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Businesses can Profit from Invoice Factoring

A new survey for small businesses in the United States shows an increase in business owners who believe economic conditions are improving. About 30 percent of them believe the economic climate will get better within six months.

The survey also asked them about their intentions to invest, and 23 percent say they would increase spending in their businesses.

But 43 percent still plan to decrease spending. Small business owners who say the current economy is good or excellent was 13 percent in April, up from 7 percent earlier in the year, however it's the highest it has been in 20 months.

It does appear that for many small business owners cash flow issues have eased slightly. Fewer owners said their businesses experienced temporary cash flow issues in the past 90 days. This caused them to hold off on paying bills.

Although the confidence survey shows some month over month improvement, there is still significant room for improvement and many businesses continue to suffer from cash flow challenges.

Accounts receivable factoring companies have stepped in to assist many businesses during this recovery period when cash is need to help them expand.

One of the oldest and most widely used forms of funding for businesses is use of invoice factoring companies who perform standard invoice factoring, which has been around for thousands of years. Some businesses don't get paid right away for their products or services; however in order to sustain and grow, every company needs cash.

Most recently, a newer form of accounts receivable factoring has become popular, which is known as spot factoring, or single invoice factoring. It is of benefit to firms that do not get paid for 30, 60 or 90 days. How? Some factors advance up to 90 percent against invoices. Factoring companies offer "use it as you need it" funding options, whereby every invoice purchase is a separate transaction and does not form part of a portfolio lending approach. The transaction is modeled as a buy-sell transaction. Steps include:

Due Diligence - Factoring companies usually go thorough a due diligence effort that typically takes up to 48 hours.

Review Invoices - Once the due diligence is completed, the client is at liberty to offer invoices.

Credit Verification - A factoring company will check the credit of the debtor named on each invoice after receivibng them, just to make sure the sale represented by each invoice has been completed.

Debtors' Notification - Each debtor is notified of the purchase by the factor and then the client is paid for the invoices.

Debtor Payments - At the end of the credit period the debtor will make payment directly to the factoring company and completing the transaction.

Most factoring companies are fast, flexible, cost effective and user friendly with professional rates that are competitive; each client's circumstances will vary and may have an impact on the fees.

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