The Factoring Force BIG Blog

Factoring may be more expensive than traditional financing but, for a business startup, factoring may be the surest bet to staying solvent during the lean times of getting the business up and running.

I came across a  example of the way that invoice factoring may be the right move in certain circumstances. Read about a fictitious company and the way that two make believe partners take advantage of factoring their receivables to keep the business afloat.

Rather than take a lot of time typing out the FAQs for invoice factoring, I have taken the liberty of linking to a website that provides answers to some of the basic questions about factoring receivables. I’m sure that the good folks at Working Capital Company won’t be complaining about the link love.

Get answers to your FAQs here.

I came across a very thorough article about invoice factoring at a blog called Good Small Business. The blog describes a variety of best practices for managing a small business and includes this article about invoice factoring. Thought that it would be helpful to anyone trying to understand the basics of factoring receivables.

By factoring accounts receivable a company can generate working capital and move the business forward rather than play catch-up all of the time because of cash flow issues. But besides just providing liquidity, factoring companies can also provide services that will assist business owners to make better decisions.

To view a factor as simply a funnel for cash is to miss the opportunity to capitalize on other business resources that can help a company be more profitable and better managed.

To gain some more insights into these additional services you can check out this blog post over at Ozark Capital Funding.

Everybody wants to use your money to make money. Say you bill a client $10,000 on January 1. On March 1 you finally receive your payment, if you’re lucky. That means that for 60 days your client has been able to use money that should have been yours.

So how do you get your money? Consider factoring. Read this article about factoring invoices as a means of addressing slow pays and cash flow issues.

Perhaps there is no industry so blatantly affected by rising fuel costs as the trucking industry. Smaller companies and independent owner-operators are challenged every day to quote rates based on a wildly fluctuating diesel market. If you are quoting based on $4.50/gallon and diesel rises to $4.75 before you have even started the job you are up a creek. Compounding this problem are slow paying customers who may stretch a company or driver out 30, 60 or even 90 days before paying their bills.

One approach that many trucking companies use to keep cash flowing despite slow paying clients is freight factoring. Essentially, a trucking company will sell its outstanding invoices to a freight factoring firm for about 90% of the amount due. This provides the trucking company with cash immediately instead of having to wait. The factoring firm then becomes responsible for the debt and the trucking company can remain solvent. Once the invoice is paid by the client, the balance is forwarded to the trucking company less the factoring company’s fee which typically ranges from 1.5% to 3%.

Cash flow is the life-blood of a small business. No cash, no money to operate. Freight factoring is one method trucking companies can use to stay afloat during economically volatile times.

A good overview of freight factoring is presented here.

If you want to gauge the condition of the economy, just take a look at the trucking industry. When truckers are hurting, everyone is hurting…or will be soon.

Trucking companies are cash spewing machines. Every single day, company trucks and owner-operators line up at the pump to fill up with $4/gallon or higher diesel. Add in maintenance, tolls and salaries and it’s all some companies can do to keep things going each day. That is why factoring receivables is so critical to the trucking industry.

With the recent problems in the financial sectors, credit has been hard to come by. Even if a company decided that they wanted to take some sort of loan, there are not many banks willing to provide financing. That is why freight factoring is so critical during an economic downturn.

A blog I found focused exclusively on freight factoring provides some pretty relevant insights into the difficulties faced by truckers and the increasingly important role of freight factoring services. Give the Freight Factoring blog a read for some good info.

One of the obvious benefits of utilizing an invoice factoring company is to help your business maintain a positive cash flow. I read a blog post today that identified scenarios whereby factoring receivables may provide asset protection and offer tax advantages.

I’ll avoid repeating all of the details here, but the blogger presents a scenario whereby a doctor with a successful medical practice protects his assetts from potential lawsuits by “selling” those assets to an invoice factoring company. Since the practice no longer owns the receivables they are no longer subject to recoupment as part of an insurance settlement.

The author also outlines the circumstances by which this physician creates a favorable tax situation by using the factoring to fund insurance coverage.