Obtaining loans from banks and other traditional financial institutions can be a long, painful and often frustrating process. Luckily, business owners and managers have spot factoring - a highly effective alternative to traditional financing.

Account Receivable Financing

the semantics of accounts receivable financing and factoring

Semantics can really be confusing, especially with a term like accounts receivable financing. In technical terms, financing means a loan involving two parties, usually a bank and you. Financing terms are based on your credit. Factoring on the other hand means a purchase of your invoice and involves three parties, the factoring organization (for instance, IFG Network who buys your invoice), you and your client whom you’ve invoiced. Fees and discount terms are based on your customers or clients’ credit, not yours.

Compounding matters, the term "accounts receivable financing" is often confused with accounts receivable factoring, which is really invoice factoring. Since IFG Network is in the factoring business, we will concentrate on the accounts receivable financing usage as a phrase to mean invoice or spot factoring.

As already pointed out, one of the major differences between factoring and bank loans is factors can often make funds available when banks cannot or will not. This is because factors are mostly concerned with the credit worthiness of the debtor, (the customer you invoiced for goods or services) while banks are primarily concerned with your company's credit worthiness.

Thus, factoring can be an important tool in the small business' arsenal of financial planning. Factoring can be a source of working capital for the startup business or it can provide spot cash to tide the company over a rough cash flow stretch. This is especially true for the underfunded, recently launched small business which often has difficulty securing financing from their bank.

One point worth considering is that quite often accounting and legal professionals are not up to speed on factoring practices. Therefore they sometimes discount factoring as being a viable choice for the rapidly growing or turnaround business.

To get the straight scoop on accounts receivable financing or factoring we invite you to fill out our inquiry form by clicking here. An IFG Network representative will be in touch shortly. Or you can call the IFG Network at 877-210-9748.

Testimonials:

"I have done extensive research on debtor finance over the past 12 months, and have been working with IFG for the past few months and have been really pleased…one great thing (and hard to find) about IFG is their flexibility, you can factor some of your invoices or none of them each month, you decide. I would highly recommend both debtor factoring and IFG as a way to boost cashflow and enable business growth."

Sally Edwards
Origin HR Victoria & SA
(Torquay, VIC)