fast A/R Funding we are a little different.  We do everything online.  We don't use paper and we get things done.

For more information give us a call at the number above or click one of our fill out one of our "get more information" forms.  One of us will get back to you quickly.

One of the things that affects just about every small business is the price of fuel.  

Accounts Receivable Factoring Services in Los Angeles

Los Angeles is home to more small businesses than any other city in America. As one of the world’s largest regional economies, Los Angeles hosts 23 of California’s 57 Fortune 500 companies. Small businesses and start-ups struggle the competition, high cost of living, and some of America’s highest taxes, leaving many looking for small business financing. Fast A/R Funding fills that need with accounts receivable loans and commercial finance factoring.

Article 3: Outsourcing

Small business owners throughout the U.S. are seeing signs of life for their companies as customer demands slowly increase. While this is good news for the economy overall, for many entrepreneurs, the economic recovery is exceedingly frustrating because they lack the small business financing to meet growing demand.

As we head into 2011, small businesses are seeing signs of international economic recovery. For many, these signs are a call to action, ‘‘’All signs point to a continuing improvement in economic conditions for 2011, which means small business owners need to be thinking now about how best to take advantage of business opportunities in the new year,’ says Jason Fryer, Head of Small Business Services Australia, American Express” in a recent www.news.com.au article.