Posts Tagged ‘Invoice Factoring’

Export Financing – How Export Financing Can Grow your International Sales

December 26th, 2009

Selling your products or services in export markets can be a very profitable and a true engine for growth for your company. Manufacturers, service providers and traders can all benefit from adding foreign markets to their portfolio of customers. However, selling into export markets can also deplete your cash flow. Large companies that have a cushion of funds in the bank, usually have no problems. However, smaller and emerging firms can run into cash flow issues very quickly.

The biggest issue for exporting firms is waiting 30, 60 or even 90 days to get paid for their goods or services. Slow paying customers can really affect your company’s cash flow. This can challenges your ability to pay suppliers, employees or even rent.

One solution to this common problem is to go to the bank. If you can provide them with a few years worth of audited financial statements, have a good track record and have good personal credit, then the bank should be able to help you obtain business financing. However, obtaining bank financing can be very difficult for small and medium sized firms.

A better alternative is to use export factoring, a form of export finance. Export factoring allows you to accelerate the payment of your foreign export invoices, providing you with the necessary funds to meet your obligations and grow your company. With export factoring you can get your invoices paid in as little as 2 days. And, as opposed to most conventional financing tools, factoring is easy to obtain and quick to set up.

Invoice factoring can also be very easy to use. It works as follows:

1. You sell and deliver your goods/services to your customer

2. You invoice your customer

3. The factoring company provides you with an advance on your invoice of up to 85% of its net value. This is the 1st installment

4. You get immediate funds to operate your business

5. Once your client pays, the transaction is settled and the factoring company rebates the remaining 15% as a 2nd installment, less a small fee

The most important requirement to qualify for factoring financing is to do business with reputable foreign customers, such as multinational corporations. If you do business with reputable clients you’ll have a good chance of obtaining financing.

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Using Invoice Factoring as a Source of Quick Financing

December 12th, 2009

One of the challenges of looking for conventional business financing is that it can take a very long time to find out if you will qualify for it or not. Although there are no hard and fast rules, most companies report that it takes a couple of months to go through the process. It’s understandable that institutions take that long to reach a decision, they have to do a lot of due diligence to make sure they make a solid investment. At the very same time, the long application process also puts your company in the very tough position of waiting a long time to know if you’ll get financing – or not.

If your company needs financing quickly – or can’t qualify for a business loan – you should consider whether invoice factoring is the right solution for you. Factoring financing has been gaining traction, especially among companies that need flexible financing.

Factoring invoices provides a simple very proposition. It allows you to get a funding advance against your accounts receivable, providing you with working capital to pay employees and suppliers. So, instead of waiting 45 days to get paid by a client, the factoring company can give you a working capital advance. This provides the financial liquidity to meet your company’s current obligations and allows you to take advantage of new opportunities.

Factoring can be incorporated into most companies and works as follows. First, you deliver your product or service. Then you invoice your client. Now, instead of waiting to get paid, you send the invoice to the factoring company. In turn, the factoring company advances about 80% of the gross value of the invoice to you. Once your client pays the invoice, the factoring company advances the remaining 20% of the invoice to your company, less the financing fee.

Factoring costs can be higher than the costs of conventional products (e.g. business loans), which should be taken into consideration. Monthly fees can range from 1.5% to 3.5%, depending on the company’s industry, financing volume and other parameters. As a rule of thumb, factoring works best if a company has margins of at least 15% and customers that pay regularly. However, each business owner should evaluate whether factoring will work for the company.

There are some substantial advantages to using accounts receivable factoring. First, accounts receivable financing is easy to obtain. Second, it’s a flexible financing solution where financing increases are tied to your sales, making it an ideal tool for startups. And lastly, it can be setup quickly. Depending on your transaction, many times it can be financed in as little as 2 weeks.




By: Marco Terry

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Factoring Financing. The Easy Way to Finance your Business

December 6th, 2009

Waiting up to 60 days to get your invoices paid can really be a major source of stress for business owners. This can be especially painful if you have to pay rent, suppliers and meet payroll. This is even more painful when most of your money is tied up in slow paying invoices. Having money tied up in slow paying invoices can also prevent you from capitalizing on new opportunities. Why? Because few business owners can deliver large orders to new clients and then underwrite the transaction for up to 60 days.

If you cannot afford to wait to get paid by your clients there is a solution that can provide you with the necessary financing. It’s called factoring financing. With factoring you can accelerate the payment for your invoices and get funding to pay rent, pay your suppliers, meet payroll and take on new projects.

As opposed to bank financing, invoice factoring is easy to qualify for. The main requirement is that you have invoices from mid size and large commercial customers. Most factoring companies are comfortable working with new companies – even if they have no hard collateral – provided that they have good invoices and a solid business plan.

Another advantage of factoring is that your financing is not fixed on any specific amount, like a loan or line of credit. You can usually factor as many invoices as you can deliver on. As a tool, factoring allows you to tap into the power of your greatest asset – your roster of credit worthy customers. It allows you to grow and capitalize on new opportunities, while circumventing the restrictions and challenges of obtaining regular bank financing.




By: Marco Terry

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