Factoring companies offer small businesses a way to get their outstanding accounts receivable transactions squared away without having to have the staff and infrastructure for their own collections department. While small business factoring companies do take a percentage of money acquired, in most cases it is well worth the small loss in order to get the outstanding dues paid.
Large companies and firms that send out thousands of invoices for small amounts of money will likely find factoring economical. This is because factoring companies base their bids on the credit report of the indebted customer rather than your small business. Factoring companies charge for every invoice or account they have to investigate for credit rating information.
Let's take those numbers further. If you want to know if your business can profit from factoring loans, you just need to determine how much you would lose to a factoring loan service fee compared to how much a bank would charge you in interest.
Pull out a piece of lined paper and find yourself something to write with. Let's do the numbers to find out what is best for your small business.
First, determine how much money your business would lose through interest if you were to take out a standard loan. You'll want to look online to find this kind of information. Look at major banks as well as third party lenders, small business specific loans and credit union to get a real sense of what rates are available.
Next, do a little research online to find a factoring company that meets your specifications. The specifics of their factoring services should be listed prominently on their website, but don?t be shy about giving them a call or sending an email if you have questions. Once you have all this information, you?ll be able to make a realistic estimate about how much of your accounts? outstanding balance you would lose by choosing a small business factoring company.
Now, compare the cost of you doing your own collections work against the cost of working with a factoring company. In most cases, small business factoring saves money and extra stress in the long run. However, every business, business model and financial situation is unique and should be given individual attention.
By analyzing and balancing the data gathered, you will be able to see what choice is best for you and your small business. If you need money in hand right away, a small business factoring loan is a reliable and effective way to get just that. You may lose some money up front, but if you invest your sudden influx of cash correctly, it?ll make you a bundle down the road.
Large companies and firms that send out thousands of invoices for small amounts of money will likely find factoring economical. This is because factoring companies base their bids on the credit report of the indebted customer rather than your small business. Factoring companies charge for every invoice or account they have to investigate for credit rating information.
Let's take those numbers further. If you want to know if your business can profit from factoring loans, you just need to determine how much you would lose to a factoring loan service fee compared to how much a bank would charge you in interest.
Pull out a piece of lined paper and find yourself something to write with. Let's do the numbers to find out what is best for your small business.
First, determine how much money your business would lose through interest if you were to take out a standard loan. You'll want to look online to find this kind of information. Look at major banks as well as third party lenders, small business specific loans and credit union to get a real sense of what rates are available.
Next, do a little research online to find a factoring company that meets your specifications. The specifics of their factoring services should be listed prominently on their website, but don?t be shy about giving them a call or sending an email if you have questions. Once you have all this information, you?ll be able to make a realistic estimate about how much of your accounts? outstanding balance you would lose by choosing a small business factoring company.
Now, compare the cost of you doing your own collections work against the cost of working with a factoring company. In most cases, small business factoring saves money and extra stress in the long run. However, every business, business model and financial situation is unique and should be given individual attention.
By analyzing and balancing the data gathered, you will be able to see what choice is best for you and your small business. If you need money in hand right away, a small business factoring loan is a reliable and effective way to get just that. You may lose some money up front, but if you invest your sudden influx of cash correctly, it?ll make you a bundle down the road.
About the Author:
I'm a small business loan consultant specializing in small business financing options.
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