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Old 7th June 2011, 02:09 PM   #1
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Default Invoice Factoring

Hello and good morning,
I'm just curious if anyone here has tried invoice factoring as a way to increase cash flow?
Just to be honest, I'm working for a company that offers it and am looking to find the general perceptions of this type of financing. I'm NOT trying to push its services or even promote the company. Just wondering if anyone here uses invoice financing and what the experience is like.
Thank you-

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Old 1st July 2011, 11:20 AM   #2

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Location: Baltimore, MD
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Invoice Factoring could be crucial when looking to increase short term financing. You have to make sure you have a motive with this money when conducting this payment structure. For example, maybe you want to increase short term cash flow in order to invest in other businesses. You want to make sure that you are confident with this investment.

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Old 1st July 2011, 01:12 PM   #3
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Thanks for the reply, Portal. Very much appreciated!

Travis Griffith
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Old 1st July 2011, 01:16 PM   #4
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Factoring? I know it's not for everyone... and you really need to understand how it all works to be comfortable... but it could be the perfect answer to small growing businesses.

I used it in a company that I owned several years ago. It is more popular in some industries... so when you introduce it, you (as a business owner) should have a clear and easy to understand method of explaining things to your customers.

I said that, but it all depends on how the factor works. I haven't been involved for a few years... but the way I understood it... the factor contacts the account and basically explains that payments are directed to THEM, not the business.

In some cases, that could be viewed as 'weak' as far as the business is concerned. Factoring could also be an expensive way to finance... so you have to keep your eye on that ball to.

But look at this. Small business... great idea... people asking for the product... and no money to produce. Worse... the bank manager ONLY gives you a warm smile and a firm handshake.

Tell the banker to go 'pound salt'... if you know what I mean. Just about every business can get factoring money. Now, there are some factors that only deal in certain sectors... or industries... but there are good factors that will work with you. It's a great way to get your business launched... and you can 'stop' the financing (in most cases) whenever you want.

Hope this helps! Good luck!

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Old 25th August 2011, 10:46 PM   #5

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I advise my clients that there are 3 things that need to be present before factoring is a good idea:

1. The company has to have identifiable growth opportunities. If factoring is viewed as a way to bail out of a difficult business situation it probably will not work. However if a business has growth opportunities and needs factoring as way to finance that growth then that will work.
2. The company has to have good and consistent profit margins. If the profit margins are thin factoring is going to eat the profit margin up more.
3. The company has to have customers that pay their bills on time and are credit worthy. If they are not credit worthy then factoring will cost a whole lot more.

Michael Barbarita - Next Step CFO - CFO Services
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Old 6th September 2011, 03:14 AM   #6

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with invoice financing you don't borrow any money or get a line of credit. Instead, you finance your invoices for instant cash flow. The organization financing your invoices pays you and takes on the risks associated with unpaid invoices. Because of this, you won't get the full invoice amount. Instead, you receive the invoice amount minus the financing costs. benefits include
- Available cash flow grow your business, buy equipment, do anything you have wanted to do to build a better business.
- Instant cash helps cut overhead.
- Pay vendors paying your vendor bills early or on time can lead to better relationships and potential discounts.
- Buy supplies, equipment and buildings some businesses find they can't stock up on supplies, which puts off finishing jobs for customers. With cash from your invoices, you can increase your supplies so you can meet more demand or keep up with demand.

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Old 17th September 2011, 10:20 AM   #7
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Expensive -but if your company is growing (and only if it is growing) and feeling growing pains (cash flow issues between shipping and payment) then invoice factoring can be OK - short-term.
If you are using it for long-term financing or for a business in decline - then you have other issues you should be working on.

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Old 31st October 2011, 09:10 AM   #8

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1. Factoring - Grow as fast as the invoices come in. It is instant cash flow based on your invoices.

2. Merchant cash flow factoring - similar to invoice factoring but instead of factoring one particular invoice for an amount. It is factoring your total volume of verifiable deposits via bank statements or credit card processing statements.

3. Business Line Of Credit - These can be secured or unsecured. Unsecured is almost impossible to get unless you know what you are doing. Secured can be easy, especially if you have heavy equipment or real estate backing the loan.

4. Hard Money - Hard money loan against real estate. This can get you cash out of a paid off property. These are great if you have been turned down for traditional financing.

This is just a few of the things we help business with on a daily basis. Call me if you need help with any of these. Philip 864-735-5366

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Old 31st October 2011, 10:19 AM   #9
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Very interesting topic. For the experts what is considered a better method?

Advanced Factoring or Maturity Factoring?

What about these two methods in comparison to invoice discounting?

Also has anyone heard of a new trend coming about called "reverse factoring"?

I think one of biggest keys to all of this is the fees and costs you can expect to pay / incur per method or outlet. No matter how good of a financing method or plan you have or no matter how good you are in business you can do serious damage to your business opportunities through ill advised financing. It is kind of like what happens to general people in real life using credit cards. It can turn ugly quickly even when there are the best of intentions just because the fees are too high and all the small logistical details are not correctly worked out.

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Old 15th December 2011, 01:19 AM   #10
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In my commercial banking days I often referred clients to "factoring companies". Small businesses sometimes need to finance their accounts receivable.

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