BGN Entrepreneur

As cash flow is a problem, and companies can not ensure that additional credit line is always the possibility of factoring receivables and invoice discounting.
Given the current state of the economy has cash flow should be more of a great concern for every business. When loans and credit lines are no longer an option should contact the company to bill discounting and factoring to ease cash flow problems and increase immediate funds. So what is the difference between these two options and how they can help companies raise capital?
What is factoring and how does it work?
Factoring is easy with an outstanding balance due from a customer on the invoice and sells them to a factoring company, which is simply a finance company. In return, these companies provide the finance company money for a portion of the invoice value, and then go to collect the claims. Once the debt paid in full, the company offers back the difference, the company, minus its fees for the transaction.
What are the different types of factoring available?
Factoring is available in two versions. There is recourse factoring and non-recourse factoring. While there are advantages for both factoring options, companies must be sure they understand the differences between the two.

* Recourse Factoring: In this option, the sale of the enterprise assumes all the risks and ensure the customer ultimately pay the finance company. If the customer does not pay, the company is responsible for the entire invoice amount.

* Non-recourse factoring is: In this case, the financing of companies, which will assume all the risk, not the company selling the account. If the customer does not pay, the company sells the bill is not liable for the lost height.

What are the fees and costs of these two options, factoring?
Since the use of the option does society assume all risks, the finance company tends more in advance to pay the bill and provide lower pay, once the transaction is completed. If the non-use option is exercised, it is the factoring company, which will assume all risks and therefore does not provide as high an initial payment for the bill, and perhaps charge a higher fee once the transaction is completed.
How does invoice discounting vary from factoring?
Invoice discounting is a discrete or secretive option for companies. Unlike factoring, where the finance company follows the company’s customers for the payment of the invoice discounting is not the company’s customers in any way. In this case, uses the company’s customers would not pay bills as collateral or credit card and cash draws from the account of the value directly from the finance company.
If those companies use the invoice discounting option, they will normally receive a minimum of 65% to 75% of the invoice value. However, unlike factoring option, the company has to interest on money, they pay rent and probably a monthly fee pays for the service. However, as it is not directly involved in customer invoice discounting is sometimes the more preferred method.
When companies need to raise funds, and can not afford to wait for customers around to finally pay their bills, these two options simply and quickly than expected on a business loan approved. Consider these two simple and straightforward tools to help resolve problems with liquidity shortages.

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