Different Types of Factoring

If you are not familiar with factoring, then this is a financing tool wherein unpaid invoices of a business will be sold to a factoring organization and they will finance the working capital needs of your business. You might need this help to improve the cash flow within your business for a smooth operation. This is also possible if you want to expand your business. You need to become aware that this financing company will charge a specific interest rate. These financing companies can offer different kinds of plans for this purpose.

The first one is single invoice factoring and this type of plan is dedicated for small as well as medium sized businesses. This is if you want additional cash flow with no contract terms. A business can get 80% financing according to their creditworthiness and the ability of the debtor to pay. Once the debtor pays the financer, he or she will get the balance. The benefit of this plan is the flexibility that it can provide to businesses. It also requires low fees. When compared to full service contracting, single invoice is more expensive.

The next one is full service factoring that is suitable for businesses that do not have account departments. With this type of business lending, you will get financing for your invoices and support in terms of giving service for your Accounts Department, Credit Department and Collection Department. This is very useful especially for small businesses because they can avoid having bad debt. They do not have to deal with debtors, so they can concentrate with their business growth and expansion. This type of plan can also offer 80% of invoice value and another 20% will be given right after a month once fees have been deducted.

There is also partnership factoring that is suitable for businesses with established account department as well as booker. With this agreement, it is only financing that is needed from the lender. There are times when lenders will not do any credit check that is why a business will encounter lesser accounting worries. The fees with this plan are lesser compared to full service. With Partnership, transactions are mostly done online and it is also known as paperless.

You can also opt for confidential factoring that is especially designed for large corporation with no lack in contract. With this agreement, the debtor can choose which invoice they want to fund and the number of debtors that will be included within the process. This type is most of the time used real estate security that is why it is known as a flexible financing aid. The process will give you the freedom to disclose the agreement with debtors or keep it confidential. In case debtors will not be notified, then you need to pay for higher fees as it is high risk for the lender. The business will get 80% of invoice and there are interest rates. It is important for businesses to find out what type of factoring they need to help their business to expand its horizon.

Factoring

• Factoring companies can help improve your cash-flow finance with invoice discounting and debtor financing. For more details visit https://www.fifocapital.co.nz