What is Factoring of Receivables and How Can You Benefit From It?

If your business is cash-strapped and you’ve heard that factoring could be a great way to get out of a financial rut, then chances are, you’ve thought about factoring of receivables. Factoring is not rocket science. It’s actually a simple, cut-and-dried arrangement between you and a third party known as the Factor or factoring company.

Whatever business you engage in, whatever industry you belong to, you’ll always need a steady flow of cash to offset any changing cash needs that occur in the course of doing business.

For example, some of your equipment or tools may suddenly need to be repaired or upgraded. You may need to hire additional temporary staff whom you need to pay per day of service rendered. You may be offered bargain prices on materials that are important to your operations, but the catch is, you need to pay in cash for all your purchases.

All of those activities require spending, which wouldn’t pose a problem if your business had a continuous stream of cash payments. However, most likely what you have are accounts receivable or payments that are yet to be collected. Unfortunately, the waiting period can tie up your finances.

You have options to manage the situation:

You can defer making any purchase, no matter how necessary, until you have enough funds. The downside of this is you could jeopardize the efficiency and quality of your operations.

You can take out a loan and have to contend with interest rates, as well as expose yourself to the risk of being unable to meet your obligations on time because your account receivables don’t clear up as scheduled.

You can apply for factoring.

Factoring and Your Business

To understand what is factoring of receivables all about, review these steps:

Present yourself to the Factor as a business that needs immediate access to cash and has a number of accounts receivables.

Offer to sell your invoices to the Factor. Invoices are proof that products or services have been delivered to creditworthy customers, but no payments have been made yet, and as such, need to be collected.

The Factor calculates the aggregate amount of the invoices. From the total, the Factor buys the invoices at a discounted price. The payment is given to you immediately, in cash.

The Factor then takes care of collecting from the customers, and administers the sales ledgers.

When you consider that 26% of invoices that are 3 months old, 70% of invoices that are 6 months old, and 90% of invoices that are 12 months old become uncollectable, then it makes sense to inquire about your options with a factoring company such as Neebo Capital as soon as possible.

Neebo Capital will be able to inform you more about the details relevant to what is factoring of receivables, such as how much you can get for your invoices, in order to maintain the solidity of your business operations and the stability of your cash flow.

Inventory Finance combine with Accounts Receivable Finance

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Accounts Receivable Inventory Finance is a fundamental form of commercial lending that is collateral based. This type of financing combines elements of short term business loans with secured lending. In the purest form a commercial borrower will use the value of their receivables and their working assets or inventory as collateral to secure financing as a way to produce and market their services and products. Financing is repaid when the inventory is converted to cash. This is done either from direct sales or through collecting accounts receivable notices. Depending on the borrower’s risk profile, the lender will exercise different degrees of control over collateral in order to minimize the risk of the transaction.

ARIF Variations

There have been many variations of ARIF developed over the years. There are some forms of ARIF that will include assets other than inventory and receivables. In addition, the controls over the collateral have been changed and repayment sources are expanded to not only include the conversion of working assets.

This type of loan used to only provide funds to finance inventory, but now can be used for financing acquisitions, restructuring debt, and to hold companies through times of distress. Service organizations, importers, retailers, distributors, wholesalers, and manufacturers all use Accounts receivable inventory finance to meet the needs of their business. While there have been several changes made to this form of financing, it still remains one of the most essential ways for a borrower to leverage their assets in order to get financing.

Why Use Accounts Receivable Inventory Finance?

Many ARIF relationships have a moderate to high risk. A borrower will turn to this type of financing when they are unable to get another type of financing. Borrowers using this type of financing are typically not as financially strong as another commercial borrower. There are some reasons for this, perhaps their company operates in an industry where there is significant seasonality or has a high volatility. Some companies are experiencing a rapid growth and need the money quickly. This type of borrower exhibits a higher risk of default characteristics including:

High leverage
Marginal profitability
Limited cash reserves
Limited working capital
Collateral pools that are constantly changing and whose value could fall quickly.

ARIF Structure

ARIF transactions that are properly structured will limit the risk of default by imposing certain controls on both cash and collateral of the company that has borrowed the money. When the loan is margined properly and prudent control processes and monitoring is applied by the bank, the risk of loss can be less than some of the other types of commercial lending that is available. The key is to minimize the risk. When a borrower poses a significant amount of risk, the lender will need to implement more control over the loan. Lenders have to have a large amount of management expertise including a great understanding of the business that the borrower is in and good reporting systems. In addition, the lender must keep ongoing supervision of the relationship and collateral of the borrower.

