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Asset based factoring

airplane30902462.jpgFactoring is a wonderful option for many businesses. It allows you to sell off your invoices and acquire money within 2 days after an invoice has been generated. When you create invoices and give your customers 30 days or longer to pay, it can literally take weeks or months before some of your customers will ever make their payments. This is why it's a wise idea to sell off your invoices and acquire money for your business that you need to sustain your cash flow.

Having money now provides you with a chance to take on larger orders that may have tied up your cash flow in the past. You also have money that has freed up your cash reserves as you don't need to dip into these emergency accounts to purchase inventory and necessary supplies for your business.

Asset based factoring does require you to go through a business credit check to ensure that your company is financially strong. Factoring firms may also require credit checks on your clients if they are concerned about their ability to meet their monthly payment amount for their invoices. Customers that are known for late payments may not be taken on by the factoring firm and your next option is to consider a collection firm.

When you use asset based factoring, you are selling off all of your payable invoices for an 80% deposit from the factoring firm. The factoring firm will be responsible for the collection of the funds and they will pay you the rest of the money minus their fees once the customer pays them. Why is this attractive? New businesses need money and most of them do not have cash reserves to fall back on. When you get an order, it can suck up all of your cash flow money, leaving you with just enough to squeak by while you wait on the customers to make their payments. Using asset based factoring; you don't have to wait anymore for the customers to make their payments. Instead you get to have the money right away so you can put it back into the business for marketing expenses, payroll, and a number of other things.

Companies often turn to asset based factoring if they do not qualify for a loan. New companies or those that have bad credit struggle to convince lenders that their high risk days are in the past. Asset based factoring may be the only option you have to acquire the money you need to keep your business afloat.

Factoring firms will only pay you money for the invoices you have. They won't give you money based on predictions or other things. That is why it is called asset based factoring because you are securing the money with your invoices, which is money that is owed to you and it is guaranteed.

Companies can benefit in a number of different ways from asset based factoring. You no longer need to wait on your customers to pay their bills as you have the money right away. You also get to skip out on the collection process, which can be time consuming and frustrating for a lot of companies. When you are considering asset based factoring for your company, always comparison shop. You will be charged fees so you need to seek out the company that has the best fee amount. Some companies will charge you per invoice while others base it on a higher amount like for the entire sum. It is also important to discuss time limits with the factoring firm as some companies will return the invoices if customers do not pay within a specific time frame.

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