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5 Reasons to Consider Factoring Receivables

Factoring receivables is something done by a variety of companies. There are many reasons why you should consider this method of obtaining cash funds.

1. You Were Denied a Traditional Bank Loan

Traditional bank loans are often difficult to get, especially when you’re in a hurry. There is a lot of paperwork that needs to be filled out. When you’re denied the loan, you can turn to factoring your accounts receivables because you’re able to use that as your means to get the money as opposed to borrowing from a bank.

2. You Have Poor Credit

Your business credit score isn’t taken into consideration when factoring receivables. Instead, the total cost of your invoices is used to determine how much money you’re able to obtain. The best part is that you don’t have to actually take a loan. Instead, you are given a percentage of the total value of your invoices. You can determine how many invoices you want to hand over based on your needs.

3. You Need Money Instantly

If you need money instantly, you might not have the time to wait two or three weeks for a loan to be approved. Many invoice factoring companies will be able to process a loan for you in a matter of hours. If you make the request on a non-business day, it might be a little longer. However, it’s faster than traditional loan processing.

4. Many Accounts Receivable Accounts Are Past Due

Past due accounts receivables can cause a real problem within your business. When you have invoices that are 60 days, 90 days, and even more days past due, you have to do something. Instead of sending all of your customers to collections, you can choose to factor all of the invoices. The factoring company will then be responsible for collecting the money.

5. You Want to Overhaul Your Accounts Receivable Department

You might not be happy with the terms of your accounts receivables. If you want to change to COD or require your customers to go through a better process to get approved for credit, you might want to factor all of your existing receivables. It will give you the cash flow you need and allow you to start with a clean slate.

By understanding some of the reasons for factoring receivables, you can make the decision to use the process when you need money. It could be just what you need to get your finances back on track.

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5 Things That Would Make You Factor Your Accounts Receivables

There are many reasons as to why a company would consider factoring receivables. Here are 5 reasons when factoring is ideal.

1. You Want to Raise Money Quickly

One of the biggest reasons why a business would sell their accounts receivables is to get quick cash. The factoring company usually gives you a reduced amount of cash for your accounts. They earn a profit as they collect the money from your customers and you get quick working capital to buy inventory, expand operations or use on whatever you want for your business. In this financing agreement, the receivables act as collateral. This is also a good way not just to get working capital, but to free the capital that is stuck with debtors.

2. You Want to Get Money Without Increasing Your Debt

Debt becomes necessary for business operations. However, accumulating debt can hinder your ability to raise working capital in future. Some lenders may also restrict companies from taking extra debt. Companies with large amounts of debt are not able to grow as well as those without debt. In order to avoid all these issues, the best option is factoring receivables.

3. You Want to Reduce the Amount of Time it Takes to Collect

Many companies find that they are paid months after they have delivered services when they have bills to pay such as rent, payroll, and even funds for expansion of their business. Factoring receivables helps cure the problem of debtors and transfers the risk to another party. In most cases, factoring companies are more skilled at debt collection than your company. You will want to take advantage of this expertise. If your company has a large list of clients who have not paid you for your services, then this is also a way to make sure they pay.

4. You Don’t Qualify for a Bank Loan

If you don’t qualify for a bank loan then factoring will enable you to get the money you need for business use because it is a form of a secured loan from the factoring company. You might be unable to qualify for a loan because you already have too many loans, or have had an issue repaying loans in the past and banks refuse to give you any more loans based on your bad credit history.

5. Your Company Doesn’t Have a Collection Department

Small and medium-sized businesses do not have a collection department whose specialty is dealing with defaulters. The factoring company acts as an outsourced debt collection department because they help you collect your debt and pay you an advance at a fee.

If you are in any of the following situations, then you can factor receivables to get quick money.

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6 Ways of Expanding Invoice Factoring

Account receivable factoring is among the ways to get extra money in the form of creating new means of acquiring more pathways of getting expanding one’s business. Factoring accounts receivable keeps the organization on the track when issuing invoices and making a promotional sale. Having a payment from an invoice guarantees a profit in every invoice received. The following are the ways of expanding your invoice factoring:

1. Have A Plan

Before thinking of undertaking an invoice sale and factoring receivables, there is need to stay organized. That is, to know how clients present their invoices that are exceptional and the income that it’s going to bring. Every client must have an at least a documentation which has their credit requests, and the general correspondences enquired. All these included in the invoice will provide a clear view that the client is ready to undertake a trade.

2. Terms And Conditions

There should exist an agreement with the customers by constructing a terms and condition contract. It is good to have these in place with all the customers available for the extension of the credit. Again, in case of any change of these terms and conditions, there has to be an agreement signed formerly any trade undertaken.

