Businessmen and financial managers should not be deceived around our statement “increase cash flow” and “lose money” as a recommended strategy. But when they understand the essence of receivables financing, they see the truth in this statement, which revolves around how receivables factoring is evaluated and how it benefits their business.
Accounts receivable is a source of working capital
This is not debt financing, which is the wrong perception of what it is and how it affects your business. In technical terms, A / R is sold to its partner A / R. This sale is carried out at a discount, which means that within 30 days it will usually receive 98,000.00 on a loan of 100,000.00. This cost of 2k is, ink essence, a loss or cost of financing. What you do with these funds, and how you run your business, allows you to sell more, do more, and recover most of these financial costs.
This type of financing agreement is used in a wide variety of industries by thousands of companies, including, we are sure, many of its competitors.
If we had identified the two main advantages of this commercial sme invoice finance method, we would say that this is simply a high level of advance in its sale/receivables, as well as, of course, a quick turnaround.
If you are planning to fund the same day for any sale you make in our book, this is a quick change.
In relative terms (for example, about the authorized bank) financing is perceived as expensive. We say “perception” because when we sit down with customers and analyze the fact that they already write off receivables for 60–90 days, plus the fact that the new cash flow found can be used for various types of profitable activities. We think you understand the point. And this perception is not always a reality.
If the receivables financing agreements are executed correctly, you can even be sure that you do not represent a third party in the process of your client. Our recommended strategy is a C I D installation, that is, a term for the confidential discount on invoices, which allows you to issue invoices and receive your own A / R, use advantages and exclude disclosure!
We are sure that today you understand our main principle:
Just information, facts and the correct interpretation of this method of financing create a winning combination.
Some of the key benefits can simply be grouped under the term “predictable cash flow.” And if you choose the right partner company and the recommended confidential A / R installation, your strong customer relationships will not change.
We are open enough to say that most companies that factor in receivables cannot receive financing elsewhere, especially at their bank. But do not forget that in many cases, companies such as yours are growing too fast or have reached this “big contract” or order. It was at this time that business owners appreciate the fact that their net worth, profitability, debt coverage or operational losses are no longer under the microscope. And your company is free to explore other ways of borrowing from your A / R assets.
Talk to a reliable, trustworthy, and experienced commercial finance consultant who can help you understand the benefits of this type of financing.