'Sorry, closed for new customers'
General banks are helping companies that have run into trouble due to the corona crisis. But as they currently have their hands more than full with their existing customers, they have no time for new customers. Understandable, but annoying for companies that do not yet have financing with a major bank and need it just now. They face a closed counter. And at that counter there is no note saying when it will reopen ...
Fortunately, you do not need the sofa for a long time. In recent years, many new, modern forms of financing emerge. Think crowdfunding, transaction finance and factoring. In this space, we would like to talk about the latter form: factoring. Whereas banks, insurers and also advisers are increasingly bound by tight legal rules, factoring companies can be started up quite easily. This is what happens. Factoring has many guises, of which the so-called 'American factoring' one of the simplest and fastest to realise forms of credit is.
Why American factoring?
In addition to struggling companies, those whose turnover has not (yet) declined significantly may also face additional liquidity needs. This can be caused, for instance, by buyers stretching their payment terms from the usual 30 to 60 or sometimes even 90 days. As this is - expectedly - a temporary situation, not every company wants to enter into a financing contract for this for one or more years.
In that case, it is also possible to temporarily transfer part of the turnover or even some large invoices to a financier. This pays out 80 to sometimes 100 per cent of the invoice amount within 24 hoursso that you quickly have working capital with which to do business immediately.
What is important here is that the receivables to be transferred relate to completed services. An advance or instalment invoice is not eligible for financing. Another important element is the buyer's so-called good standing. Financiers always do a check on your buyer's financial position and ask for an insurance limit on the debtor. After transferring the claim, you no longer have to worry about the invoice. This is because the factoring company also handles credit management. A nice touch!
Advice on American factoring?
Are you wondering if American factoring is a form of financing that suits you? Xolv Finance's advisers can help you find the best solution and the best party for your specific financing question. Contact us via this link.
Read also: Pass the bank! 5 ways to always have working capital
