Factoring is a promising way to stimulate the cash flow of a
company. Its growing popularity can be gauged from the
statistics that factor finance approximately amount to $70
billion in United States each year. In United Kingdom it
represented a total volume of £104.4 billion in 2002.
However, before leaping on the
factoring (
http://
www.hjventures.com/factoring/factoring.html ) bandwagon it
is important for the business owner to know what makes a
business suitable for factoring?
- Before making any decision the owner should have a list of his
customers and they should be in sufficient number
- No customer should contribute over third of the turnover
- Customers are needed to accept the standard payment terms of
the industry.
- Period of credit given to the customers should be reasonable
Following factors make a business unsuitable for factoring:
- When there are too many small invoices (
http://www.hjventures.com/factoring/invoice-finance.html )
- Factoring is unsuitable when it is sold to the public. It is
only available for sales to commercial customers
- There is a provision for the customers to make part payments
- When there are many disputes and queries
- The business is not reliable, credible and sound in its
operations
It is very important for the business owners to have a good
understanding of these factors as they will be sharing important
financial information of their business and will be in direct
contact with the customers too. Earlier factoring was not widely
used due to the ignorance of business owners regarding the
benefits factoring could bring in to the company. Thus it is
important for every business owner to be aware of benefits of
factoring before using it in their business.
Learn more about
factoring / business finance :
http://www.hjventures.com/factoring/factoring-glossary.html
About the author:
Howard Schwartz is a partner in several business strategy
groups, including HJ Ventures International, Inc. Howard has
worked with hundreds of entrepreneurs worldwide with a focus on
writing Business Plans for companies interested in raising
capital from Venture Funds.For more information:
http://www.hjventures.com/factoring/factoring-glossary.html
