Invoice factoring, which is also known as accounts receivable financing is the process of selling the invoices of a company at a discount to a factoring company or a finance company for the purpose of obtaining immediate capital or cash in hand. Applying for an accounts receivable loan is very helpful for a business because it would enable it to gain access to the funds which would otherwise have been accessible after the course of the normal billing cycle followed by the customers. ‘Factoring’ here means the act of selling invoices or accounts receivable to a factor.

Before going for invoice factoring, it would be a wise step if one attempts to understand some of the essential points in this type of financing method. The first fact is that it eliminates bad debt. When you choose a non-recourse factor for the purpose of obtaining the accounts receivable loan that you need probably desperately, you will automatically be eliminating the risk of bad debt. Therefore it would not appear in the company’s books of accounts or income statements from that point onwards. This is a good thing for building up the reputation of the company.

An accounts receivable loan can certainly help your business in ways more than one. First of all, it enables your employees to get rid of a huge deal of responsibilities because the factors would be taking care of a major portion of the work pertaining to processing invoices, like posting, depositing the checks, computing records from time to time, entering the payment entries in the books of accounts and so on. Did you know that invoice factoring is the only financing source which could increase your company’s sales figure? Yes, this is true and it also facilitates the availability of additional money.

Although invoice factoring may not be suitable for everyone, it does prove to be highly useful for those who find it suitable. It is the primary source for unrestrained capital, which allows the company to meet the increasing demand and also provide it with the opportunity to grow and expand. An accounts receivable loan is highly useful in case of financial emergencies and also in everyday matters. For instance, one can save up to 5% on raw materials pertaining to business transactions since timely payments can be made from the money obtained from this method.

In case of other financing methods, businesses have to give up their equity for the purpose of getting finance. This is a major drawback because it is unfavorable for the companies. However, in case of invoice factoring, one doesn’t have to give up equity and nor does one need to take on any partners, one will be able to get whatever amount one requires via an accounts receivable loan. People generally tend to have the misconception that factoring is a type of loan but it actually isn’t because your business would not be incurring any kind of additional debt.

You will find that invoice factoring is highly useful for your business. Of course you might need to endure a bit of trouble during the initial stage because the initial transaction generally takes anywhere between 3-5 days for completion but once the account is successfully set up then the money would be rolling in faster. Moreover, when you obtain an accounts receivable loan you wouldn’t be bound by any monthly obligations or debt repayment, so you have full freedom to control the amount you factor and the time when you want to factor. It all depends on the cash flow needs of your company.
Amongst the many financial methods, invoice factoring http://www.factorsmarter.com is certainly one which benefits the business in a number of ways. In fact, many entrepreneurs consider it to be one of the best ways of acquiring accounts receivable loan http://www.factorsmarter.com since it completely dissolves bad debt and also provides ready cash for usage.