The Pros of Selling Your Customer Invoices

The current finance market is absolutely brutal. For no reason whatsoever, many businesses are seeing their credit lines pulled as the Wall Street crisis transitions to Main Street. In such a situation, flexibility is the key and selling invoices is one way to get it.

As a business, you can sell your invoices to certain types of finance companies to get money immediately at a small cost. The process is known as "factoring." It is an extremely popular way for dealing with cash flow issues that a business might face with large orders or a client that has a long net pay period of say 60 to 90 days. An example can help explain how factoring works.

I start a company making a new kind of seat belt for cars. It is a major step forward in safety. Toyota takes a look at it and likes it. In fact, the company decides to use it on every car and truck it makes. It orders 3 million units, but only if it gets a 90 day net on each shipment. I have a manic moment. I am happy to have such a huge order, but worried about how I am going to pay for the materials and labor to fill it. Employees need to be paid every two weeks and I have to wait 90 days for the first payment.

A factoring company will provide the solution. It will see Toyota is the creditor and give me money on the spot. I can expect to receive somewhere between 95 to 99 percent of the amount indicated on the invoice. With the cash on hand, I can buy the materials and pay for my labor cost to fill the orders. It is a win-win for everyone.

The above scenario provides you with a clear example of many of the benefits of factoring. First and foremost, the decision to approve your application is made in a couple of days. Second, the factoring company is looking at the credit worthiness of your client, not you. Third, the cost of the factoring is very low, particularly given the benefit you get from cash flow relief.

The traditional finance market is a mess right now - incompetent management has led to this credit crunch of all credit crunches. Factoring companies have plenty of money on hand and are more than happy to help you with your cash flow issues. If you could use some relief, give factoring a try.

Stephen Teak writes about factoring for FactoringCompanyInformation.com - sell your invoices for quick cash today!

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