Receivables financing
(or accounts receivables financing) involves the sale of invoices to
a factoring company for anywhere between 70% and 90% of their value.
This generates immediate cash flow to buy capital goods or to enable
an advance purchase of stock. The speediness of the cash available is
the main advantage of receivables financing, and depending
on the credit worthiness of the customer, there is a credit control
aspect involved as well.
There are other
advantages to receivables factoring, including not having to put up
collateral (such as your house) as this is not a loan, or being charged
a lot of money for an overdraft. If worked properly, this can fund entire
transactions, sometimes quite large ones.
Receivables financing
is definitely worth looking at as a way to raise cash quickly and efficiently.
It is ideal for new businesses which tend not to be cash-rich and is
particularly useful when putting together a deal which involves suppliers
and customers who may happen to be located in different countries.