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Factoring is Great for Large Holiday Orders

holiday factoring — If your business needs extra working capital to get you through the holiday season, factoring is definitely something to consider.

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Recourse factoring or discount factoring is a way for a business to get immediate and flexible cash flow to help your company restructure, grow, and take advantage of discounts from suppliers for larger purchases or for early payments, or even to use to fund your payroll. There are many businesses that need more cash flow during different seasons because of changes in demands. This is why factoring is great for use when making large holiday orders.

Discount factoring is a business financing method that is widely accepted and is used by many large companies that are very well-known. Discount factoring is cheaper than traditional factoring and is also less restrictive than equity financing. It allows a company access to money without giving up any shares of the company as well as giving you daily and weekly access to availability when requested. In addition, discount factoring can increase and decrease based on the current needs of your business. In addition, you will gain administrative support to help manage receivables without needing more staff.

Discount Factoring: How it Works

There are several companies that provide discount factoring for businesses that have different capital needs. The company that provides the factoring will work out an agreement with your company. The agreement will include terms that will be used for each of the invoices.

Once the agreement has been put in place the invoice will be sent to your customers. Depending on your needs and the factoring company that is chosen, they may send out invoices for you. Your company will receive at least 90% of the invoice immediately. The factoring company will keep a percentage of the fees in order to cover their own expenses.

The factoring company will work with you and your consumer directly to make sure that timely payments are made. This will help streamline your accounts payable department, increase communication with customers, and provide faster feedback on any problems that may occur such as lost and damaged items. This is extremely beneficial during the holiday season.

When it comes to recourse or discount factoring it is important to consider whether or not it is the right solution for your particular business. During the holiday season discount factoring can become quite useful as it will provide your company with the money that it needs in order to fulfil holiday orders.

Factoring Advantages

Another advantage of using discount factoring is that it will provide your company with access to experienced and professional business development officers. These individuals will be able to help you determine what the benefits of factoring are and how factoring can help meet your current cash flow and business needs. Financing specialists will work with you directly to help create a capital solution that will work best for your particular business.

Factoring is not for everyone and as a business you will need to determine which form of discount factoring will be best considering your particular situation. If you simply need extra money to get you through the holiday season, factoring is definitely something to consider.

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Invoice Factoring for Technology Staffing Companies | Tech Staffing Factoring

Companies that handle factoring for tech staffing companies have been funding payroll and growth for staffing companies for decades. What kinds of things can these companies do for your technology staffing company?

Companies such as Neebo Capital are proficient at getting maximum cash flow for your staffing company, eliminating bad debt, offering full payroll services, helping out young companies trying to grow, and some of these companies are great for brand new upstart companies because no minimum volume is required to get a foot in the door.

Does your company need cash flow sometimes, but not all the time? Sometimes, as-needed cash flow is essential. If the cash flow of your business suffers sometimes from seasonal ups and downs, customers not making as many orders, or orders coming in unexpectedly, you’ll discover that a cash-only program can really do the trick. When you require the cash, just send the timecards and invoices on customers who are credit-approved, and if you’ve chosen a fast-acting company, the cash can be transferred into your account the very next business day.

Your company may need maximum cash flow too. If your company is growing, you may want maximum liquidity to come from your assets. Try to sign up to get the maximum amount of cash flow. You will then just have to send in your weekly timecards and invoices, and you may get up to 90% of your cash, or even more, in your account the very next business day. Some of these companies can even help your business by cutting down on your expenses, eliminating bad debt, or cutting down on your overhead too. Focus your own staff on building the business, not on making pesky collection calls.

Some of these companies can also provide cash plus total services. If you’re trying to find a complete solution that offers administration and working capital, go for a full-service approach. Not all companies will provide a full range of services, but you should take advantage of them if they do.

A lot of these companies have national clients, and they manage hundreds of companies and clients all over the country, and they offer a full range of services too. Call and ask what they offer, and don’t be shy about finding out what they can get your company, outside of just quick cash for your invoices. Take advantage of the full suite of financial services that many of these companies offer.

Factoring is a normal and good part of a lot of different industries and businesses. It is when an outside company purchases accounts receivable. Factoring helps businesses out by giving them the power to make sure growth can happen without incurring debt or diluting their equity. Factoring for staffing companies is very common, and you should look into as a very viable way to get a cash infusion into your business without having to do some of the more unsettling things like getting debt or having to sell off a part of the company for some much-needed capital to help the business grow.

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Local Medical receivables lender | We finance Medical receivables!

