Factoring Loans

Written by James Kitchens
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Taking out a factoring loan is just one of the options open to an entrepreneur who finds himself in the situation of needing extra working capital. It works on the principle that invoices, or accounts receivable, will be sold to a financing company in return for immediate cash. This process is much faster than taking out a bank loan and is a much more acceptable way of raising cash to most small business owners.

In actual fact, many new businesses, or those who are going through temporary hard times, may not be able to take out a loan from a bank or any other lending institution. This can put them in a very difficult situation. If they're short of operating cash it can jeopardize their whole future.

Taking out a factoring loan will enable wages to be paid, or inventory to be purchased. It will even allow for the purchase of vital equipment if necessary. Be sure to discuss the matter of recovery if money owing on an invoice with your finance company. If the invoice is overdue, you don't want them to harass your customer into paying.

Ask Questions about Debt Recovery

Heavy handed debt recovery could lose you custom in the future, especially if the invoice is not overdue. Find out what procedure is adopted by the finance company when recovering money owed on invoices. The entrepreneur can decide how much of his accounts receivable should be sold in this way, so that sufficient liquidity can be raised.

Increasing cash flow without taking on the burden of debt has a lot of advantages. There is no need to wait until an invoice is overdue. Many finance companies that grant factoring loans will even accept new invoices, as little as 24 hours old.


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