Tag Archives: factoring companies

How and Why Export Finance Works

Exporting-financeBusiness, as it is, is not an easy venture. It takes a lot of dedication, hard work, finances and of course guts. If opening up shop domestically is already a massive undertaking, imagine how magnified everything becomes when we think internationally. Exportation both frightens and excites an entrepreneur. But to us, it’s not something to be scared of especially when we’ve got export finance to back us up.

To a lot of people, export finance is something new and foreign. But given its perks and benefits, you’d be at a disadvantage if you never get to hear about it and we’re here to fix that.

By definition, export finance is the method by which companies get to trade internationally without the usual burdens of documentation and threats to collections and liquidity. This is done by selling the rights to collect against export sales invoices in exchange for an advance of their value to be received earlier than their maturity.

Majority of sales transactions happen on credit. If you look at your accounting books, you’ll realize that sales occur either on cash or on credit. With foreign trade, majority of importers opt to defer payment. This means that they shall withhold payment until a set maturity date which is oftentimes the time by which the goods are received or when they have been resold.

The very reason why many businesses find it useful is because it helps avoid issues with collection and liquidity. International trade means additional administrative costs and the need to fine tune certain processes to comply with the culture and laws of a specific country or territory. Additionally, export finance providers tackle the administrative requirements in terms of collection which saves the company both time and resources.

Moreover because it speeds up the collection process, the level of cash inflows grows as sales increase. This alone strengthens working capital and improves the entity’s state of liquidity and solvency. The process even helps minimize if not completely avoid financial risks namely credit, foreign currency and interest rate risks.

Overall, export finance help business entities who wish to take advantage of the opportunities presented by the world market. By cutting down and removing factors that present risks or negate benefits, it allows even the smaller companies to venture further. Even startups can make use of it as it does not have the strict requirements and application process that most funding methods and institutions require.


Learn more at workingcapitalpartners.com

On Choosing Spot Factoring Companies

choosingChoosing spot factoring companies is just as important as picking which among the wide array of financing alternatives to use. It spells either the success or the ultimate failure of one’s endeavors. After all, despite the method’s effectiveness things will still boil down to whether or not the provider can indeed supply what they claim to do so.

So the question goes like this. What do we look for?

1.    COMPETENT STAFF

As they say, a company is only as good as the brains behind it. No one can continue walking the path to success with an incompetent team. Make sure that the people and the professionals are indeed skilled and qualified as they say they are. Check for qualifications, licenses and even ask for previous experiences and services.

2.    CUSTOMIZED SERVICES

Not all companies belong in the same industry. Not everyone has the same transactions. They don’t sell the exact same products and offer completely parallel services. Businesses differ in one way or another making it a must that your factors should be able to provide you with a service that is personalized and custom built for you. Sure, the policies and other standard procedures will hold steadfast but there will be items that should depend on the company being serviced.

3.    PUNCTUALITY

One of the reasons why business entities decide to factor their receivables is to hasten the recognition of cash. If the provider is unable to do so in a timely manner then the very purpose of one’s actions will be foregone. We all know that time is an important factor in business and those who cannot deliver on time are dead weight.

4.    REVIEWS AND FEEDBACK

One of the important parts of running research and background checks on the available spot factoring companies is to look for relevant and reliable customer reviews, feedbacks and testimonials. These should come abound. With the help of the internet, they are easier to find among forums, blogs and industry websites. Recommendations from friends, family, colleagues, employees and partners are also welcome but make sure to take them with a grain of salt.

5.    REASONABLE PRICING

This is something to consider when looking for spot factoring companies. We surely do not want anyone to charge us with a price so high that it becomes so much of a burden. Make sure that they too do not come with hidden charges making them affordable upfront but expensive later. Always consider things at the long run.

Dos and Don’ts When Working with Factoring Companies

factoring-companiesFactoring companies offer invoice financing services that allows business entities to raise funds and capital through their customer receivables. In such an arrangement, the company advances an amount equivalent to around eighty to ninety percent of the value of their chosen invoices with the balance less fees forwarded only upon full payment is received from owing customers. The burden of collection will also be transferred to the factor.

There are benefits to this type of financing that has made it one of the most widely used in the business world today but just like anything else using them in the wrong ways will earn you a migraine. This is what makes it important for business owners and entrepreneurs to get to know the service more. To help you with that, we’ve come up with a list of do’s and don’ts when working with factoring companies.

Do your research well. There are many factoring companies out there so it is you job to find who they are and get to know them better. No two are exactly the same so be sure to research well. Make a list, compare them to your qualifications and short list your candidates.

Do read client reviews and feedback. To know about how quality driven they are, it is best to ask people who have experienced their services firsthand. You can do this in many ways from reading forums and blogs to calling up people personally.

Do understand every clause and sentence you are agreeing to. Again, no two factoring company is the same. They will have varying clauses to their terms and conditions and different processes. Before you sign into any agreement or contract, be sure that you understand every word there is to it.

