Factoring Finance: An Introduction!

Also known as invoice discounting, accounts receivable and debtor factoring, factory is an old method of fund raising for any company. In this method, the company actually sells its income receivable sources at discounts to a party that gets the right to collect the funds from the original sources. It is not any kind of loan agreement however; it can be seen as the method of raising capital for fulfilling immediate needs. Here, the buyer gets the profit upon the collection of the debt. Factoring is the method of transferring ownership of the debts to one party to another and subsequently surrenders the money collection rights as well.

The main concern of this method of fund collection is to allow the liable party to get rid of the troublesome loan conditions for usually discounted price. However, the risk taker (buyer) gets the right to make some amount of profit by owning rights of getting the rights of income receivables. Here, the seller of the fund receives the working capital in addition to purchasing the rights at discounted prices. Isn't it a worth buying income receivable at much lesser than it actually costs? In general, the discounts available for such dealings can be anything up to 25% of the actual worth.

As the name suggestions, factoring finance in San Antonio is a reliable service in which the factor or the buyer gets the right of money collection. For this, he or she has to make additional fee for seeing a smooth transfer of the funds upon realization.

The process should not be misunderstood as a form of loan but it is a common practicing money raising process.

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Why a Confidential Factoring Receivable And Invoice Finance ...

Are we right or wrong? We have always maintained that knowing something others don't in business gives you an advantage, and we think you'll see that advantage when we tell you about a confidential factoring program that works and why this type of invoice finance puts you head and shoulders above your competition.

You probably have heard that thousands of Canadian firms have moved to invoice discounting as their primary finance vehicle. Unfortunately misinformation about this type of financing is everywhere, and we'll show you how the advantages of receivable financing can be put to work immediately.

The real power of confidential invoice financing is the fact that you have the ability to bill and collect your own receivables. 99.9% of your competition won't be able to do this, and it is that stigma along with their suppliers, employees, etc that your competitors can't overcome.

Invoice financing works because as you grow your company the collection of cash doesn't, unfortunately, match the amount of sales you are generating. Those customers of yours continue to pay you in 30, 60, and 90 days... like it or not.

Naturally we tell our clients they have the option of restricting their customer's credit, holding shipments, and enforcing a strict collection policy - as you can imagine that is not their preferred solution - which is more often than not to extend more credit and be patient with their customers.

If you have an operating line of credit from a bank you could generally fund this working capital at a pretty decent cost - unfortunately small and medium sized business in Canada can't always access this type of credit.

Enter a confidential factoring receivable and invoice finance program! When you utilize this type of financing you are generating all the short term borrowing you need, and, more importantly, you have the ability, unlike those competitors of yours to bill and collect your own receivables. Most receivable financing in Canada is actually done on a full notification basis - it works, but we don't like it, because it involves notifying our clients, employees, etc as to how your firm is being financing. We prefer that to be our clients business, not the entire marketplace!

When you use confidential invoice financing you receive approx 90% of the invoice amount the day you generate the invoice. The balance is simply held back and remitted to you when your customer pays you - less the financing charges.

And hey, what about those financing charges - aren't they high? We have some strong opinions on that, mainly due to misinformation that abounds on the cost of factoring. Confidential invoice factoring costs the same as regular financing in this manner, and we point out to clients that the charge is not dissimilar to carrying those accounts receivable for 60-90 days on your books. And making using of that cash to generate further sales and profits, enhance relationships with suppliers, etc, is a key benefit of this financing.

Speak to a trusted, credible and experienced Canadian business financing advisor and learn how you can take a unique competitive lead via a confidential invoice finance program.

Supply Chain Finance & Reverse Factoring

Supply Chain Finance can also be known as Supplier Finance or Reverse Factoring. The term "supply chain" in this context is used to refer to the network of organisations and activities involved with producing, distributing and paying for goods and services provided by one or more suppliers to a single customer. For example a large company being supplied by numerous smaller businesses. "Supply Chain Finance" refers to the provision of finance to a number of supplier businesses, within a single supply chain, under one umbrella arrangement that has been initially set up by the customer at the top of the supply chain.

An example of Supply Chain Finance would be where a supermarket is purchasing products from a wide range of smaller suppliers. The supermarket will arrange a Supply Chain Financing agreement with a financier such that all of their suppliers have the option of accessing finance under the umbrella arrangement. This is often provided at competitive rates that reflect the size of the supermarkets business rather than the size of the individual supplier businesses. In this way, the suppliers benefit from the arrangement as they are able to access finance at much lower rates than they would typically be able to achieve in their own right.

Some arrangements may be as simple as funding the outstanding sales invoice to the supermarket or similar large business, but in some cases there may be other services bolted onto the arrangement to help improve the management of the entire supply process.

The Benefits of Supply Chain Finance
The benefits of Supply Chain Finance to the large business arranging it in respect of their suppliers is that they are able to enjoy credit periods from their suppliers. These are being funded at competitive rates that their individual suppliers may not have been able to achieve in their own right. This will encourage their suppliers to continue to provide that level of credit when they may not otherwise have been able to afford it.

The key benefit from the perspective of the suppliers within the arrangement is that they are able to access finance at rates that would normally be reserved for businesses that are much larger, for example, national or global supermarket chains.

In recent times we have seen a few examples of this type of arrangement being established by some major companies and these types of arrangements can be provided by a number of funders that also provide more traditional invoice finance and factoring facilities.

Alternative to Supply Chain Factoring & Reverse Factoring
However, a Supply Chain Finance or Reverse Factoring arrangement may not always be the right answer for a particular supplier as there can often be other issues that cause a supplier to seek a facility that is independent of their customer. An example might be not wishing their financing to be connected to their customer. The take up of a Supply Chain Finance arrangement may not be unanimous amongst the suppliers to a particular business and each situation needs to be reviewed on its own merits and compared with other options available independently within the market.

The Future
Although Supply Chain Finance appears to have taken off relatively slowly within the UK so far there are examples of new arrangements emerging and the product is likely to feature increasingly within the Invoice Finance market.

Glenn D. Blackman is a Director of Cashflow Acceleration Limited ( http://www.cashflow-acceleration.co.uk/ ), a firm of commercial finance brokers, established in 2003, that specialise in Factoring, Invoice Discounting, Trade Finance and Asset Finance. We offer a free, independent quotation search service and our consultant directors have nearly 50 years industry experience between them.