Factoring and Your Business

Factoring is often used synonymously with accounts receivable financing. Factoring is a form of commercial finance whereby a business sells its accounts receivable (in the form of invoices) at a discount.

Effectively, the business is no longer dependent on the conversion of accounts receivable to cash from the actual payment from their customers, which takes place on typical 30 to 90 day terms. Businesses benefit from the acceleration of cash flow.

Factoring is considered off balance sheet financing in that it is not a form of debt or a form of equity. This fact makes factoring more attainable than traditional bank and equity financing.

There are usually three parties involved when an invoice is factored:

  • Seller of the product or service who originates the invoice.
  • Debtor and recipient of the invoice for services rendered who promises to pay the balance within the agreed payment terms.
  • Assignee (the factoring company) (Wikipedia)

As with any other form of business financing you have to determine the cost of the funds that you receive. Please use the articles and links here to help determine if factoring your receivables or other assets is the right choice for your company.

Sample Writings

What is factoring? Accounts receivable financing, also known as factoring, is a powerful financial tool that has fueled the growth and success of a number of companies. Factoring enables companies to capitalize on their unpaid receivables by selling them to a factoring company for immediate payment. With factoring, companies immediately get paid for their invoiced work from the factoring
Continue . . .

This article provides useful, detailed information about Factoring Software. Factoring software can be defined as an interacting, continuing, future-oriented structure of equipment and procedure, designed to generate and process information flow that can aid business executives in the management of their programs.Factoring software involves broader and more inclusive activity then, say, research. It
Continue . . .

The Facts on Factoring: How to Increase Cash Flow Without Borrowing By Fred Coutts, CPA, CMACash flow is one of the main reasons businesses fail. At one time or another, every business, even successful ones, have experienced poor cash flow. Cash flow does not have to be a problem any more. Do not be fooled -- banks are not
Continue . . .