ipl-logo

Pros And Cons Of Receivables Finance

701 Words3 Pages

Receivables Finance - Best Financing Option Available to Small Business these days
Any business need cash flow to meet its running expenses that evolved on a daily basis. At times it happens that customers make you wait for weeks or months to pay for the invoices. However your business cannot stop running and wait for these customers to pay back. It becomes problematic to pay the suppliers as well as meet the regular business costs and expenses.
Now Finance companies help these small companies to meet their running expenses using Receivables Finance. Also known as invoice discounting or factoring, this form of financing has helped business of varied sizes to bridge the cash flow gaps by borrowing funds based on the accrued receivable value, …show more content…

If a business is expecting a payment in next 60 to 90-day from the customers, then this funding technique let businesses to access cash more promptly. The kind of funding a business may need is dependent on the quality of the debts owed. The lender authenticates the pros and cons of the debts, before giving a green signal.
Unlike the usual factoring product and the invoice discounting, Receivables Finance is based on supply chain management and financing platform. The receivables funding is directly linked to the supply chain as a result of which the businesses can access funds faster, and also divert their receivables to pay suppliers faster than usual. Thus, Receivable finance has made payment of suppliers and also meeting daily business expenses …show more content…

And Even if it does so, the rate of interest is extremely high. However no such cost is involved while using receivables financing.
Easy money
Receivables financing is another form of easy money. Usually every business has to go for mortgage while taking bank loan. Even Necessary documentation takes a lot of time. The process is quite cumbersome especially for small businesses. If they are not able to provide all the documents, then they don't qualify for the loan. However it is not the case for Receivable financing.
Today, qualifying for a short term or long term loan is difficult as there are a lot of uncertainty in terms of performance when it comes to small business. Banks aren't willing to grant loan to them as a result of which small business with good credit history are denied loan. In that case Accounts receivables financing is a saviour. They are ideal source of fund for these businesses. Till they have outstanding invoices owed by clients with good credit history, they are qualified for receivable financing.
A business credit score doesn't

Show More
Related

  • VA Loans Advantages

    150 Words  | 1 Pages

    Potential advantages include access to a loan that requires no down payment, no mortgage insurance, and a limit on the total in closing costs. VA Loans can only be used when purchasing primary residences. VA loan are backed by the

    Read More

  • Tootsie Roll Case Study

    1047 Words  | 5 Pages

    Acid-Test Ratio The acid-test ratio is a more conservative liquidity ratio because only the current assets easiest to convert into cash are included. Those are: cash, short-term investments, and accounts receivable. Inventory and other current assets more difficult to convert into cash are not included. The acid-test ratio for Tootsie Roll Industries is calculated below: Acid-Test Ratio =

    Read More

  • Massachusetts Stove Company Case Study

    1064 Words  | 5 Pages

    Thus, they are in a position to cover any debt obligations that may come up quickly. Their inventory turnover has been relatively steady over the five years of data. In year 7 their inventory turnover reached 3.2 which means inventory is moving through to customers at an increased rate over the year which correlates with their increased sales. This statement is supported by the fact that the days inventory held for stoves has dropped over the past five years from 146 days in year 3 to 114 days in year 7. These reductions have allowed for the reduction of their days in accounts payable from 51 all the way down to 11.

    Read More

  • Publix Vs Kroger

    461 Words  | 2 Pages

    I prepared this project since March, but because of the anticipation of spring break, I wasted some time. Otherwise, I could finish it before the break. This project also is the last one except entrepreneur project. Those practices about economic let me understand a bit about money. I think this also will help me about financing in the

    Read More

  • Provider Reimbursement In Healthcare

    1122 Words  | 5 Pages

    These methods include many financing agencies that are utilized by individuals

    Read More

  • Advantages Of Cash Flow In Healthcare

    1152 Words  | 5 Pages

    By creating a cash budget, a company can predict when there could be a cash deficit and the magnitude of this deficit. In return, the budget shows that the difference between budget and actual value may need to be compensated by borrowing. Short-term financing may require purchasing inventory, promoting products or paying monthly fees. By forecasting cash demand, companies can assess future business opportunities based on the likely financing needs and cost components of the

    Read More

  • Pros And Cons Of Accounting As A Career In Accounting

    1176 Words  | 5 Pages

    Career in Accounting “ Accounting is the practice or profession of maintaining financial records, noting expenses or revenue, and determining how much one owes or is owed. Accounting seeks to assure that every individual or company pays or is paid the correct amount” according to http://financial-dictionary.thefreedictionary.com/accounting”.

