When The Bank Says No
Below is a MRR and PLR article in category Finance -> subcategory Credit.
When the Bank Says "No"
Introduction
Factoring has a rich history, dating back to ancient times when Romans and Phoenicians sold promissory notes at a discount. The term "factor" is derived from the Latin word meaning "to do" or "to make." This financial practice played a crucial role in financing ventures such as the Pilgrims' voyage to America, where they received funds from a factor and repaid them through earnings in the New World. While factoring is common in Europe, it remains unfamiliar to many American business owners.
Understanding Factoring
Factoring involves selling your accounts receivable for immediate cash, instead of waiting 30 to 90 days for customers to pay. When you submit your invoices to a factoring company, they provide a loan based on those invoices. The process is straightforward and can be automated after the first transaction. Notably, the factoring company assesses your customers' credit history, not yours, which is particularly beneficial for small to medium-sized businesses operating for less than two years.
A Real-Life Example
My first encounter with factoring occurred with a tax client who ran a small trucking company. He faced a significant tax liability due to unexpected business growth. Despite the success, the company had cash flow issues because of unplanned expansion.
We discussed his tax situation, and while rental costs of additional trucks provided some write-offs, he still faced a hefty tax bill. He revealed that he had $30,000 worth of unpaid invoices on his desk, which were not reflected in his income for that year.
Discovering a Solution
Curious about factoring, I researched it online. Fortunately, my client contacted a company he worked with, which advanced him 50% of the invoice amount immediately, with the rest following soon after. This provided the cash flow he needed.
Helping Others Through Factoring
Inspired, I started offering factoring solutions to others. Soon after, a CPA contacted me about a client who imported culinary products and needed to factor a large invoice. I connected them with a factoring company that facilitated a purchase order from their overseas supplier. The client received over 90% of the invoice amount within days and repeated the process several times.
Conclusion
While obtaining purchase order funding can be more challenging than accounts receivable financing, it is invaluable for businesses making large purchases to resell to third parties. Factoring offers a vital solution for businesses facing cash flow challenges, allowing them to thrive even when traditional bank loans are not an option.
You can find the original non-AI version of this article here: When The Bank Says No .
You can browse and read all the articles for free. If you want to use them and get PLR and MRR rights, you need to buy the pack. Learn more about this pack of over 100 000 MRR and PLR articles.