Can a factoring company helps your business?

Have sufficient working capital to run your business is a key if your company is to prosper. Without it, it will not be able to meet current liabilities as the payment of rent, salaries and suppliers. Faced with cash flow problems, many owners try to ignore the issue pending before acting. The hope that the problem is resolved. This happens rarely. While a cash flow problem can be temporarily resolved by a rapid payment of the customer, often chronic liquidity problems are fixed and need management action.

One of the most common causes for the problems of net cash flow has 30 or 60 net terms to customers. It is a common way of doing business in Canada, but offering terms of delaying the payment of the invoice the customer. However, you are still obliged to pay its suppliers and employees quickly. This creates a gap between when it is necessary to pay debts, and when you receive an income from an invoice.

Many companies that can bridge this gap by using their reserve funds to cover their expenses. Those who do not have any reservations usually try to get some form of business financing to cover the gap. Often, the owner will approach their local bank, hoping to get a business loan. While business loans may be used to correct this problem, are more suitable for the purchase of assets rather than in the case of cash flow problems. For many companies in Canada, a better solution is to use invoice factoring. Also known as invoice discounting, invoice factoring has been gaining traction in the Canadian market as an alternative to bank financing.

Invoice factoring is a form of financing provided by a factoring company that provides an immediate advance on payable invoices in 15 to 90 days. This provides cash flow to cover operating expenses, helping to ensure that your company can keep its promises. Factoring has a number of advantages. The most important is that the quality of your customers' credit plays an important role in the transaction, and for the most part, determines the amount of funding can be obtained. This feature makes it very dynamic as factoring financing line can grow as billings grow. This function is also an advantage in the Canadian market, where companies have been less affected by the ongoing credit crisis and were able to maintain good credit ratings.

Factoring companies structure the transaction in two installments. The first payment, about 80% of the invoice, the invoice will be funded when presented to the client. The second payment, about 20% (less than the maximum), is funded once the customer actually pays the invoice.

Factoring is a great solution for companies that have great potential, but can not afford to wait to receive payments from customers .......