Factoring is an efficient and reliable way of meeting capital
needs of the business. It is beneficial when a business promises
to have definite profits in future but faces capital deficit
to get the project completed.
Factoring Fundamentals: http://www.hjventures.com/factoring/factoring.html
Principles that govern factoring are same as those governing
bank loans, credit cards and other such lending methods. The
basics of factoring are divided into two main practices. When
a factor purchases an estimated value of the future account
receivables it is known as non- recourse factor practice.
In non-recourse factoring the factor bears the bad debt risk
and the business owner is required to pay interest to the
factor for the period specified in the factoring agreement.
The second full-recourse factor practice involves the use
of invoice as a security to make a loan. In recourse factoring
the factor has recourse to business owner if the concerned
customers do not pay. Recourse factoring is cheaper than non-recourse
factoring. How does factoring work?
The first step in the process is to fill the documents provided
by the factor and when they get completed the factor provides
the business owner with cash against receivables. The factor
then pays the business owner a certain percentage of the total
value of your invoices. This can be up to 90% of the total
value of the invoices. This is paid as soon as the invoices
are received, or at the time agreed upon between the business
owner and the factor. The process normally takes 24 hours to complete and is either sent directly
to business owner's account or through the mail. Once customers
pay up the bills at pre-determined dates lenders too pay up
the remaining amount. In the end business owner will also
receive copies of customer checks on the date of receipt to
keep a record. http://www.hjventures.com/factoring/accounts-receivables.html
Factoring fundamentals once confirmed and acknowledged, are
a step towards a stable and secure business, as they help
in keeping the working capital needs of the company on track.
Howard Schwartz is a partner in several business strategy
groups, including HJ Ventures International, Inc. Howard has
worked with hundreds of entrepreneurs worldwide with a focus
on writing Business Plans for companies interested in raising
capital from Venture Funds and Angel Investors. Howard's business
plans have secured several million dollars in funding. For
more information: http://www.hjventures.com/factoring/factoring-glossary.html
