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When to Consider Invoice Factoring

 

When your company routinely finds itself short of cash (technically called “Working Capital”) to cover payroll, pay its bills timely, or if you do not have the ability to fund growing sales, it is time to look for outside financing.

Outside financing can come from Credit cards (heaven forbid), family and/or friends (dangerous to healthy relationships), or more pertinently from a Bank as a line of credit.

Should none of these be available (especially in the case of a Bank), or insufficient for your needs, Factoring is the ideal tool to use to propel your business to new levels of productivity and growth.

Factoring provides Working Capital,  based on the value of your sales to credit-worthy customers and has the flexibility to grow with you as your sales increase. Importantly, factoring allows an infusion of the Working Capital needed for companies large or small as the funding relies on the financial strength of your customers, rather than on the strength, profitability, cash flow or net worth of you or your business.Factoring can save you the cost of operating your in-house credit department and so allows for the effective utilization of your human resources. Unlocking the cash available in your Receivables can ease cash-flow problems. Factoring provides predictability in cash flow under all circumstances. Factoring maintains cash flow where there would otherwise be a slow-down in the rate of company collections (when times are bad). Customers pay more quickly when they know a Factoring company is acting on your behalf. Aberdeen can provide Credit Insurance on large credit lines and on risky ones. If you are embarking on Capital expansion, Factoring gives the money to do so easily.  Aberdeen can also help established clients with additional short-term unsecured loans to cover unexpected demands on cash resources. If your company is considering the acquisition of another company, perhaps exposing your company to a new and unfamiliar customer base, Aberdeen with its effective and professional receivables management procedures already in place, will cater to your need for enhanced Credit management. And since granting trade credit is the equivalent of making an investment in another company, Aberdeen’s infrastructure and support helps prevent unsound investment decisions.

We also provide financing, known as Purchase Order financing to pay for the goods you need to buy to satisfy an Order from a customer. We can provide Letters of Credit for foreign manufacturers and, through this service, allow you to take advantage of large orders to expand your business, for which you would not otherwise have the resources to do.

Factoring has been around for eons. The first recognized use of this type of financing in American history was by early American settlers who sent their agricultural products back to England, the home country. Instead  of having to wait the interminable time for the sailing ships to cross the Atlantic in two directions to receive payment, these settlers would accept discounted payments for their products from Factors who would then collect the debt from the British merchants.Factoring is an exciting way to turn your outstanding receivables into a flood of cash and is used by businesses to improve cash flow.  It is also a way to decrease the administrative costs of doing business. In this regard, see our  “Credit Management Calculator”  on this website. We all know that “cash is king.” Having a strong cash flow and a healthy bank balance is the lifeblood of a business. Instead of being strapped for cash while you wait for your customers to pay, after delivery of goods or services and the production of an invoice, your company will have immediate access to cash advanced against that invoice. You can then use these funds in your business to satisfy those demands you deem appropriate. Use it to pay for the additional costs of expanding sales, or even to assist in the investment of capital equipment for your operations.

A factoring client can raise up to 90% of the face value of an unpaid invoice immediately, usually within 24 hours. Sometimes funds can be made available on the same business day as the production of invoices. Factoring turns any business into a cash business and best of all, funds availability grows in line with increasing sales – no need to go back to the bank to beg for an increase in your credit line (if you have one)! Once the customer pays, the balance of the invoice less the factoring fee, the amount known in the industry as the “Reserve” is paid to you.

Designed to help you go the extra mile, our Factoring Programs offer easy deployment of the Working Capital you need in a way that is professional, quick and easy. When it comes to your productivity and peace of mind, every detail counts and our Credit processes and Portfolio monitoring services do just that.