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| | Factoring Receivable
Accounts Receivable /Due Bill Funding (Factoring)
In many situations, Receivable Funding is more appropriate than bank financing,
because:
Is based only on the accounts receivable. A client’s ability to raise cash by
Receivables Funding is
based on the total accounts
receivable, rather than on traditional measures of financial
strength and stability.
Provides continuing cash flow without the requirement of periodic payments or
interim
payoffs. New sales continuously create new power to obtain cash, and the
business does not have to
deal with renewal of loans or worry about maturity dates.
Gives a business increased access to cash as sales and receivables increase.
There is no
ceiling beyond which the factor must stop providing cash. The more sales a
business
makes, the more cash it can draw. The factor does not concentrate on the
business debt/equity ratio to
provide funds, as banks do.
Offers a dependable, continuing source of cash without the necessity of making
separate loan
applications.
Avoids the necessity of obtaining funds from venture capitalists, who receive an
interest in the
business and generally have a say in how the business is run.
Saves the business owner precious time waiting for a loan board to grant or deny
his or her loan.
Loan boards’ decisions are influenced by many considerations, and the outcome is
often
unpredictable. With factoring, periodic delays and negotiations are eliminated,
allowing the
business owner time to do what he or she does best – run the business.
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