Factoring is a purchase of assets. The business remains active with the flow of the finance. The flow of the finance is clear from the factoring accounts receivable, invoices and other related services. Factoring actually is a financial operation where a businessman sells its invoices. Here the more emphasis is given to the values of receivables than the credit. It is not a loan. It involves three parties instead of two.
Factoring plays a vital role in the progress of the business. They provide the information regarding the financial services and funding policies. They also assist the clients to choose the right factor for the growth of their business. To manage cash flow the concept of factoring has been used since long by businesses.
Factoring account receivable is the flexible and simple service through which businesses can avail finance. The process is carried over by invoices. Instant or immediate working of the cash is protected through the selling of invoices or accounts receivable. It is very helpful to get a good deal. A factor company will buy the receivable in advance payment up to 90%. The left over balance is released on the receipt of invoices. But you should weight before you get payment. Factoring assists the business owner to select the best factor according to your requirement. This facility makes you able and confident to extend your sales and grow your business.
Factoring accounts receivable is the fastest mean through which you can get finance easily. To get finance from other sources is very long and wastage of time for a small business owner.
Sometimes the buyers do not pay the invoices. In such situation the sellers fully take the responsibility of funding. In reverse funding the factors can buy the account receivable with their choice. There is a risk in selling the accounts to the factors and the whole of the risk is on the shoulders of sellers itself.