Don’t settle for lackluster quality. If you want to make the most out of your invoice receivables then do not settle for less. Always go for gold.

Don’t go for the cheapest rate in a heartbeat. Entrepreneurs want to be cost efficient but do not let quality suffer. Just because a certain factor offers very cheap and rock bottom rates do not mean that you have to settle with them. There are other factors to consider and not just price.

Don’t use factoring without knowing what it is. If there are things that confuse you about the financing method, go ahead and ask the factoring companies you are dealing with. They will most willingly love to enlighten you and keep your facts straight.

Working Capital Partners on What is Receivables Financing

Receivables financing is one method used by a number of companies around the globe in order to draw out their needed funds. As its name suggests, the cash is driven from the entity’s own receivables. To some, this may still sound foreign but it has in fact already existed for years now. But what is it really and how does it work? Working Capital Partners is here to explain to us exactly that.

In receivables financing, companies actually hasten up the conversion or recognition of cash. Sales happen on credit and with this come the presence of customer invoices. It could however take time before cash is actually received as payment can come in periodical installments. Such funds may be needed by the entity for various reasons; funding operational expenses would be one. To do this they choose among two options: factoring or discounting.

With factoring, they sell the right to collect against the said invoices to a financial institution called a factor that in turn provides them with up to ninety five percent of the value of the customer invoices. The same proceeds to collect from the owing customers and once such has been completed they then will give the remaining five percent balance less any pre-agreed fees.

On the other hand, discounting is more akin to a loan only without interests and debts. What happens is the company uses the said invoices as collateral getting their value in advance from the financing institution. The company still proceeds in collecting from its owing customers and once this has been completed, they will then repay the financial institution plus nay pre-agreed fees.

To put it simply, it hastens and cuts short the turnover from receivables to cash. Receivables financing, both factoring and discounting also produces the same effects and benefits, to wit:

  1. receivables-financingIt improves the entity’s cash flows thereby moving hand in hand with sales.
  2. It is fairly quick to use for as fast as twenty four hours and does not require the entity to provide financial statements or show their credit history and rate.
  3. Locked up cash is freed and made accessible and available for use especially for emergency cases.
  4. It does not affect the liabilities portion of the financial statements but rather only cause a decrease in trade receivables coupled with an equal increase in cash.

Thanks to Working Capital Partners, all these have been laid out clearly. So what are you planning to use? Factoring, discounting or both?

Factoring Companies and How they Work Magic

Maybe you have heard about Factoring or maybe you haven’t. Either way, you better read up and get to know more about it. Who knows, it might just be the solution that you have been looking for to better your company’s operations. Okay, so let’s get started and discover how Invoice Factoring companies work their magic to help businesses, small and big alike.

But first, what is factoring? It is a kind of receivables financing method apart from discounting that seeks to derive funds from the company’s receivables and customer invoices by hastening their collection. Now who wouldn’t want that?

invoice finance londonA company in its usual operations and trade sells its products and/or services either in cash or in credit. In the latter, this is referred to as trade receivables and is contained in the customer invoices. There is a sale but the receipt of cash isn’t always spot on. When sales are on credit it can take for weeks to months before full collection is attained. In some cases, the owing clients even default in payment, others late while others not at all. But the company may have the need to get hold of the cash locked up in such invoices for several reasons. This is where factoring steps in.

The business sells its customer invoices, a corporate asset, to a financial institution often referred to as a factoring company or simply a factor. The factor in turn gives the selling company an advance which is equivalent to a major percentage of the value of the sold invoices. This can be for as high as eighty to ninety five percent in value.

Another perk of such financing method is that the business is freed up and relieved of the collection process as the factoring company takes charge and holds the responsibility of collecting from the owing clients. Upon complete collection, the factor will give the company the remaining balance of the value of the invoices less the discounts and fees that both parties have agreed upon at the onset. In essence, factoring involves the sale of the customer invoices and the right to collect against them.

The services of factoring companies can be divided into two: bulk or single invoice. In the former, the company sells off all of its invoices and pays a monthly fee. The latter on the other hand is more of a one-time transaction only but should a company wish to use it again then they can do so and the fees involved are only attributed to the invoice at hand.

Single invoice finance Tips From Factoring Companies

We all know very well that trying to borrow from factoring companies and succeeding is not an easy task. But then again, you go through it anyway as projects and plans need funding. Plus, the sad fact daunts us that cash cannot be readily available at all times. They can be tied up in various places, receivables and invoices being two of them.

Two of the many institutions which can provide you with your needed resources are banks and factoring companies. Money is very hard to earn and very easy to spend. Again, that’s another sad fact but we all have to deal with it. We must work our way around it and plan our actions carefully so as to make the right decisions. Also, there are cases when we need funds but do not have any at hand. Banks can provide you with loans but these loans have to be approved first. Meanwhile factoring can provide you the cash provided you give them your invoice in return.

