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Old 15th December 2011, 06:13 PM   #11
autoprt
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Default Invoice Factoring.

I agree when businesses need additional cash flow short term and the banks aren't lending, many don't have a choice but go to alternative funding such as leasebacks and factoring.

Not a bad move but just have to be aware you will pay more for the money but if you need it and have money coming in to pay for it you will be ok. The problem comes when you have no cash flow to pay for what you borrowed when it comes to leasebacks.

Getting money from receivables is great when you have slow paying clients.

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Old 19th December 2011, 09:52 AM   #12
factoringguy
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Default Re: Invoice Factoring

Well, the great thing about factors, they are more concerned about a specific purchase order or accounts receivables to leverage. Vs banks that aren't loaning to small businesses even when they have good credit and a great history.

This gives small businesses a much better chance of being able to get the loan they need.


Quote:
Originally Posted by tgriffith View Post
Hello and good morning,
I'm just curious if anyone here has tried invoice factoring as a way to increase cash flow?
Just to be honest, I'm working for a company that offers it and am looking to find the general perceptions of this type of financing. I'm NOT trying to push its services or even promote the company. Just wondering if anyone here uses invoice financing and what the experience is like.
Thank you-
Travis


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Old 19th December 2011, 07:54 PM   #13
tobuso
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Default

Quote:
Originally Posted by factoringguy View Post
Well, the great thing about factors, they are more concerned about a specific purchase order or accounts receivables to leverage. Vs banks that aren't loaning to small businesses even when they have good credit and a great history.

This gives small businesses a much better chance of being able to get the loan they need.
Really we are looking at the ability to pay of the customer paying you. So your credit or your businesses credit does not have to be good. We just want your customers credit to be OK.

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Old 30th September 2013, 02:41 PM   #14
twhansbury
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Before factoring look at your AR and see what you can do on your own to help with cash flow.
-Be on top of AR. develop internal controls and procedures to review your aging.
-Offer discounts to your vendors direct (2% net 10)
-On the other side call your suppliers and see what you can do with your terms with them. can you go from 30 days to 45 on your accounts?
-with these and all ideas keep in mind your net returns.

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Old 8th March 2016, 07:26 AM   #15
elisagrace
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Hey, invoice factoring is really an excellent approach towards cash, fund growth. It helps in growth of the business. There are many benefits of invoice factoring, check " http://pipelinefinancialservices.com...ring-invoices/ ".

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Old 9th March 2016, 12:53 AM   #16
jaynorth
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Invoice financing is very much innovative & something that can be look forwards to. But ensure to gain thorough knowledge of it through every source, before making progress with it.

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Old 9th March 2016, 12:39 PM   #17
HassleFree
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Default Factoring is usually always more expensive than it sounds

For a few percentage points, selling receivables sounds like a great way to increase your cash flow. Depending on the collections reserve, you can net 75% to 100% of 1-months worth of cash flow... immediately.

However, this is a one-time bump. So you really have to associate lifetime costs against that immediate cash flow. And the reason we say lifetime, is because hardly anyone ever buys their self out of a factoring arrangement.

So if your horizon is 5 years, and the cost is 2% of monthly invoices, you are paying 24% a year for one months worth of money. If your reserve is 25%, then it is even more expensive. In this case, the true cost would be 30%.

It's like taking on an equity partner that never goes away.

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Old 14th March 2016, 01:48 PM   #18
HassleFree
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Default When you really dive into Factoring, it's more expensive than you think

I'll use an example to illustrate this point.

Let's say you process $100,000 in Invoices per month. Let's also say that you can factor them (turn them into instant cash) for a 2% rate. Let's say your average invoice collections are 30 days. And let's also say there is a 10% collections reserve put on your Invoices.

So you are basically getting a $90k one-time loan (as the Factoring arrangement usually goes on forever and only gets you a 30-day bump in cash flow).

So since you will keep factoring invoices going forward, your annual cost on the $90k "loan" is about 24%. This is a cost of $21,600 per year. In just over 4 years, you will have paid back more than the $90,000.

After that, you will be paying back more than what you borrowed. And it is likely that the only way to get out of this arrangement is through another type of loan.

So why not get that other type of loan in the first place?

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