Your Guide To Accounts Receivable Factoring

YOUR GUIDE TO ACCOUNTS RECEIVABLE FACTORING What is Accounts Receiva ble Factoring? A type of asset-financing arrangement in which a company uses its receivables - km which is money owed by customers - as collateral in a financing agreement. How Accounts Receivable Factoring Works? Step 2: Sell Your Invoice To A Factoring Company Step 1: Invoice Generation An invoice is generated after your products are sold to a customer. Your company sells the invoice to an accounts receivable factoring company. You will receive the payment in 30-90 days. Step 4: Receive Funding The factoring company purchases Step 3: Verification of Credit History of Your Customers the invoice and advances 80-90% of the amount receivable to your company. Instead of looking into your financials, the factoring company authenticates the paying potential of your customer whose invoice you wish to factor. The rest (10-20%) is held as reserve against delayed payments. Step 6: Conclusion Step 5: Collection The factoring company returns the reserve balance to your company. The factoring company collects the balance of the invoice from A factoring fee (1-3%) is deducted for assuming the collections risk. your company's customer. Who Can Use It? You can use accounts receivable factoring if: 2. Your business has a payment cycle of 1 30-90days and you You do not want to block equity in loans are in need of operational funds You do not want to put in time and energy You have a weak credit history which does not allow you to receive loans from bank but your customers in collections have a good payment history 10 You do not want to take the risk of default in payments Presented by FACTORING FAST w ww.factoringfas t.com Sources: http://www.investopedia.com/terms/a/accountsreceivablefinancing.asp http://campus.murraystate.edu/academic/faculty/lguin/Schematic/Factoring.htm Prepared by Media Mosaic Differentiate yourself.. www.media-mosaic.com