Medical receivables lenders — Medical receivables financing is different from getting loans from medical financing companies. It is sometimes called medical factoring, and it is different from ordinary monetary assistance that is offered by lending institutions. As opposed to a loan, medical receivable financing puts more of an importance on the valuation of a company’s receivables and upcoming potential for earning, instead of on its prior business performance.

Medical receivables financing is a great solution to moving your small private medical practice forward.

Managing a business that is involved in any facet of the healthcare or medical services industry is tough enough just on its own. It can get more complicated when you add all the difficult billing processes to it that are currently being forwarded by healthcare payers from third-parties. Collecting the money owed to your small private medical practice can be extremely tedious and painful to do.

However, there is always the option to get monetary help from banking institutions that are traditional in nature. However, a lot of these lending institutions have some extremely strict criteria. This makes it harder for a lot of health care operations at the professional level to qualify to get financing, medical equipment loans, or working capital.

Medical receivables financing is different from getting loans from medical financing companies. It is sometimes called medical factoring, and it is different from ordinary monetary assistance that is offered by lending institutions. As opposed to a loan, medical receivable financing puts more of an importance on the valuation of a company’s receivables and upcoming potential for earning, instead of on its prior business performance. When you do medical receivable financing, you are getting rid of your medical invoices for fast cash, and you are not taking out a loan.

It is a speedier way to get the working capital that you need, because medical institutions and healthcare practices usually wait about a month to three months to get paid. They may be forced to take out small business loans from medical finance companies to get the resources they need to continue on with their further operations. These loans can take between one month and two months to get funding and approval. However, with medical receivables financing, you can get a quick influx of capital, and it is unnecessary to wait to get paid. When you use a medical receivable financing service, you can get the funding the day after you make the request, in some cases.

There is no limit to the availability. Medical financing companies base the amounts of their loans on the past performance of an enterprise, tax returns, and repayment history too. You will need to have excellent performance and superb profitability to get the approval that you need for these loans and to qualify for any real funding. This isn’t the case with a good medical receivable financing service. As long as the business you have is making invoices, you can get access to the capital that you require, and there is no cap on how much you can qualify for.

There are highly competent financing and lending advisors that can help you out in all areas of your healthcare and financing operations. Discuss with some of the medical receivables officers at a reliable company about just how much financing you can get for your company, and also let them help explore some of your options with you too.

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Medical accounts receivable factoring | We offer fast Medical receivable factoring

Fast Medical factoring — Medical factoring is excellent for small, private practices that don’t have the money to move their business forward in the moment.

Medical accounts receivable factoring is sometimes a necessary part of running a small medical practice or a private office that takes in new patients because it’s the only way to ensure that the business stays afloat, moves forward, and can expand as needed. It’s just one of the most essential ways to help get that much-needed working capital to move the business in a good direction, even when you don’t have the money yourself. It can be hard for a struggling healthcare specialist to move their business in a positive direction when their capital is held down.

Why should you have to wait one to three months to get the payments you need from your patients, when there are medical accounts receivable factoring companies that can give you the money up-front for those invoices so that you can have the working capital to move forward. You can get cash advanced on your accounts receivables in less than 24 hours in a lot of cases.

What is medical factoring? Factoring is taking the accounts receivable of a business and turning them into cash when the outstanding invoices are sold to a “factor” for a discount. It’s true that you’re not going to get the same amount of money for your invoices, but you are going to get close to 80%, and you are going to get the money right away, which makes it kind of worth it. Accounts receivable factoring gives the business the immediate cash stream needed to manage its function in a more efficient way.

A lot of businesses just haven’t considered factoring when it comes to looking for financing, and that is a darn shame. They might not understand factoring or how it could help them. They need to realize, however, that factoring is one of the oldest methods of offering working capital to help businesses deal with their cash flow needs.

Cash flow problems can always happen at the inception of a business, in the beginning stages of business development, or throughout periods of rapid growth. Cash flow can be a real problem in the healthcare industry because the completed work might not be paid for, for one to three months after the invoice is issued. So, a lot of businesses try to apply for small business loans.

However, the ordinary kind of borrowing increases the business expenses, and it often necessitates more collateral too. This is not something that a lot of doctors relish, and they don’t want to come up with a lot more money to pay back the loans, when you take interest rates and terms into consideration, but they are unaware of the alternative of medical accounts receivable factoring.

The factoring company will just evaluate the strength of the client’s accounts receivable, and based on the credulity of the doctor and the patients, the company will give money for the accounts that haven’t been collected on already. That is an excellent thing for small, private practices that don’t have the money to move their business forward in the moment.

