For companies in need of cash sooner than the receivables are due, factoring receivables may be an excellent option.
Invoice Factoring is a straightforward yet effective solution that allows companies to trade their invoices for an injection of cash into their cash flow at a discount. Companies choose this method of financing to meet current and pressing business expenses while currently waiting on their receivable assets to be paid.
Reporting Benefits- Many business owners are hesitant to add more debt that must be reported on their company’s balance sheet. Factoring is an off-balance-sheet form of financing because receivables are considered contingent assets.
Minimizes Loss Risks- With traditional bank loans, all business assets are secured as collateral. On the other hand, a factoring company will only hold accounts receivable as collateral, minimizing the risks of losing your business equipment inventory or real estate assets. Business owners can also protect their equity and get through temporary cash shortages by factoring in receivables.
Helps Small Businesses- 1st Commercial Credit is a factoring company helping small businesses in Detroit with minimal sales volume by providing invoice factoring services. It is difficult for small companies that have been established recently and have lower annual revenue to be candidates for bank loans or lines of credit.
How Can An Invoice Factoring Company Help Businesses Offer Credit Terms To Their Customers? Another plus provided to your company by invoice factoring is customer credit flexibility. Many companies are losing potential customers to competitors because they cannot offer or extend credit terms. Offering multiple payment term choices is ideal for retaining and maintaining customers pleased.
Business owners no longer have to wait months for invoice payment and can factor in invoices quickly after these are issued and work is completed. Businesses will receive quick cash, and the company that factors the receivables will wait for the customer payments to arrive. This makes it easier to offer payment term options to clients without worrying about a possible shortage in cash flow.
1st Commercial Credit offers financial programs to businesses in Michigan and its cities in multiple industries including medical providers, trucking and freight, staffing agencies,cable and telecommunications, and many others. We also fund manufacturing companies in Detroit and offer payroll loans for businesses and lending on receivables.
Accounts receivable make excellent security for short-term loans needed to fund payroll, pay for materials, production costs production, and business expansion. (A/R) based financing involves the use of your Detroit company's accounts receivable to secure short-term loans. It's a form of asset-based lending that uses the organization's accounts receivable as collateral instead of using a combination of equipment, inventory, receivables, and other assets to secure the loan.
Receivables-based financing is different than factoring.
The terms Factoring and Receivables Based Financing are often mistaken by the other even though they are not the same. Both are financing ways of using receivables to obtain immediate cash flow. A/R-based financing uses receivables to get a loan, while factoring is selling the receivables to a factoring company.
A/R Financing vs. Factoring
Any manufacturing, distribution, service, or staffing company requiring short-term financing to manage its business cash flow may find A/R-based financing helpful.
This particular loan type is advantageous when:
New organizations without a substantial credit track record of their own will generally be unable to obtain A/R-based financing. If short-term cash is required, factoring would be a better, more feasible option.
To be eligible to receive accounts receivable financing, you'll need to meet the following requirements:
Most accounts receivable financing companies will also examine the business credit rating of your customers. Strong customer repayment history is a good indicator that you're eligible.
More Favorable Terms Than Traditional Financing
Many businesses that have trouble obtaining bank loans can qualify for factoring. Additionally, you'll find that the terms and conditions are more beneficial to your long-term financial health. For one thing, invoice factoring won't make your business take on additional debt. You aren't taking out a loan but simply leveraging your invoices. This means you don't need to put up collateral such as real estate or equipment. Many businesses find that factoring is a more favorable and less stressful type of financing than bank loans.
Factoring Companies Also Provide Back Office Support
Aside from financing, factoring companies help you save time and run your office more efficiently. They offer assistance in areas such as collections, accounts receivable reporting, and customer relationship management. When you work with a reputable factoring company, you get valuable help running your back-office tasks so you can devote more time to essential tasks such as recruitment. This is another way that lending for staffing companies can help your business thrive and grow.
Extra Benefits Staffing Agencies in Detroit Experience with Our Accounts Receivable Financing
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