| Banks won't lend money to a business seeking to | | | | Since Accounts Receivable Financing rates depend on |
| acquire larger contracts because its not viewed as an | | | | the credit-worthiness of your customers, your average |
| asset. So if you are a small start up company, funding | | | | invoice, average payment cycle, and factoring volume, |
| for expansion may be hard to obtain. Accounts | | | | its hard to predetermine the exact cost of the money. |
| Receivable Financing could be the key to funding for a | | | | However, you should remember, whatever the cost is: |
| start up with desires to bid on large Government (or | | | | Its TAX DEDUCTIBLE and this is important. This |
| Corporate) contracts. | | | | means that the cost to factor is offset by IRS. |
| So what is Accounts Receivable Financing? It is the | | | | Not all Factoring companies are created equally (you |
| selling of your accounts receivable invoices for cash | | | | can't tell that by looking at their web pages). A Cash |
| versus waiting 30-60 or 90 days to be paid by your | | | | Flow Consultant or an Accounts Receivable Broker |
| customer. Accounts Receivable Financing is also know | | | | can stir you in the right direction. There are issues such |
| as Factoring. | | | | as: process to acquire funding, will the Accounts |
| Securing the services of an Accounts Receivable | | | | Receivable Financial company (factoring) company |
| Financing Company will allow a small company to bid | | | | handle your collections, will they provide the funds |
| on almost any contract within reason. A small | | | | through a credit card or will they wire the monies into |
| company would know in advance that the funds | | | | your business checking account, will the Accounts |
| needed to produce goods or provide services are | | | | Receivable Financial company factor with recourse or |
| available once they win the contract. In fact, some A | | | | without recourse? (Meaning will they take responsibility |
| R Companies will advise you on which companies | | | | for the debt or will you the client take ultimate |
| they will Factor Invoices from and which to avoid! | | | | responsibility? The rates are different) |
| (Federal Government contracts are considered "gold" | | | | Sometimes an A/R Broker has a choice, but not all the |
| however not all Factoring companies can handle | | | | time. For instances, there are not that many companies |
| Government Receivables) | | | | that provide Accounts Receivable Financing for health |
| One of the major concerns for most small business | | | | care or construction. It all depends on what type of |
| owners is how much does Accounts Receivable | | | | business you have and what your needs are. |
| Financing cost? Between 1 to 5% generally speaking. | | | | |