Factoring: Helping Businesses Who Have Been Turned Down By Their Bank

Factoring: Helping Businesses Who Have Been Turned Down By Their Bank

Accutrac Capital 24-Mar-2011 0 Comments

These days bank financing isn't just a slow drawn out process for prospective homeowners, but for businesses as well. It can takes months to get approved for financing -- time which many businesses do not have. As is often the case, businesses may wait far too long after applying for a bank loan, only to be told that they aren't approved.

There's no doubt that the credit market has changed in recent years. Just think about GM, where the government had to come in and remedy their financial woes. Then there is Circuit City who went belly up. And these are large companies. Even solid companies, who are operating at a profit, are holding onto their cold hard cash. What does this mean? It often means slower payment to suppliers and vendors. What about smaller businesses? Is there help for their cash flow in all this?

The answer to this question is yes! Factoring is a stable way for businesses to take control of their cash flow, rather than letting their cash flow control them. Rather than being reactive in accordance with the ebb and flow of their cash inflow, they control their cash flow. Business owners that take part in receivables financing can better predict their cash flow, which can help stabilize their business operations and enhance their expansion. Start-up businesses, high growth companies and transportation companies often experience inconsistent cash flows, making it difficult to forecast their cash flow for day-to-day operations or long- term expansion.

Businesses that have been turned down by their banks for bank loans know that they need another means of financing in order to stay afloat. Just as if the business was going to the bank for a line of credit, factoring receivables is considered to be similar to obtaining a line of credit, only factoring uses your businesses accounts receivable to extend you funds.

Factoring Receivables can help a company get through a rough financial patch when a request for a bank long was denied. One of the most important benefits of factoring receivables is that it helps a business, particularly a high growth company, keep up with increased demand to grow the business. That said, obtaining lines of credit, in whatever form, is a very normal part of most business operations.

Receivables financing involves selling invoices and receivables to a factoring company, who will provide the business with funds for the factored receivables and invoices. The factoring company assumes the credit risk of non-payment of the invoice or receivables in exchange for a small, nominal fee. Factoring receivables is a common business financing method for many businesses and industries, including the transportation and trucking industries.

Business that have been through the bank loan process, with either an approval or denial, will find that factoring receivables is a breath of fresh air in comparison to all the red tape involved in applying for bank financing.

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