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Sub-Contractor Factoring Is Tough | We offer Sub-Contractor Factoring

Sub-contractor work can be tough if you don’t have the right sub-contractor factoring company to help you out with your business and financial obligations. Making payroll accounts and paying suppliers can be a financial strain on the business, and it can be almost impossible when you have to wait one to three months to get paid for a job you’re doing.

The scenario is pretty common in most industries, and it is especially common when a small or mid-sized sub-contractor doesn’t have enough cash reserves to float the payroll or purchase supplies or equipment. It might slow the business down to an absolute halt. That can be really tough on the business for sure, and it might make the sub-contractor go under before they can afford to finish the job. That’s why it’s so important to have a sub-contractor factoring company behind you ahead of time so that you can get backed up in the event of a financial emergency.

A lot of sub-contractors would just try to apply for a line of credit from a bank, or another financial institution, but that would not be the wisest move. They can get the best terms with sub-contractor invoice factoring. They can get a serious cash advance to help finance the ongoing costs of expanding and paying for their payroll and equipment costs, or whatever kind of related business expenses are related to that industry. A financial institution might require construction subcontractors present several years of financial statements, and if they get approved, it might take several weeks or months to get the money that’s necessary to build the business. No one should have to go through that in order to get the money they need to grow their business.

Invoice Factoring For Sub-Contractors Is A New Solution

Sub-contractors can make payroll and pay their suppliers without the need for a loan. An invoice factoring plan can be just the right solution for you or your newly budding small company. Sub-contractors should be able to get paid immediately for a job. Immediate payment has a lot of benefits like immediate cash flow, enhanced efficiency, and it enables you to expand your sub-contracting business very quickly.

Factoring Works Really Simply Too

All you need to do is create your invoices for your completed jobs. Then, you sell your invoices to a factoring company who will give you cash immediately for them. Note, you don’t have to have completed the job yet, but if you have the invoice, and you are committed to completing it, you can probably still get an advance from a factoring company. If you are up to the task of finishing a job, but you don’t have the resources or equipment, a factoring company might be able to help you with the money you need to get started. It can be that simple to get your feet off the ground if you are a newly starting company that just can’t meet its financial demands to get started quickly.

What You Need to Know About Factoring Invoices Glossary Invoice Discounting

There are a lot of terms to understand when it comes to factoring invoices. You might have to understand the differences of factoring accounts receivables from invoice discounting (both are similar but they do have slight differences). You might have to know the different terms and agreements that factoring companies use when dealing with businesses and their clients. In all of this confusion a glossary of basic terms could be very useful. Take the time to consider the following factoring invoices glossary invoice discounting list:

Common Glossary Terms

Accounts receivables – this is your invoice or the sales ledger that encompasses all of your profits from the client
Assignment – this is the official transfer of collection rights to the factor, enabling them to receive the payments (the accounts receivables)
Facility limit – this is the maximum amount that can be factored for a single company. Some factors will set a limit on how many accounts receivables can be bought and sold
Minimum term – this is the minimum contract period; many factors will require that your contract period with your client is good for at least six months
Non-recourse factoring – in this agreement you are 100% insured of debt responsibilities, protecting you from bad debts
Recourse factoring – you are not protected from bad debts and thus collecting the due amount now falls under your shoulders
Sales ledger – the structure that will encompass all details regarding sales invoices
Service charge – this is the processing fee that is required for the factor to assess the invoice and the client’s credit history

Understanding Factoring Invoices from Invoice Discounting

Another factor that a factoring invoices glossary invoice discounting glossary should contain is the difference between factoring invoices and invoice discounting. They are both very much the same since they are all about selling accounts receivables to a factoring company but the main differences lies on control over your ledgers and the visibility of the factor.

When you go for regular factoring the client you work with will be aware of the factor. This is because the factoring company will now be in charge of your sales ledger and will be the ones handling all transactions. They give you the amount indicated in your invoices (albeit at a discount) and will be the ones to collect the amount from your client later on. This means the payment from the client will never even pass through your bank account – they go directly to the factor.

Invoice discounting can seem a little bit more attractive because in this type of factoring the factor is not visible. The client has no clue that you are working with a factor. This means you have full control over your ledger and all of your accounts. It also means that you are now responsible for collecting the amount from the client and then paying the factor for the advanced cash as according to your agreement.

There are a lot of different data that you need to comprehend before finalizing a deal with a factoring firm. This is crucial information that you will learn when you have a reliable factoring invoices glossary invoice discounting guide.

Check out our Factoring Glossary here

Fast Construction Factoring – We offer Construction Factoring

Construction factoring is sometimes referred to under the name of commercial construction loans. When a construction company gets a new project, it needs to have the money on hand to purchase equipment, labor, and raw materials. This makes it hard on many construction companies to conduct business, and it puts a serious financial strain on them. The volume of work is growing, but so is the mountain of unpaid invoices.

