Factoring refers to a financial deal through which a business can get immediate cash to finance itself by selling its invoice. This is a quick and efficient way to get liquid cash for business expenses. Factoring is a better way to get immediate cash, than applying for a bank loan.
There are two main types of factoring:
1. Recourse factoring - This is most commonly used preferred procedure. Under this type, a company is responsible for paying for all the statements. The services under recourse factoring include financing, sales ledger administration and collection of debts due. A factor will have the right to sell the debt that he purchases.
2. Non-recourse factoring - Under this type of factoring, a factor analyzes several fields in order to get a good idea of the business. If the company finds it safe to buy the invoices, it will approve and will proceed with the deal. The policies that this type of factoring involves are pretty stern and do not allow any flexibility.
It is very important to choose the right company for financing your business. Here are a few tips that could help you to find a good company:
1. You must make sure of the type of service that a company offers. A recourse factoring company will take up any business firm and can free you from the burden of collecting payment from the customers. A non-recourse company will not easily take up a deal with any business. it will do a research on the background of a business concerned and decide whether to proceed with the deal.
2. Type of customers is an important aspect in choosing a company. It is better that your customers hold a good record of paying up in time. A factoring company will give preference to the business firms who has links with quality customers.
There are two main types of factoring:
1. Recourse factoring - This is most commonly used preferred procedure. Under this type, a company is responsible for paying for all the statements. The services under recourse factoring include financing, sales ledger administration and collection of debts due. A factor will have the right to sell the debt that he purchases.
2. Non-recourse factoring - Under this type of factoring, a factor analyzes several fields in order to get a good idea of the business. If the company finds it safe to buy the invoices, it will approve and will proceed with the deal. The policies that this type of factoring involves are pretty stern and do not allow any flexibility.
It is very important to choose the right company for financing your business. Here are a few tips that could help you to find a good company:
1. You must make sure of the type of service that a company offers. A recourse factoring company will take up any business firm and can free you from the burden of collecting payment from the customers. A non-recourse company will not easily take up a deal with any business. it will do a research on the background of a business concerned and decide whether to proceed with the deal.
2. Type of customers is an important aspect in choosing a company. It is better that your customers hold a good record of paying up in time. A factoring company will give preference to the business firms who has links with quality customers.
No comments:
Post a Comment