You’ve probably known by now that there are tons and tons (if not a gazillion) number of rejected loan applications. So how do you succeed in getting your application stamped with an approval? Here are some useful tips to help you.

  • business lending moneyAs always, do your research. It would be a very good idea to make a thorough research about your possible options to fund your needs as well as the available institutions from whom you are getting these funds from. Take this for example. There are banks that cater only to loans applied for by companies in a particular industry or sector. At the same time not all banks can provide for every loan applied for. Let’s say real estate.  The amounts needed here can be high as we all know that properties are in no way cheap. Not all banks will say yes to loans that are in huge quantities.
  • Look at yourself. Do you have a good credit score at the present? Are you paying your dues right and on time? If your answer to both questions is a resounding yes then you’re a step ahead, otherwise don’t expect any bank to approve your loan.
  • Express your needs and payment plan preferences. It is important that you communicate well what your needs and expectations are as well as your planned mode or type of payment. It is true that your financial status and ability to pay will be highly questioned and looked into but having a good grade on those two won’t simply cut it. Business lending institutions will want to secure your invoice so they can make sure to get paid from your single invoice finance loan. In the first place, they won’t lend you if they get the idea that you won’t pay them right, on time and within the terms agreed upon.

 

Spot Factoring: What is it?

These two words may sound a little foreign to most people but definitely not to businesses. Single invoice or spot factoring is the strategic process of raising financial resources against individual invoices. Here, cash is released which are still locked up. It is a business financing solution which enables a business to receive cash in advance on a single outstanding invoice. Companies involved in this provide their clients their needed resources by financing client invoices as they are generated and as they are needed.

business lending 01There are some companies which are hesitant about factoring as they are afraid of getting tied up in lengthy contracts and on going commitments which in the long run can be fatal to them. Here the beauty of spot factoring comes in. It is a one time basis and unlike other factoring contracts, they won’t hold you down for far much longer than you would want to.

When looking for spot factoring companies there are three essential elements for you to consider and to study about. The first two are the size and amount of your invoice while the third is about customer impact.

These said companies will check upon your invoice, confirm that your products or services have indeed been delivered or rendered and then underwrites the credit worthiness of the debtor. When these are accomplished, they will advance a percentage of the invoice to the business which will depend upon the agreed proportion. The balance will then be released when the invoice has been fully paid.

Companies use this for several different purposes like unexpected expenses, the need to fund an important and urgent project, for extra income, a boost in employee morale, opportunities for growth and a better chance at reaching out and influencing the general community. Do know that those are only a few of the many things companies encounter that make them need spot factoring.

Whenever businesses urgently need financial resources for whatever reason and cash is not readily available, they would often reach out to banks or lending institutions where they acquire debt. This has been a common practice but is often frowned upon as a heavily indebted company is in very risky waters. When credit risk is so high, investors can get skeptical and scared that they might withdraw. So most companies would then turn to spot factoring. It does not incur them any debt and at the sane time it provides them with the resources they need.

UK Factoring Companies: What Services Do They Offer?

Factoring is known to provide an answer to companies who have slow paying customers and those who need a boost in their working capital. Others even see it as a means to protect themselves against noncollectable accounts and losses from bad debts. At present there are notable UK factoring companies like workingcapitalpartners.co.uk who provide their services to the market. They offer many different services and types of factoring. These variations occur as different companies may provide for different rates, terms and conditions. Rest assured these are always communicated to their clients as transparency is one thing that keeps this business growing.

factoring companiesFirst and foremost let us describe the process. The owner of the receivables or invoice sells these to a factor who in turn gives a percentage of the value in advance. The factor will chase after and collect the payments from the customers and once the whole amount has been fully collected, the balance left of the invoice’s value will then be given by the factor to the seller. This will then be less any fees or commission which both parties have agreed upon. So what services do these UK factoring companies offer? Here’s a little info for all of you.

For one, there is this thing we call Recourse. Here credit protection is not part of the agreement. In here you are responsible for buying back the invoices which have not been paid by your customers within the agreed upon period. Even if the factor has purchased the invoices from you and given you a percentage in advance of their values, you assume the risk of uncollectability. Fear not though as factors help you out to avoid having these buy backs. As part of their services they will check up on your accounts and customers to see their ability to pay. Also they can take care of managing your receivables alongside your own in house team.

If however you do not want to assume any risk of uncollected amounts you may opt for Non Recourse. They will completely assume the risk and thus relieve you from any bad debts.

There is also what we call the Modified Recourse where the factor carries receivable insurance for amounts uncollected due to inability to pay for financial reason. For other causes other than that the company must buy back the invoices.

In the event that you don’t want to subject all your receivables to a factor but would prefer a one time transaction, UK factoring companies may provide you with spot or selective factoring. This will allow you to choose which receivable to use and when to use it.