Accounts Receivable Solutions

Written by Patricia Tunstall
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Factoring can be a comprehensive financial package that uses accounts receivable bookkeeping and credit risk protection, and combines working capital/cash flow financing with collection services. Until the recent entrance of banks into the factoring industry, factoring was largely unknown, despite being used by multi-billion dollar corporations for decades. Banks have done themselves, their customers, and the factoring industry a service by offering this type of financing, because now the financial package that has traditionally only been available to corporations is accessible to smaller businesses as well.

Factoring Can Mean Peace of Mind

Even though over $200 billion was factored in 2001, according to the industry, factoring is still a growth industry simply because startup and small/medium businesses are not fully aware of its advantages. Here again, banks are spreading the word about this alternative to traditional financing, which usually requires at least two years in business, a consistent profit, assets that are susceptible to liens, and an excellent credit history. Factoring could not make a more compelling contrast to this conventional approach, with its immediate cash advances with very few guidelines to meet.

Any business extends credit to its customers, and accumulates accounts receivable. Factoring permits businesses to turn these invoices that tie up vital cash into instant lines of credit. With no new debt involved, businesses can sell their invoices and tap into their line of credit to overcome temporary cash flow problems.

Factoring is not a loan. It involves a sale and a purchase. This could not be simpler in that it is a straightforward business transaction that can prevent bankruptcy by smaller businesses in any field. It certainly can bring peace of mind to any business owner by making cash flow consistent and responsive to the business's needs at any time.


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