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How to get small business funding with invoice factoring


Posted: 25th February 2020 14:06

Many small businesses and startups are familiar with the problem of funds shortage. The sellers do not get paid on time and fail to support the production process.
 
The regular situation is that the consignment of goods has already been shipped, but payment for it has not yet been made. Money is critical to keep the business going, to purchase new raw materials, to pay to employees, to settle the debts and so on.
 
There are many costs that an entrepreneur must spend. In such cases, invoice factoring is one of the best solutions.
 
What is Invoice Factoring and How Does It Work?
 
The most common definition of factoring is the acquisition of corporate debt by a specialized financial institution or bank. These can be deferred payments for goods, works, services. This form of interaction allows one legal entity to receive goods with deferred payment, and others to accumulate working capital without freezing them for a long period. 

Credit institutions also have their profit. When it comes to non-specialized banks, factoring brings them solid benefits (the specific percentage depends on the amount of the transaction).
 
Factoring operations usually involve three parties:
In some cases, there may be a fourth intermediary party, which can be responsible for providing an electronic platform for factoring transactions.
 
Factoring started in the USA at the end of the 19th century. Then it found application in the countries of Western Europe. In the 1980s factoring operations have been actively conducted by banks in Australia, the Middle East, and Southeast Asia. By the mid-1990s the volume of factoring operations had the following geographical distribution:
There are many types of factoring services that differ from each other primarily in the degree of risk that a factoring company takes.

The main are the following ones:
  Pros and Cons of Invoice Factoring
 
Factoring is developing so fast thanks to its inevitable advantages:
  But it would not be fair not to mention drawbacks of factoring:
  Factoring companies are dynamically developing around the world. Among the most important reasons are:
 


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