IFG Network: Factor for Small Business

Small businesses today are faced with so many issues. some (lawyers, financial companies and medical practitioners) are dealing with compliance issues, while others are trying to make their marketing dollars stretch. There are also many small businesses that are simply thinking about purchasing a new, and very expensive, piece of equipment and need capital fast? Factoring may be the easiest way to drum up cash in a pinch.

Plus, there comes a time in every small to medium-sized business where something breaks, and it usually happens during your biggest job and under a very tight deadline. So where will you turn when you need $10 thousand dollars to buy a new piece of equipment. You know you need it or you could risk losing a job that is worth thousands more? You turn to your accountant and ask: “Do we have money coming in? When is it due? How long can we wait?” The answer is always the same – you can’t wait. Some of those invoices may not be paid for 60 to 90 days, but if you don’t finish the job on time, you might lose your biggest job and also ruin your reputation. The good news is that this is a challenge that can be solved by factoring via IFG.

So what is in it for the factor? The factor receives the full value of the account receivable. The factor is also responsible for collecting any payments on the amount and any fees associated with such debt collection. There’s risk and reward – typical of most investments. The credit of your business is not at risk, you remain debt-free and no longer have an obligation to collect on the invoice. Your client will now be paying a third party – the new owner of the debt – the factor.

Can a small business afford factoring? The discount rate on factoring is usually between 2.5 and 3.5 percent per 30 days or 1 percent per day that the invoice remains unpaid. This in reality is a very small price to pay when your small business may have reached a point where it just cannot operate without much needed cash. The real question is whether or not you can afford not to factor? It is much faster than taking a loan from a bank and will not impact your credit as much as a bank loan might impact things.

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One Response to IFG Network: Factor for Small Business

  1. Pingback: Factoring Newsletter – April 2012 | IFG Network Press Room

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