How to Finance Your Company Using Sales as Collateral
Own a company that needs business financing? Read this article to learn how to finance your company using your sales as collateral.
Factoring financing helps companies that sell to other businesses on net 30 terms. In other words, it helps companies that cannot wait 30 (or 60 days) to get paid for their invoices. It provides an immediate source of capital that enables you to cover your company expenses and puts your company in a stronger position to pursue new sales opportunities. Accounts receivable factoring offers a simple proposition. It provides an advance, usually 80% to 90% depending on the industry, for invoices that are going to be paid in up to 90 days. The remaining 10% to 20% is advanced, less a small fee, once the invoice is actually paid.
Factoring companies consider your invoices from credit worthy clients to be great collateral, which is why they are able to advance funds for them. Qualifying for the services of a factoring companu is fairly easy; you need to have good clients and must be free of legal or tax problems.
Another common financing problem that wholesalers/resellers have is getting a purchase order that exceeds their current capital. Most resellers area forced to turn away such orders because they do not have sufficient money to pay their suppliers. This is easily solved with po financing. Purchase order funding covers your supplier expenses associated with a specific purchase order. It enables you to complete and book large orders – positioning your business in a very strong position for growth.
Although factoring and po financing are not very well known yet, they have been gaining traction in the past few years as a flexible solution for growing companies.
Factoring has also specialized sub products for different industries – freight bills factoring for transportation companies, medical factoring for the medical industry and construction factoring for subcontractors. These solutions are a great alternative to conventional business funding.
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