Do You Know The Definition of Factoring?


Within the last few decades business owners have looked for a better way to define factoring. Many of the definitions we used in the industry over the last 20 years are now obsolete. This article, provided by NeeBo Capital will explain in detail how many business owners in the US, Canada, and Europe Define factoring.

Before we can jump into the real definition of factoring we must point out that the term factoring has multiple meanings. There are a number of financial strategies business owners implement that involve factoring.

 

Another point to consider is the market is always changing, face book advertising  and Search Engine optimization did not exist as a business expense 10 years ago. Times changes and so do interest rates, lending options, monetary tools, and even financial strategies.

 

Because of this it is incorrect for us to get a single definition of “factoring.” Below NeeBo Capital has included the most current definitions of factoring;

 

As of 2011 the worlds defines factoring as- the ongoing arrangement between a seller of products or services on credit and a intermediary company(factor). The factor company purchases the sellers accounts receivable for immediate cash. The factor company may also collect the accounts for the seller, offer the seller bad debt protection by taking on risk of loss, and may also track payments and perform other administrative duties.

 

Some of the services provided by factoring companies that are commonplace are as follows. The factor company can keep your invoice factoring confidential or non-confidential to your customers, The choice is yours. The factor company will collect the invoices directly from your customer if you chose or let you collect. Some companies prefer to allow factoring companies such as NeeBo to Collect the invoice because it makes the sellers look more legitimate.

 

While defining factoring it is important you understand recourse. A factoring company will offer you an option called recourse, meaning they will NOT cover bad debts. If your customers does not pay on the invoices the factoring company does NOT take on the risk. Without recourse means the factoring company will assume risk. Making the decision to pick recourse or without recourse depends on the amount of customers and the creditworthiness of your customers.

 

Today the most common method of receivables funding is a deal where a factoring company continuously agrees to buy your invoices. Also the factoring company agrees to collect the bad debts and also provide the seller with detailed reports on the status of unpaid invoices.

 

Some company define factoring as invoice discounting. The two are very similar, however with invoice discounting the factoring company does not provide administrative ledger operations. Many larger companies prefer invoice discounting. By definition factoring through invoice discounting appeals to larger companies doing over $2 million in sales per year. Therefore the amount of capital involved is a lot higher.

If you would like to know more information to better define factoring please visit NeeBo Capital’s website. NeeBo defines all of the factors involved, all of the services offered and some of the lowest rates in the industry.

 

Published by

Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at www.neebocapital.com

7 thoughts on “Do You Know The Definition of Factoring?”

  1. Great information! i wondered what factoring invoices involved. I have 7 employees and meeting payroll is not easy with this economy.

    1. Like any other profession, there are the good the bad and the ugly. Good aouncntacts work closely with their clients to find the best possible solutions at a specific point in time. There are many ways to obtain additional cash for a business. The small business person needs to run the business and does not have the time or experience to do the groundwork to find additional capital. A good accountant can identify the best options thus providing a valuable service to their client.

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  3. My brother suggested I would possibly like this blog. He was once totally right. This post truly made my day. You can not imagine simply how so much time I had spent for this info! Thank you!

  4. If the government are gntiteg their view of invoice finance from the Financial Times then we may as well all call it a day. Likewise FT articles reflect poorly on ABFA who presumably provide statistics & contribute content. Any business looking at the FT’s article on invoice finance dated dec 30th 2008 would run a long way before even discusiing such a facility. Look at the Ft’s site, search invoice discounting

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