Any entrepreneur will vouch
for the fact that running a small business can be an unpredictable
and sometimes risky business. A good business idea that is
well executed can be very profitable, but periods of low income
can come just as quickly, which puts an obvious strain on
cash flow. If your small business is suffering from cash flow
problems, a business loan could be the answer. A business
loan can give you the instant finance you need to either fund
future ventures, or simply to ensure that your business continues
to run successfully.
SELECT
YOUR COUNTRY TO GET QUOTES:
A common method used by entrepreneurs to
provide money is known as “factoring finance.”
This is a service that can be provided by common financial
institutions such as banks and building societies. Factoring
finance is a short-term financial agreement that gives the
lender the right to collect revenue from a customer of the
borrowing firm that has previously been invoiced. This means
that immediate payment for goods or services provided by the
firm can be guaranteed. The lender grants 90% of the invoice
value to the business up front, sometimes as soon as 24-hours
after the invoice has been issued to the customer. The lender
then collects the full invoice amount from the customer, from
which they take 90%, and also their own (reasonable) fee,
and the remaining balance is returned to the firm.
This is often a suitable solution for all
parties as it preserves the customer’s flexibility options
with regard to payment for goods or services, while at the
same time providing instant income for the borrowing firm,
so that cash-flow continues to run smoothly.
The many advantages of factoring finance are listed below:
• The financial status of the borrowing
firm is not an issue. Even if the business’ credit record
has not been good enough to previously obtain finance, factoring
finance can still be of assistance as it is the customer which
becomes the debtor, not the business.
• The factoring company assumes all
responsibility for ensuring that customer invoices are fully
paid. This means that the business does not owe anything to
the factoring company if the invoice is written off. Effectively
it means that the firm cannot be held responsible if the customer
defaults on repayments to the lender. |
