Funding Growth With Accounts Receivable Factoring

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Executive Summary

Factoring accounts receivable can be a powerful way to fund growth, especially when bank loans and other sources are not readily available. With factoring, instead of waiting until the customer pays, the supplier can get immediate cash for invoices to fund new work and free up cash flow. The examples given in this paper demonstrate that the discount fee in factoring receivables is not the same as borrowing from a bank charging a standard interest rate. Just like the terms for a bank loan, the factoring terms depend upon the details of the participants and the situation.

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