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ANSWERING THE TOP 5 FAQS ABOUT FACTORING RECEIVABLES TO FUND YOUR BUSINESS

 


Business owners know the struggles of cash fluctuations while running their firm. They often experience a gap between the receipt of payments and due date for vendors. Many firms can have a cash crunch because their clients do not clear payments in time. At the same time, they have to contend with the pressure of mounting dues from suppliers and creditors. In such situations, “factoring receivables” can help them get easy financing solutions for their business. Let’s break it down and answer the most frequently asked questions about “factoring receivables”.

 

Factoring Receivables: The Concept

Accounts receivables include all the outstanding payments your firm is yet to receive from the buyers. A delay in clearing these receivables can cause cash issues in your business. Moreover, the time and resources required to chase these dues can affect your firm's functioning. "Factoring receivables" is an excellent financing solution that allows you to get funding by giving up these accounts.

A firm can give up its outstanding invoices and get up to 90% of the value as financing for the business. This strategy can help an organisation escape the hassles of chasing dues. Moreover, it can allow them to liquidate their receivables to get an instant infusion of cash.

 

Top 5 FAQs about “Factoring Receivables”

 

1.     Is “Factoring Receivables” a form of loan?

No, “factoring receivables” is completely different from traditional forms of debt. This process essentially involves selling the rights to your accounts receivables. The financier takes over these accounts. They pay you a stipulated amount and take the responsibility of recouping the money. You do not get debt on your balance sheet after making this transaction.

 

2.     Does “Factoring Receivables” mean settling for a loss?

Not Necessarily! The financier will indeed pay you a lower amount than the total figure of your outstanding invoices. However, getting that money back quickly will help you turn a profit and get better returns than you would by pursuing those accounts. You can use the liquidated receivables to fund expansion plans or reinvest them to get profitable returns.

 

3.     What are the documents I need to apply for “factoring receivables”?

You need a valid Australian Company Number (ACN) or Australian Business Number (ABN). Moreover, you should submit copies of the outstanding invoices. These invoices must be with other Australian firms. You also need to submit proof that you have supplied the goods or services to the people who owe you money.

 

4.     How long will it take my firm to get funding through “factoring receivables”?

The approval process may take anywhere between three days and a week. The firm can get the funds within a day of approval.

 

5.     What types of firms can benefit from “factoring receivables”?

Most businesses dealing with large-scale customer accounts can benefit from this facility. This option is most suitable for business-to-business operators. The prospect of recouping payment on a business-to-customer level is infeasible in this model.

 

If you want to explore this financing option, you can contact Broc Finance, Australia’s top finance broker, today!

 

 

 

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Location: Australia

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