Accounts receivable finance-related articles.
Invoice Factoring A Viable Alternative For Companies In Need Of Working Capital
Businesses in need of working capital have a business financing tool in their hands that is often overlooked. It's called invoice factoring (the selling of accounts receivable for cash) and it's an effective alternative to bank loans. As a pioneering factoring company with a heritage that spans five decades, Riviera Finance offers you a number of reasons why invoice factoring may be preferable to a small business loan.
Since we're talking money, let's begin with the issue of cost. Bank loans are typically less expensive than factoring because the bank product is pure finance, whereas factoring involves additional services. However, when you sign for a bank loan there are a number of costs at play in addition to interest on the amount owed, including audit fees, set-up and annual fees, servicing fees on some A/R lines, etc. The end result is often much closer to the cost of factoring. At Riviera Finance, our factoring fees are charged as a percentage of your invoice, and generally include the full cost of our finance, credit, and receivables management services.
When you structure a bank loan (secured or unsecured) debt is established. Whether it's a term loan or a line of credit, collateral will usually include all company assets as well as a personal guarantee. Invoice factoring on the other hand is not a loan. We are merely purchasing your receivable, so there is no debt, and collateral includes only receivables and in most cases a personal guarantee. Our contract terms are as short as six months.
Invoice factoring provides a host of services that bank loans usually do not. We can finance up to 95% of your invoice in cash and offer invoice processing, credit reviews and guarantees, and receivable management services including collection, reporting, and posting. By comparison bank lines will usually only advance up to 70%. And while most offer collateral reporting and a lockbox for invoice payments there is no invoice administration or credit management.
Banks often have stricter qualifications for their loans as well. Usually they require that you've been in business at least two to three years, and that you have a positive cash flow, two years of tax returns, strong credit, and more. They also put limits on collateral depending on concentration, days outstanding, etc. We don't require a certain amount of time in business for our factoring clients. All we ask is that you are current on your taxes, that you can demonstrate a regard for your obligations, and that your customers have good credit.
Finally, anyone who's ever tried to secure a bank loan knows that the paperwork is extensive and that the turnaround time can take anywhere from two weeks to two months. When you factor with Riviera Finance our turnaround time is minimal, taking anywhere from two days to two weeks.
If your business is in need of working capital, increase your cash flow without incurring debt or tying up all your company assets. Choose invoice factoring with Riviera Finance.
