Debt and Factoring

Topics: Debt, Accounts receivable, Corporate finance Pages: 3 (995 words) Published: August 19, 2010
Nowadays, every business needs finance. But at the same time, bad debt has become a stinging problem for the creditors. Many companies are faced with the high credit risk, so obtaining it can be one of the most difficult parts of running your business. So what is the solution for this problem? You can see, there are so many types of business finance, including: bank loans, credit cards, leasing, even outsides investors, family and friend loans… But in my opinion, one of the quickest forms of low cost business finance is factoring, where you can get up to 85% of the value of your invoice immediately, and the remainder (minus the factoring company’s fee) after the money is collected. kFactoring is one of the best ways to get quick finance, improving your cashflow and allowing you to make the most of your sales without risking late payment. What is factoring? You can image that just be simple to sell your invoice to a factoring company. You can get cash quickly, have a chance to access immediate funds, without having to wait for the customer to pay the invoice. You also don’t have to collect the debt. Because you transfer the mission to the factoring company. They get debt and have to collect it. Of course, you lose some of the value of the invoice. And the difference between the price it paid for the invoice and the money from the debtor is the factor’s overall profit. They can provide money either with recourse or without recourse. This is particularly beneficial to those of you who are in a growth period and committing more working capital to customer credit \ debtors. There are three basically parties involved in factoring transaction. First, the seller of goods. Second, the buyer of goods. And lastly, the factor or factoring company. Three parties interact each other during the purchase of goods. And what about the history of factoring? In fact, it started centuries ago. It was used in England before 1400. It appears to be closely related to early merchant...
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