What is factoring? Credit Bank Loan Entrepreneur
There is no shortage of people who wonder what factoring is. Are you in the same group? You also don’t have a clue what this service is all about? If so, we invite you to today’s article that will allow you to expand your knowledge on this topic.
Factoring is a modern service that is increasingly desired by business customers. What is all this about? It should be emphasized that factoring is the acquisition of specific claims by a selected factor. What? People who run their own businesses sell specific products or provide services. They often issue invoices for one or other activities. Unfortunately, Polish law gives a chance to settle its receivables quite slowly. It cannot be denied that this results in the fact that a given company simply has significantly lower working capital … Money from this aspect is useful for buying new raw materials, machines etc. Simply put, this cash is intended to finance the current operations of a particular enterprise. If there is too little money at the cash register, unfortunately you have to take into account that the company will not operate at a sufficiently high turnover. This of course means that a given enterprise is not well perceived in the eyes of other customers.
How does factoring help us?
Fortunately, you can guard against this situation. Factoring helps in this. People who are wondering what this service is should know that the chosen factor simply takes over the issues related to cash recovery. After delivery of invoices, the Customer receives up to 90% of the amount. The rest is supplemented when the recipient settles all his payments on the factor’s bank account. What are the main advantages of this service? This is, among others, improved business liquidity. Working capital is at an appropriate level, so there is no shortage of cash for important expenses. You should also pay attention to the fact that factoring is not only quickly available funds. You also need to highlight secure cooperation with contractors, as well as lower costs associated with administering receivables. There is no denying that it is the factor that has the greater responsibility associated with this issue. All this means that much greater transparency of information is present, and company owners can focus on other aspects that are more important from an enterprise point of view. Therefore, it cannot surprise anyone that this service is becoming more and more popular every year.