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Local Business  » Use Factoring to Grow Your Business, Don't Wait Until You are

Use Factoring to Grow Your Business, Don't Wait Until You are

Article:

Have you ever refused a job or an order because your business

didn't have enough capital to purchase the supplies or hire the

extra staff? You build a good reputation, have good workers and

then when you finally get a nice big contract, you have to turn

it down because all your money is tied up in accounts

receivables. You know the bills will be paid, but they aren't

due quite yet so you are the one who suffers because of cash

flow problems.

If you have customers who are established, are good credit risks

and almost always pay on time, you can sell those invoices to an

investor (a factor). The factor will give you an advance of 70%

to 90% when the invoice is issued and will wait for the bill to

be paid. Then you will get the rest of the money minus a small

fee of 1% to 5%. The advance and fee depend on monthly volume,

size of invoice, credit, time it takes to be paid and other

things.

Some business people who call me are under the impression that

the advance of 70% to 90% is all they get. They are thrilled

when they discover they get the rest when the bill is paid

except for the small fee. So they actually get 95% to 99% of

their invoice.

Factoring isn't a loan, it isn't a credit line, you don't have

debts to pay back, you don't tie up any assets other than the

invoices, it only takes a few days to get approved and you keep

complete control of your company.

Almost any business can use factoring, so long as they have

invoices that are issued to another business. Even a business in

Chapter 11 can have their receivables factored. Different

factors have different requirements, minimums, maximums, fees,

rates and applications to fill out. Some have a small

application fee, many do not.

There are factors who work with any industry except construction

and medical. There are others who specialize in construction

contractors and others in medical receivables. These two have

specific rules and regulations and risks and you definitely want

a factor who specializes in them.

A good broker will be working with several factors and should be

able to find the best factoring company for you. The broker will

work for you, will get your questions answered and will be able

to go to a second factor if the first one doesn't fit your

needs. The broker gets paid directly by the factor and your

rates and fees are not affected.

Quite often business people think of using a factor as a last

resort when their business is struggling and they are trying to

survive. In reality, businesses should consider a factor when

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they are starting out, so they can keep their business growing.

They should definitely use a factor when they are feeling

confident about their business and are ready for growth.

The businesses you do the work for simply have a different

address to send the payment to; they still do the work for you,

get the invoice from you and have the same payment terms as they

always do.

Just think how your business could grow if you were paid most of

each invoice when you issue it: you could get discounts when you

buy your supplies if you pay cash, you could do more marketing,

hire more staff, buy more equipment, increase your own credit

rating. Instead of focusing on collecting the payments you could

concentrate on going after more contracts.

Then next time a customer calls you with a big contract, you

just have to get the papers signed and get on with the work.

Sounds good, doesn't it?

About the author:

Donna Poisl is President of Creative Funding Solutions. CFS

works closely with several of the best factors in the country,

each with different rates, fees and requirements and is able to

find the best one for each client. Contact Donna at www.solvecashflowproblems-factoring.com or

by Email