Collecting Unpaid Invoices
Invoice factoring is not just a way for a small and medium-sized business to get access to funding at short notice. It has a number of other benefits to offer as well. It gives the business the ability to utilize its own assets to the maximum because it is the business’ receivables that are being used to generate funds. This type of small business funding assists the business owner with cash flow management. The business is able to avoid taking on additional debt in the form of loans. This is because it can access small business working capital provides other benefits that can assist in the day to day operation of a small business
A source of credit to the business
A business will sell its unpaid invoices to the Factor in return for a cash advance. The amount of the advance is a percentage of the approved invoice. As a general rule, the advance is not lower than 80% of the face value of the invoice.
The business is getting immediate access to funds that have not yet become due and payable simply by using Invoice Factoring.
The strength of the debtors (invoices) is what underpins the whole transaction.
The funding is provided at a discount and is immediately available.
Provided the debtors do not become delinquent and pay outside of terms then debtor finance is a great tool. It has the ability to not only assist with the growth of a business but also their ability to reliably meet other financial commitments.
Risk management presents a constant and ongoing challenge to all financial institutions and credit providers.
There is a set of basic information that the factor assumes the business owner will know about the debtor. This is important to enable the verification process to be completed.
Once the invoice has been assigned to the factor, follow up with the debtor and tracking responses. It will verify the due date for payment. This is part of the factoring process.
This frees up the business owner to let them concentrate on other aspects of the business
If the debtor fails to make payment on time, the factor will commence the collection process. This can include progressing it to legal action if required.
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