Reasons That Make Invoice Factoring A Helpful Option
Invoice factoring is a process of receiving cash that are due for the long term. Cash flow is the main problem that troubles your business always. The business which has customers who do not pay immediately, the situation is worst.
In that case, one can take help of invoice factoring. This proves helpful to obtain 80 percent of the total due amount and the rest twenty percent is paid after the cash is retrieved by these companies. The companies deduct a small amount as their factoring fees. The factoring fees are nominal and there is no risk of hidden prices.
Factoring is not the same as invoice discounting (which is called an “Assignment of Accounts Receivable” in American accounting – as propagated by FASB within GAAP).Factoring is the sale of receivables, whereas invoice discounting is a borrowing that involves the use of the accounts receivable assets as collateral for the loan.
However, in some other markets, such as the UK, invoice discounting is considered to be a form of factoring, involving the “assignment of receivables”, that is included in official factoring statistics. It is therefore also not considered to be borrowing in the UK. In the UK the arrangement is usually confidential in that the debtor is not notified of the assignment of the receivable and the seller of the receivable collects the debt on behalf of the factor.
In the UK, the main difference between factoring and invoice discounting is confidentiality.
How Is Invoice Factoring Helpful For Small Business Helpful?
The best way to crunch the problem of cash flow is to make use of invoice factoring. In Texas, there are several countries which pay instant cash and then retrieve the due amounts after proper scrutiny and approval invoices.
The small business actually uses these for instant cash. It takes only a few days for Invoice factoring Texas to check the invoice and then approve it. The following are reasons why invoice factoring is useful for small business:
- Helps to acquire instant cash:
The factoring is required by small business to acquire cash instantly. The cash that was long pending is received instantly after 3-4 days if one takes help of factoring. The eighty percent of total left amount is given to the small business and this gives a great impetus to the business owners.
This is not loan or something like that. It is just an advance of the left amount of one’s invoices. The amount left back is paid later after the cash is retrieved. The factoring fees are only three percent which makes it easier and affordable to hire a factoring agency.
- Requires less time:
It is natural that the loan one wants to get from the bank takes much time. The scrutiny of documents and approval takes much more time than that of factoring. If one hires a factoring company the cash is paid within a maximum of 5 days. This is of much help to small business owners. It is easy for them as well.
- Easy to obtain:
It is easy to be eligible for invoice factoring. One just needs to follow three steps. The steps are as follows:
- One needs to maintain a perfect invoice of the customers. A mistake in it may create a bad impression to the factoring experts.
- After the invoices are submitted it is checked. Checking and approval is done within 3-4 days.
- The maximum of cash is advanced within 3 days of approval.
All the above points make invoice factoring an appropriate way to crunch cash flow and other financial problems related to business. The small businesses are benefited by Invoice Factoring Texas to a large extent. It is the best way to derive cash and one of the feasible options to get back cash that remained pending for long.
Category: Business
