Types Of Factoring And Their Benefits
Invoice factoring can be defined as a trouble-free process to rescue your business from a financial crisis by selling your invoices to a factoring company. This is a good way to get cash in a very short period of time without waiting for your clients to pay.
There’s no point of wasting time over baseless worries instead of focusing on the growth of your business. However, you might get cheated if you are not aware of the essential issues and facts related to this matter. Mainly there are two types of factoring available, they are:
Recourse: This means you are selling your account receivables to a factoring company. If the company fail to collect the amount of money from your customers, you will be responsible for the amount they failed to collect. In other words, if the factoring company couldn’t collect the outstanding amount from a customer, they will ask you to pay the money.
Non recourse factoring: Just like the first one you need to sell your account receivables in non-recourse factoring as well. But, in here you are not liable for any payment that the factoring company is unable to collect from your customers on the given date of invoice.
These two types of factoring are most commonly used in today’s financing sector. You need to decide which one would be better for you. Here are some of the major benefits of factoring:
* Instant cash: Factoring helps you to get cash in less than 24-48 hours. So, you can easily manage financial requirements of your business, focus on expansion plans, and invest in other essential places without any worries.
* Easy to get: Unlike traditional bank loans, you don’t need to submit any documents to get cash by selling your factoring receivables. That means you get the access to immediate cash in a hassle-free way.
* It is not a loan; you don’t need to pay interests: by selling your factory receivables you don’t have to pay any interests. This is a great way to get rid of long-term obligations.
During a financial crisis, a small company struggles to maintain enough cash in its fund. With factoring your account receivables you can handle the critical situation easily and secure a future of your business. If you are looking for a company that deals with factoring, Texas has a large number of options for you. However, you need to be extra careful when selecting one.