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Finance

Making The Timing Work: Financing Receivables

Financing Receivables
Financing Receivables

Remember that Foreigner song “Love Isn’t Always On Time”? You could say the same about money when running a business. More importantly,

the thing about running a business is all in the timing.

When the check’s in the mail, as the old saying goes, but you need that money to buy goods now, you are in luck. There is something called financing receivables that takes care of the problem, at least in the meantime.

Even When Receivables Are Old Or Late
The other plus side of financing receivables is that if you are owed money from a long-outstanding debt, you can get some relief. You would get a fraction of the money in the system called factoring.

The overall solution to the predicament is called accounts receivable financing. The asset financing arrangement receivables, or money owed to a business, is put up for collateral. The collateral is for a financing agreement in financing receivables.

In return for the deal, the bank or financier takes a portion of the receivable. The business receives a reduced value on the receivables they pledge.

Now while old receivables will work as collateral toward merchandise, the age does impact the fund amounts. That’s a part of factoring.

Yes, Virginia, Your Business Gets Its Money
That does mean that there is a way out when a customer, particularly a big one, appears to be so late that they could potentially default on its debt. It is a great way for a business that needs money to cover new purchases.

It frees up money that is otherwise stuck in limbo associated with accounts receivables. Rather than spending money to collect on a debt that appears like it will never happen into the present day business operations. It’s like shifting focus from trying to squeeze water out of a rock to well — handling money. There is little comparison, but the latter example serves your needs better.

There’s A Broker For That
In business, the financial companies are more specialized than in personal banking and loans. Of course, there’s a factoring lending broker.

Big Or Small Companies Benefit
In some cases, big business gets all the attention and the tools to assist the big financial fish. Well, businesses of all sizes need brokers who capitalize accounts receivables when waiting for cash. Fortunately, they serve all kinds and sizes of business.

The key is to look for brokers who specialize in the same class of revenue, industry, and length of time lending. Getting cash flowing paints a rosier picture of your business too. It increases the appearance of your company’s efficiency with regard to receivables, and collections to improve inventory turnaround time.

Being able to make purchases today allows for more relevant goods to be purchased for today’s needs. That may improve inventory turnaround time substantially. Look at how your business picture could improve with the help of an accounting receivables broker.

They can help provide assistance. Where the picture is actually ok but the banks say no, this is a good alternative option.

The Truth about Accounts Receivable Invoice Factoring Rates

Invoice Factoring
Invoice Factoring

Most businesses are going to turn to some form of lending in order to manage anything from short term cash flow issues to longer term capital needs. There are a variety of loans available from bank loans to peer loans. One type of lending is that where a company sells its invoices for payments due to a factor that, in turn, pays them the face value of those invoices less a fee.

Factors are also known as factoring companies. They do not lend money in the same way that banks and other lenders do. As such, invoice factoring rates can create some confusion.

Basically, the factor gives working capital to businesses when they purchase a set amount of receivables from that business. They do not lend money to the business at a particular interest rate, however. This is because they take a percentage for themselves at the time they buy the invoices.

This is a fee but it should not be confused as being the same thing as interest. If you are a business owner and you have $15,000 that a customer owes you in 30 days but you need the money immediately, the factor could buy it for $14,000. This is a made up scenario, but essentially, in order to get the money from the factor, the business owner has to pay them up front for this convenience.

Some factors will advance a portion of the amount in 24 or 48 hours. The invoice factoring rates, not interest, might be 3 percent of the face value. Some factors may also charge a fee per invoice. If a business owner has several different invoices due, they may need to pay $1.50 per each invoice factored.

The factoring company has to do the work of getting the invoice paid back to them. Since they will be waiting about 30 days to collect, they take their fee in order to cover their own expenses until they do collect. Factors will normally charge an additional percentage of the invoices when they go past the 30-day mark.

There is a risk involved for the factoring company. For example, the invoice may become a bad debt. For this reason, most factoring companies will also charge a sum to place on reserve. This amount may be refunded to the business owner once the account has been settled. However, each factor company is different.

Some companies charge as much as 20 percent for a reserve while others only charge 2 percent. It is important to note that once a business has established a relationship with a factor, the fees usually go down as the “credit” they have is demonstrated.

Get up front money and move a business forward with factors. The fees and charges vary, so it is important to shop around. However, these factor rates are not the same as interest rates. Factoring is a great option to traditional loans and this method of sourcing capital should be on every business owner’s list.

How to Get an EB-5 Immigrant Investor Visa

 

Immigrant Investor
Immigrant Investor

Getting an EB-5 Immigrant Investor visa is not easy. These visas are aimed at people who can invest a massive amount of money into the United States. The requirement is one million dollars, for most businesses, along with the creation of, or maintenance of, at least ten jobs for people other than the investor themselves, and the immediate family of the investor.

This requirement is relaxed slightly for people who are investing in rural areas, and areas where the unemployment rate is equal to or more than 150% of the national average. If you are not sure whether the area you are thinking of investing in qualifies for this, then contact the state authority. Some states maintain list of targeted unemployment areas and will be able to offer you advice on this. Not all states offer this advice, however, so you might have to find the statistics from another source.

You can invest yourself, or you can use a fund manager to invest for you. Some businesses that have franchise opportunities will advertise themselves as being EB-5 investment opportunities. If you are interested in that type of business, then this can be a good option, because it will likely be cheaper than a fund manager (many regional fund management companies charge fees for handling your investment), and it means that you will have a ready-made franchise business, complete with the contacts, expertise and brand name that being a franchise manager provides.

The application process for the EB-5 visa is complex and long, and there are caps on the number of people who can take advantage of the opportunity each year. Even if you are accepted, initially, you will only be given leave to remain in the country for two years. Around 90 days before your two year period expires you will be asked to provide proof that you have made the required investment, and that you have either safeguarded ten jobs or created them. If you have not yet created ten jobs, then you must be able to prove that you will do so within a reasonable period of time.

The EB-5 Immigrant Investor visa is not a way to just ‘buy a passport’ – it is something that must benefit the United States. The number of visas of this kind granted is only in the thousands per year, because the controls are so strict. However, if you have the required funds, and you want to get access to the kind of talent pool that lives in America, it is a great option. Make sure that you seek legal advice before you start investing, though, and if you go through a regional investment management company, practice due diligence before choosing them. This is a large sum of money that you are playing with, and you must remember that if you are ever turned down for a visa, getting re-granted it could be incredibly difficult. You must make sure that you do it correctly.