By financen | December 10, 2017 - 3:46 pm - Posted in Business, Factoring

Keeping a healthy cash flow can be a challenge in today’s competitive business world. You want to keep enough money on hand. However, you also have to spend money to pay for necessities like payroll, utilities, inventory, and other expenses. This dilemma can leave you wracking your brain for how to come up with the money you need to keep going each day.

Rather than allow your business to exist on the bare minimum of cash, you can instead use assets to free up money and secure financing you need to build your company. You can find out more about accounts receivable and asset based financing when you visit the company’s website today.

More about Factoring

The process of using your accounts receivable for collateral is sometimes referred to as factoring. In this type of financing, you sell your accounts receivable to the lender who in turn pays you a slightly discounted amount for them. You may receive up to 90 percent of their full value upfront or be extended financing based on that amount.

Businesses like, accounts receivable buyers, and factors then takes possession of the assets and handles the collection activities on the accounts. You can use the money for whatever purpose you deem appropriate without having to worry about collecting on the debts or managing the assets from this point onward.

Starting the Process

If you are interested in this type of financing, you do not have to undergo an extensive application process like you would when pursuing a bank loan. The entire process is handled online, and you get a faster answer in many cases than you would with an in-person meeting with a bank loan officer.

You also do not have to worry about making payments on the money if you sell your accounts receivable for cash. The financier makes a profit by paying you a discounted price for the accounts. After the debtors pay the financier, the business regards that overhead as the profit. However, you may have to pay a small processing fee for this arrangement.

You may not have the time, credit rating, or history in the business market to get financed by a bank. You need to use other means to secure the money you need to pay bills. You can use assets in your possession to get cash that you can use to make payroll, pay utilities, and meet other expenses.

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Prior to the Bank of England’s recent monetary policy committee (MPC) meeting, there were two schools of thought on what might happen to the base rate of interest. Some argued that rising inflation would force the BoE to act and increase the base rate, in order to negate the spiralling cost of living in the UK. Others suggested that such a move would be impossible, however, as the looming spectre of Brexit continued to underpin an uncertain and decidedly volatile economic climate.

A Look at the BoE’s Decision and the State of the Economy

Ultimately, the BoE decided to hold the base interest rate at a record low of 0.25%, amid a reported split between the individual members of the MPC. This internal divide was indicative of the prevailing climate, as while some members voted to raise borrowing costs immediately as a way of negating disproportionate inflation growth, others felt that the current base rate and an accompanying money-printing program was enough to support the pre-Brexit economy.

This is even accounting for sluggish real wage growth, which along with inflation hikes (and particularly the rising cost of food) is placing a significant squeeze on households and preventing them from saving their hard-earned money. The plight of the economy was drawn into sharper focus after the Federal Reserve (the central bank in the U.S.) decided to hike their own base interest rate to 1.0%, with further increases proposed for next year.

What This Means for Businesses in the UK

We may well see the BoE increase the base rate in the UK later in the year, of course, but for now it is important that business owners recognise the current climate and adapt accordingly. Now may well be the ideal time to borrow money and raise funds, for example, as the cost of borrowing remains restricted by the base rate. It is also important that businesses reconsider their pricing strategies, however, as dwindling disposable income levels, soaring inflation and the inability of households to save is sure to impact on consumer spending in the months ahead (particularly in relation to big ticket purchases such as cars, holidays and real estate).

With a keen focus on pricing and re-investment, businesses can create a flexible business model that is capable of consolidating in the pre-Brexit climate. This is also a strategy that can pay dividends once the UK has left the EU, as businesses will undoubtedly be forced to alleviate the financial pressure created by higher trade tariffs and reduced turnover. One way in which this can be achieved is through cash flow finance measures such as invoice factoring, which enables payments to be advanced from your sales ledger.

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By financen | September 22, 2011 - 1:57 pm - Posted in Personal Finance

Any business owner will tell you that occasional cash shortages are a natural part of the ebb and flow of any company, and not necessarily a sign of a business in serious trouble. Many factors can contribute to these shortages, such as late client payments, end-of-month outgoings such as staff wages and unexpected expenses. Even the best-run company isn’t immune to these issues, but frequent cash shortages can have a knock-on effect that impacts on the ability of your business to trade profitably and develop.

If you find that your business is being hampered by cash shortages, invoice factoring can be an important lifeline, providing you with the cash you need, when you need it, without the need to take out a bank loan. However, in some cases you may prefer not to disclose your financial arrangements to clients and potential investors. In these cases, utilising confidential factoring services could be an ideal solution.

A confidential factoring facility ensures that the invoice factoring service performs all credit management under your business’ name. This service is generally a good choice for larger, more established businesses with a strong balance sheet. Invoice Discounting is the most common form of confidential factoring. In many other ways it is similar to invoice factoring; in which your customer invoices are used as collateral in return for instant capital of around 90% of the value of the invoices. Once the invoices have been collected (usually by the factoring agency under your name) the remaining 10% will also be released to you, minus a small service charge.

There are a number of key benefits to invoice factoring and confidential factoring compared to a bank loan. A good invoice finance company will be able to provide a flexible funding option that increases in line with your turnover, without forcing you to renegotiate your contract. It can also help you to simplify your finances and cut down your overheads, allowing you to plough those resources into other areas of your business.

With all the options available, there’s no reason to allow your business to struggle or stagnate due to cash flow problems, especially in the current challenging economic climate. Get in touch with a reputable, fully accredited invoice finance company to find out more about your options. It could be the best decision you ever make for your enterprise.

Invoice factoring allows you to release cash for your business utilising invoices as collateral. Hitachi Capital is a reputable and leading provider of recruitment finance solutions. Winner of the Factor and Discounter of the Year award at the CreditToday Awards 2011.

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