Factoring accounts receivable proves to be beneficial for every industry. Nowadays, large numbers of manufacturing units, IT consultancies, staffing establishments, health care providers and retail firms are searching for accounts receivable in order to meet their instant money requirements. That is why invoice factoring with Universal Funding and other companies has been increasing in popularity.Have you ever though why is it considered better than the conventional bank loans? What are the reasons behind its growing popularity? If not, let us find out these things in this article.
For those who are inexperienced, factoring accounts receivable is a fast, cheap, hassle-free and a flexible method of getting an easy access to money for expanding one’s business. If you own a business and apply for a loan, you must have gone through a long procedure. Along with offering different important documents, as an applicant you need to show why you are applying for a loan, attain personal guarantee, offer lien assets and fulfill various other responsibilities. Once your loan gets an approval, the bank decides interest rate and payment schedule. Factoring accounts receivable is one of the easiest ways to attain fast money.
The only thing that you need to do is to fill an invoice financing application form and then send it along with other important financial documents to any of the invoice factoring companies. These companies demand financial documents in order to validate credit worthiness of accounts receivable vendors and their customers against whose invoices as well as accounts receivable were drawn. If the invoices are worth the credit, they are immediately approved and acquired by the factoring companies. These firms offer immediate money against accounts receivable at attractive rates.
There are neither excessive interest rates nor any unnecessary charges charged by the banks on the factoring accounts receivable. You will come across many factoring firms that provide advance rates of nearly 99% on the accounts receivable. Once you attain the money, you can use it as you want. You can use it for purchasing raw material, machines, for payrolls, for distribution or for marketing purposes. The factoring firms unlike conventional financial organizations and banks is not at all concerned with what the business owner does with the cash provided to them. Most significantly, there is no need to pledge any asset or security while factoring invoices. One needs to just sell their accounts receivable and get money in exchange provided by the factoring firm. With so many advantages, it is not surprising why medium sized and small businesses consider factoring accounts receivable as the best option.
Selling factoring accounts receivable is much needed than a bank loan. Firstly, it is simpler and easier as it does not demand any collateral or credit history. Secondly, there is nothing to pay back as the money belongs to the firm. No paperwork is needed as firms do not have to send notices for payment. Statements are also eliminated. Factoring of receivables lessens the credit risks for a business owner as it brings the cash receipts. This keeps the business away from debts. Moreover, factoring of accounts receivables also lessen the cost of collections.
James Vasanth writes a blog on Alliance One LLC about Invoice Factoring, Account Receivable and connecting the dots between online and offline.