Starting a business has not always been easy and there might be more challenges as time goes by no matter the industry in which it is operating.
Some of the challenges that might be faced include financial challenges. These challenges arise as a result of many factors, one of them being non-payment of credits by customers.
Some industries commonly operate on a credit basis. An example of such an industry is the fashion industry that sells goods on a credit basis and gives its customers a specific timeline to clear their debts.
However, the companies would still cash to continue with their everyday operations and pay their employees. This is where fashion factoring agencies come in handy. These agencies provide the company with a financial agreement that will see them receive money worth their current invoice.
Businesses must comprehend that factoring is not a loan but it is simply the purchase of outstanding invoices.
What are the steps to be followed for one to apply a factoring service in their business?
- The first step would be for the customer to place an order with the potential client of the factoring company
- The potential client would then send the goods and invoice to the client.
- After that client would then look for a factoring company and assign the invoice to a factor.
- The factoring company would then make a bigger percentage of the payment to the client.
- Once this is done, the factoring company will then send a statement to the customer.
- The customer is then expected to make a payment to the factoring company within the specified period.
- Upon receiving the payment, the factoring company would then pay the remaining balance to its client.
What are the benefits of factoring agencies?
Factoring agencies do not require collateral- As mentioned earlier factoring agencies are providing loans hence one would not require to risk their property just to be able to acquire the funds for their businesses.
They save on time and energy- These companies have helped their clients to save on time and that would have been used to collect payments from their customers. This time and energy can be redirected to improve their business.
They are substitutes for bank loans- Bank loans can be very high-risk and one can be quite skeptical about acquiring one. Factoring agencies have been proven to be safer and hence businesses are more likely to consider them leading to their growth.
Factoring agencies provide advisory services to their clients- These agencies could offer a variety of advisory services regarding the credit assessments of the client’s customers.
They promote smooth operation of the business- factoring agencies tend to reduce the collection period. This helps to ensure that there is efficient working capital for the smooth running of the business.
They help build the liquidity position of the client- these agencies help to raise a colossal amount of money which then raises the liquidity of the client.
Business requires one to be constantly finding new ways to improve and grow it. A constant supply of cash flow is paramount thus every business person should consider factoring.