3. Inspect The Solvency Of All Clients

Checking the credit value of each, existing and new, customer before undertaking a share of the acknowledgments. It is through a credit requests and credit testimonials preview, and hence this will enable understanding the credit history if it’s weak or good.

4. Create Trust With Customers

Building a good relationship with trust will establish a secure connection between the two parties. Any new or existing customers could not undertake any act of trying to close down the business relationship. Henceforth is good to understand other people connected to the client and always check on them to make sure things are going on well.

5. Wise Use

Addressing problems on cash flow, meeting the clients or any other issue resulting will enhance the right use of factoring accounts receivable. That is, the invoice factoring enables acquiring cash flow from remarkable invoices hence minimizing any problems results in adequate business performance.

6. Credit Thresholds

When expanding credit to new clients, there has to exist thresholds. It will enable getting a complete truth of the payments behaviors of the customers before sharing. Then keep on the credit positions and limits of any new client. Again, offer more evidence on how they will undertake their duties to improve the situations and those boundaries.

In conclusion, when there is need to strengthen the business for higher profits, factoring accounts receivable is an excellent choice to reflect. It keeps you keen on how you control invoice factoring while making the occupation stouter and free a good platform for extra profits.

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6 Key Benefits of Factoring Receivables

Usually, it takes a period of about 30 to 60 days for a company to receive cash on their receivables or invoices. However, if a business wants to get cash from receivables and invoices quickly, it can sell these receivables or invoices to a financial company (third party) known as a factor. The factor will now be left to collect payments from the business’s clients. Here are the benefits of factoring receivables:

1. Credit Screening

When your business factors receivables, it obtains its clients’ credit information from its factors. As a business person, you will, therefore, have the ability to make sound business decisions on who to do business with and which clients to avoid on account of the chances of becoming delinquent. This protects the business from unnecessary losses.

2. Faster Invoice Payments

Factors often report payment details to credit agencies. This is a general report regarding the payment of the invoice. Companies (your debtors) will, therefore, try to settle their debts as fast as possible to avoid the consequences of being reported.

3. Personal Guarantees Are Not Required

As a business, it’s not mandatory that you guarantee the payment of the factor by the customers – at least not personally. You don’t have to guarantee against the client’s inability to pay. All you have to guarantee against are disputes and cases of fraud.

4. Factoring Is Fast and Easy

No projections, business plans, financial statements, or tax returns are required to factor. Unlike other types of financing where you may be required to provide up to several guarantors, there is nothing of the sort when it comes to factoring. Company principals don’t have to guarantee repayment.

5. It’s Not a Debt

Note that factoring is not a loan. Just because it’s a form of financing, many people just assume it’s some kind of a loan and try to avoid it. However, that’s not the case. You factor your accounts receivable, which is typically your money – it’s only that you need it faster than the debtors are willing to pay.

6. Eliminate Bad Debt

Bad debt can cause major liquidity problems for a business. A non-recourse factor assumes bad debt. Factoring eliminates the expense from your business’s income statement.

The banking sector has continually downcasted the practice of factoring. As a result, a lot of people are afraid to try it. For that reason, most people aren’t aware of the positive aspects of this type of financing. Hope this article has cleared things up.

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Reasons Why Your Company Should Accept Credit Cards

These days, customers don’t necessarily want to pay with cash or want to carry cash in their pocket. Instead, they want to be able to pay with their credit card and get the perks that come with using it to pay for gas, groceries or dinner out. What are some of the benefits to your company when it partners with a credit card processing company?

Increase Sales

The most obvious reason why your company should accept credit cards is that it will increase sales. If a customer doesn’t have cash or checks handy, he or she won’t be able to make a purchase no matter how badly he or she wants your product or service. By accepting credit cards, you give your customer more flexibility to buy on that person’s terms and are more likely to drive more sales and make more money.

Do Business From Anywhere

If you run a small business, accepting credit cards means that you can do business from wherever you happen to be. For instance, you can attach a card reader to your phone or tablet and sell products on the sidewalk or at a booth by the beach. You could also take orders online or allow customers to checkout from wherever they are in your retail establishment. Customers love not having to stand in line, so allowing them to find a salesperson and cash out where they happen to be is a winner from a customer service standpoint.

Get More Information About Your Customers

You can get a lot of information about your customers by getting them to pay by credit card. For instance, you get names, email and home addresses and phone numbers just by getting a customer to swipe his or her credit card into your point of sale system. This information may be used in future email, direct mail or phone marketing campaigns to target your most loyal customers or those who spent the most money with your company.

