Advantages of Debt Factoring
Debt factoring is the process of
selling customer accounts receivable to a specialized finance
company known as a factor. The invoices are purchased at a
discount and then the factor collects directly from the
Factoring has several important advantages for
- Quick Financing - A business can
immediately receive cash for the customer accounts
receivables that are carried on its books. This can be
important is the business needs cash to pursue further
- Cash Flow - On an ongoing basis, the
business will have improved cash flow since it does not
need to wait to receive cash from its customers.
- Shortens Cash Cycle - Similar to
above, the time frame that it takes for a business to turn
its cash to goods to cash is accelerated.
- Protection from Bad Debts - If you are
non-recourse factoring, any bad debts are the
responsibility of the factor.
- Cost Effective Collections - Instead
of using business resources to pursue accounts receivable
and collect accounts, the factor will typically handle