    Read More

  • Free Falling Fico Fuels Financing Case Study

    339 Words  | 2 Pages

    This lower FICO hurdle has not only allowed more potential buyers to enter the market, but more homeowners are able to refinance their homes as well. This is important since nearly half of all approved mortgage loans fall into the refinance category. While the lower FICO score signifies that banks are becoming

    Read More

  • The Effect Of Global Economic Meltdown On The United States

    695 Words  | 3 Pages

    Banks are less likely to approve the loan requests from the business because of the economic melt down and the business have taken out so many loans to support their business and keep it running. In 2007 the amount of loans approved went down by

    Read More

  • Hill Country Case Study

    968 Words  | 4 Pages

    In return for lending the money, the firm need to pay the principal plus interest payment at some agreed time in the future. The most common debt

    Read More

  • Financial Analysis Of Cango Essay

    813 Words  | 4 Pages

    These techniques will urge customers to pay their debts off at the earliest opportunity. CanGo requirements to do a total inventory analysis, they have to figure out what is in stock, the number of items, they have, what numbers of items are being sold, and how regularly they are offering products. At that point CanGo needs to decide what number of products to be held in stock and how frequently they should be re-orders. The reason for existing is to be to keep as meager stock available as conceivable without making stock outs. This will build CanGo inventory turnover proportion and spare CanGo avoidable capacity and stockroom costs.

    Read More

  • Aspects Of Supplier Management

    1036 Words  | 5 Pages

    Increased competition 3.1.4 Supplier Management Suppliers are major contributors in the effective functioning of supply chain operations. They can contribute through the timely and quality deliveries of goods and services. Therefore, it is essential that a purchase manger should work with suppliers to coordinate their operations and customer needs. i. Aspects of Supplier Management There are various aspects of supplier management such as vendor analysis, supplier audits, supplier certification and supplier partnering.

    Read More

  • Why Is Factoring Better Than A Line Of Credit?

    652 Words  | 3 Pages

    The only way a lender is going to agree to a larger line of credit is if you have even better credit than you did when you got the first one. And it can take weeks to get the approvals. Invoice factoring is much easier to set-up and expand than a line of credit. You can get approval in a few business days, even if you are not well established or have the best credit. Once you get approval and submit your open invoices, you can get up to 90 percent of the value of those invoices within a day or two.

    Read More

  • Delinquency: Reimbursement Rate

    1108 Words  | 5 Pages

    The portfolio is at risk, financial credit for both; the loss that an MFI countenance nowadays is due to overdue reimbursement. Furthermore, the prospective losses that it faces if no upcoming disbursement, are ended on that at the moment of a delinquent loan. These convey the significance of financial ratio testing in MFIs with a focal point on collection worth proportion. According to Joana (2000), portfolio inferiority ratios include; portfolio in amount overdue: “outstanding amount “ratio looked upon as merely the value of the earlier period owed disbursement; portfolio at risk: “at threat “ratio regarded as the incomplete exceptional balance of loans to facilitate delinquent by means of one or more disbursements. In cooperation the portfolio in an outstanding amount along with the portfolio at risk ratios assist the organization to supervise loan reimbursement as well as the risk of default.

    Read More

  • Pizza Hut Supply Chain Analysis

    2323 Words  | 10 Pages

    b) Relationship Management – They maintain close relationships with their suppliers in contrast to the traditional price driven relationships hence, strengthening supplier / buyer relation. Pizza hut also analyses the requirements and ensures to formulate the supplier with correct quantity, subsequent supportive plans, timelines etc. which ensures that there are no delays hence, maintaining a healthy balance between the supplier and buyer relationship.

    Read More

More about Pros And Cons Of Receivables Finance

Open Document