It can also be used to provide targeted coupons or special offers to those who are most likely to use them, which can drive sales while also creating a stronger bond between your brand and its target audience. In the event of a recall, you can contact individuals who have bought products that are involved in that recall. This allows them to return contaminated food or medical supplies before they get sick or get others in their families sick.

If your company is not accepting credit cards, it should do so as soon as possible. While you may be concerned about credit card processing fees, they are more than negated by the extra sales as well as the increased customer satisfaction with your brand. For more info, visit the resources at Collective Point of Sale Solutions.

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What is Credit Card Processing and How Does it Work?

For anyone looking to become a merchant in any kind of marketplace, it will be critical for you to understanding the basics of what credit card processing is, how it works, and how it will affect your bottom line. In this article, we will discuss the basics of this topic.

The Basics: Banks, Card Sponsors, and Payment Processors

When you decide to accept credit cards as a method of payment at your business, you are actually deciding to engage in an incredibly complex process. As a result, we will need to outline the steps of what happens every time you accept a Credit Card Processing transaction.

There is a bank that issues the card, and there is a card sponsor. Sponsors are companies like Visa and Mastercard, and the bank could be Wells Fargo or Bank of America. In some cases, a bank can be both the issuer and the sponsor (i.e. Discover) The bank takes the risk of lending the money to the buyer, while the card sponsor deals with part of processing the transactions that the buyer makes.

When a buyer chooses to make a purchase with his credit card at your store, the card sponsor is going to charge you a fee for interfacing with the customer on your behalf. This fee is usually a flat fee of about $.30 plus 2.9% on the total purchase. This is the cost that you pay to allow credit cards be used at your business.

Of course, different card sponsors charge different fees (whether higher or lower), so it is up to you to decide which card types (i.e. Visa, Mastercard, American Express, Discover, etc.) you are going to allow to be used at your business, but the more types of credit cards that that you allow, the more likely you are to receive more customer volume.

Finally, the actual terminal that you accept transactions on must be purchased by a sort of clearinghouse company that interfaces on your behalf with the card sponsor to make sure that your transactions are recorded appropriately and that helps you in the case of an error. These gateway companies will charge you a percentage fee in order to provide their services.

Our Goal is to Bring Fees Down

Quite naturally, this entire process can be quite expensive, costing you as much as 3-4% of each transaction. That might not seem like a lot of money, but when you multiply 5% by one thousand transactions, it really starts to eat away at your bottom line. Therefore, it is prudent for anyone who is looking to start a business that accepts credit cards to check the lists put out by Merchant Maverick and Cardfellow to see which companies offer the lowest rates at the beginning and then every couple of years thereafter.

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How Do Credit Card Processing Machines Work?

A credit card processing machine works by detecting the card inserted by a user. Swiping a card over the reader slot allows the machine to automatically read the information in the magnetic strip or chip including the credit card number and the cardholder’s name as well as other personal information. This information is acquired by the credit card machine and prepared for transfer.

Transmitting the Data
Credit card machines are designed to transfer the data they collect to the credit card processor. The software in the machine merges the merchant’s identification number and name with the cardholder’s data. Credit card terminals then transfer this information to the processor’s server through an Internet connection.

Approving the Transaction
Once the card has been swiped and its information processed, the machine either accepts or rejects the transaction. If accepted, the transaction receives an exclusive approval number that ascertains the specific purchase. The machine electronically confirms that the amount used does not exceed the card’s limit, that the user is the right cardholder, and that the card has not expired. Generally, the whole process takes 3 to 5 seconds. Once the transaction has been approved, the credit card machine starts processing receipts on its internal printer with details of the transaction.

Types of Credit Card Swipe Machines
The credit card has a strip with negative and positive charges. The Credit Card Processing machine interprets the charges as a series of zero and one in a binary code. The information in the credit card is transferred to the computer, which changes the binary code into digits.

Once the credit card processing machine reads the data in a card, it transfers the information to the cardholder’s bank through a telephone line. The bank then confirms whether there is enough cash for the transaction or not. This is when you will know if your credit card is accepted or not

A credit card processing machine is part of a central processing unit and can be hacked into or be affected by malicious applications and spyware. This may result in fraud and identity theft. Unscrupulous sales clerks can also use cardholder’s data to commit crimes.

The standard price of a credit card processing machine is approximately $350 including a printer. However, Installation fees are not included in this quotation. A printer is an essential component of the credit card processing machine because it enables users to get receipts with details of their transactions.

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