Have you ever been an entrepreneur? If you have never been an entrepreneur, then let’s talk differently. You might have faced some situation in your life when you were short of cash because you had lent some of your money to some of your friend who promised you to pay it back after few days.
Now suddenly there came an urgent need, and you needed cash badly. But you can’t wait for the date when your friend will pay back the debt. And it will be a bad impression if you ask your friend for the payment before time. So what will you do?
Such situations often come in the life of an entrepreneur when becomes out of cash, but he can’t wait for the payments from his client. He needs ready cash to meet the expenses of his business, but the payments from his debtors and clients will come after 30, 60 or 90 days. So what should he do? Should he wait until he gets the payment even if the business closes? The obvious and immediate answer would be a big No.
Factoring Companies – A New Trend in Business Industry
There’s a trend prevailing in the market these days called factoring or factorizing. Factoring or Factorizing is a service provided by the companies and firms called factor or factoring companies. Factoring companies give you the ready cash almost immediately, and in return, you agree to pay them all the payments of your clients and debtors to them. In other words, the factoring companies take all your debtors as their own and pay you the 90% of the total amount receivable from the debtors. The remaining amount is paid once all the due payments from the debtors are cleared.
How do Factoring Companies Earn?
The factoring or factorizing agreement is normally done at a price which is called the discounted price. Discounted price, as the name shows, is the price at which the account receivables are bought by the factor or factoring company and this price is lower than the actual amount of account receivables. The difference is the amount that factoring company is earning by waiting for the payments.
The trend of factoring companies has grown so much that you find a factoring company in any part of the United States of America or even in the United Kingdom. The terms and conditions may be different but most of the times the services and the functioning is same for all the factoring companies. So whenever your business is short of cash, you should not wait for the payments from the clients to get cleared.
Rather you have the convenient tool in hand in the form of factoring company so utilize that. Apply for the help and get almost the instant cash by selling your account receivables to the factoring company. Getting help at a nominal price is better than waiting for the business to close down due to the shortage of cash or funds. In my opinion, it is always great to get some help in the time of need even if you have to pay a nominal prince in the form of discount.