When you are working as an independent contractor or sub-contractor, you might get exposed to the kinds of risks that could put you out of business. Even though laws mandating prompt payment have been passed in many states, sometimes they don’t work well. It takes specialty contractors an average of two months and five days to collect their overdue invoices. Sometimes, a qualified construction company will have to pass on a job just because it doesn’t have the resources to fund the project. Commercial construction loans from a bank might be an option, but they are hard to get and rare.

What Are Some Of The Benefits Of Construction Factoring?

Construction factoring offers an alternative to the common kinds of commercial construction loans, and it’s an excellent way to grow your business. It’s a smart idea to choose a company that can get you money quickly for your invoices. It will guarantee that you can get the materials for your business, and you can get up to 80% of your invoice amount with the advance. The balance will be held completely in reserve until the invoice gets paid. Historically, the advance of 80% will be more than enough to cover all of your related expenses while still giving your company a great profit margin too.

How Should You Choose A Commercial Construction Factoring Company?

You should choose a company that has a good history of working with entrepreneurs from all walks of life. Choose a company that can recommend custom financial solutions for you. A lot of factoring companies refuse to offer commercial construction loans or construction factoring. Choose a company that is committed to helping your company grow. If you’re in the construction industry, it doesn’t mean that you should be prevented from getting the commercial construction loans that you need efficiently and quickly.

Choose Construction Factoring Solutions That Offer Cash Flow Problem Fixes Extremely Quickly

You should work with decision makers that ensure that the proposals are issued quickly, that the transactions are closed expediently, and the funds are in your hands as soon as possible. Choose a company that helps make the whole construction factoring process easy. From the first application fee to continual funding arrangements, you should choose a construction company that helps make the entire process quick to understand and simple to handle.
What Kinds Of Businesses Use Construction Factoring Solutions?

Space planners, security firms, roofing companies, plumbing companies, and excavation companies are just a few of the kinds of companies that use construction factoring solutions. There are a number of other kinds of companies that do as well.

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staffing factoring – We offer fast staffing company factoring

fast staffing factoring — Staffing companies use factoring companies to have consistent and reliable cash flow fast. This is primarily because the staff, and the payroll, is the primary cost of doing business.

Do you have a temp staffing company? Do you need immediate funding? Funding payroll and growth for temporary staffing agencies has been a niche specialty of many invoice factoring companies for a number of years. There are all kinds of financial instruments, and one of those extends to staffing companies.

If your cash flow suffers time and again from seasonal sales spikes, or peaks and valleys, customers tightening their belts, or unexpected orders coming in, a cash only program might just do the trick. When you require cash, just send the invoices into the staffing company factoring company, and they’ll transfer the cash, minus any fees for their service, into your account the day afterward.

If your company is growing, and you need maximum cash flow, you might want to get maximum liquidity from the assets you have. You can also sign up for maximum cash flow at many of these companies too. You will just send your weekly timecards and invoices in, and you can get a percentage of your cash, up to 95% sometimes, the next day. Once you’ve picked a company for all of your factoring, you will rest easy knowing that one company can handle most of it. Plus, these same kinds of companies can help out with all types of financial instruments like eliminating bad debt, full payroll services, maximizing cash flow, helping young companies thrive, and more. Plus, no minimum volume may be required, depending on the company you choose. That is great for young and struggling companies. Plus, there are a lot of companies that let you pay only for what you use.

There are some serious financial institutions that provide invoice factoring services to staffing companies all across the U.S. and Canada. Some of these companies are international, and they go beyond the borders of the U.S. and Canada, but most of these companies just operate in the North American continent, and that area. These companies should be leaders in providing working capital to staffing companies such as yours if you’re going to choose them to help fulfill your needs. Don’t choose a company that hasn’t had a number of years in the industry. The credit lines that these kinds of companies can provide allow clients to get immediate access to funds that would normally have been tied up in accounts receivable, eliminating a delay of payment that could last between 30 and 60 days. No company wants to wait that long to get their hands on their money.

Staffing companies, by their essential nature, have to have consistent and reliable cash flow. This is primarily because the staff, and the payroll, is the primary cost of doing business. Staffing companies usually pay their employees each week, and that adds to the cash flow stress. The balance can be maintained when the clients for the staffing company pay on time, but that’s hardly ever the case. You need a company that will back you up as far as staffing company factoring. Choose wisely, and your staffing company will run a lot more smoothly. If you don’t choose wisely, it won’t run smoothly at all.

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