CARTOONS BY CHRIS BRITT
StartUp_Wisdom_online2
StartUp_Wisdom_online2
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– FACTORING –<br />
If your company has receivables that are regularly 30 or 60 days net, you can sell them<br />
to a third-party financial company and get paid before the payables are received. Known<br />
as factoring or accounts receivable financing, this strategy allows you to get your money<br />
more quickly, improving<br />
your cash position. It is not<br />
a loan and you don’t assume<br />
any debt in factoring. It is<br />
ideal if you need to address<br />
a short-term cash issue or<br />
need to stimulate growth.<br />
HOW DOES IT WORK?<br />
If you pursue this<br />
strategy, you’ll need to do<br />
some research to find a<br />
financial company that<br />
offers factoring services.<br />
Terms and fees can vary<br />
greatly, so shop around.<br />
Once you set up an account,<br />
the factoring firm will<br />
evaluate your receivables<br />
Don’t put off ‘till tomorrow what you can<br />
talk someone else into today.<br />
and if everything looks good, will purchase your invoices. Depending on the company,<br />
you should receive between 80 and 95% of your receivables upfront. The remaining<br />
percent, minus a factoring fee, is rebated to you once the client pays the invoice. If an<br />
invoice is not paid, the factoring company will handle collections on the outstanding<br />
balance.<br />
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