"Factoring Fundamentals" - Vendor Financing

Share Article

Factoring Fundamentals: Principles that govern factoring are same as those governing bank loans, credit cards and other such lending methods.

HJ Ventures is happy to release its fifth Business Finance article in the "Factoring" series -

Factoring Fundamentals: http://www.hjventures.com/factoring/factoring-glossary.html

Factoring is an efficient and reliable way of meeting capital needs of the business. It is beneficial when a business promises to have definite profits in future but faces capital deficit to get the project completed.

Factoring Fundamentals: (http://www.hjventures.com/factoring/factoring.html) Principles that govern factoring are same as those governing bank loans, credit cards and other such lending methods. The basics of factoring are divided into two main practices. When a factor purchases an estimated value of the future account receivables it is known as non-recourse factor practice. In non-recourse factoring the factor bears the bad debt risk and the business owner is required to pay interest to the factor for the period specified in the factoring agreement.

The second full-recourse factor practice involves the use of invoice as a security to make a loan. In recourse factoring the factor has recourse to business owner if the concerned customers do not pay. Recourse factoring is cheaper than non-recourse factoring.

How does factoring work?

The first step in the process is to fill the documents provided by the factor and when they get completed the factor provides the business owner with cash against receivables. The factor then pays the business owner a certain percentage of the total value of your invoices. This can be up to 90% of the total value of the invoices. This is paid as soon as the invoices are received, or at the time agreed upon between the business owner and the factor. The process normally takes 24 hours to complete and is either sent directly to business owner’s account or through the mail. Once customers pay up the bills at pre-determined dates lenders too pay up the remaining amount. In the end business owner will also receive copies of customer checks on the date of receipt to keep a record. (http://www.hjventures.com/factoring/accounts-receivables.html)

Factoring fundamentals once confirmed and acknowledged, are a step towards a stable and secure business, as they help in keeping the working capital needs of the company on track.

Learn more about factoring / business finance: http://www.hjventures.com/factoring/factoring-glossary.html

Reprint rights: You are free to use / reprint this article - please just include the below copyright and URL / link to website:

(C) 2005 HJ Ventures International, Inc.

http://www.hjventures.com

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author