Asset Based Factoring

Asset Based Factoring – The Cash Flow Solution

Starting a business is never an easy chore. In fact, starting a new business can be difficult, time consuming, and expensive. One method small businesses often utilize to increase potential revenue is to offer a line of credit to customers. Offering credit benefits the customer by offering a product or service today with the promise of paying the debt at a predetermined date sometime in the future. The problem for the business is that the cash is in accounts payable rather than in a register. Looking for the best cash flow solution for your business? Asset based factoring may just be the perfect solution for you and your business.

Did you know over half of all small businesses fail within the first year of operation? That is a startlingly high number, but the fact is, owning and operating a business is not easy especially in that important first year. Getting customers is a priority, but so is paying the taxes, paying those employees, and purchasing new stock. Unfortunately, all of those steps take money. Getting the cash flow for a new business is important, and without an asset based factoring service, many businesses fail.

A factoring company offers you and your business cold, hard cash for those accounts receivable invoices. The factoring company purchases the invoices, or offers a cash advance on those invoices. Recourse factoring means the factoring company has the legal right to obtain the invoice amount from you and your business should the debtor default on the payable invoice; non recourse factoring means the factoring company does not have the legal right to come after you should the invoices not be honored.

Both recourse factoring and non recourse factoring are available, but usually, a factoring company will offer one or the other but not both factoring services at the same time. Obviously, there is more risk for the company with non recourse factoring and more risk for the business with recourse factoring. The party holding the greatest risk will keep the greatest amount of monies of the monies owed on the invoices. For instance, non recourse factoring companies will usually charge a higher percentage fee and have more stringent requirements; while recourse factoring offers lower percentage fees and lower requirements.

Asset based factoring offers you cash flow today based on your assets namely invoices. Getting a factoring cash advance is not a loan, but just that, a cash advance. In fact, asset based factoring is similar to how a pan shop would work. You are getting a cash advance on something you have. If the invoices are paid on time, the factoring company will then send extra monies directly to the business. Nothing could be more simplistic in nature and benefit to boot.

If you find your business is in need of money today rather than 6 months from now, asset based factoring may be the solution to aid in keeping your business afloat. Of course, factoring can be used whether the business is new or established. Contact a factoring company near you for more details.