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The Newest Accounts Receivable Factoring Company: The US Government

The Newest Accounts Receivable Factoring Company: The US Government


The Newest Accounts Receivable Factoring Company: The US Government

by Wade Henderson

Once again the US Government is making ground breaking advances in taking every measure available to get the economy back on track.

NY Times (03/19/2009):

DETROIT " The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.

Every day a new development happens to make the world more optimistic for the North American Economy. What the latest developments will mean exactly is hard to say for now, but just the fact that Congress is doing so much is very pleasing to see. Now the US Government is going to start factoring invoices that most Factoring Companies have been hesitant to accept.

A few days ago I stated that Accounts Receivable Factoring is going to be a major part of the new economy and this turns out to be right on track, but a little sooner than I expected.

For those of you that are not familiar with Accounts Receivable Factoring it is essentially a Line of Credit for Businesses that use the Invoices that are outstanding as security for the advances received by the company which generated the Invoices.

Typically the advance rate of Accounts Receivable Factoring is between 80% and 90% of the invoice face value. This cash advance can be used to pay for payroll, utilities, machinery, rent or what ever the company needs the funds for. Once the end customer pays the invoice, then the Factor will remit the balance of the payment received from the customer to the company that generated the invoice less the factoring fee.

The Factoring fee is typically between 2% and 4% per month. It can be less and can be more, this is just a guideline.

What is often used with Accounts Receivable Factoring is Purchase Order Finance. If you do get Purchase Order Finance you will need an Accounts Receivable Factoring line to go along with it in 99% of the cases I have seen.

Purchase Order Finance is not intended for companies that buy raw material and then process or manufacture it. If you are interested in the possibilities for this type of financing for your company, be sure to speak to a Commercial Finance Broker as they will have the best knowledge as to which lender would be best for your circumstance.

Generally speaking, the service of the Professional Commercial Finance Broker will not cost you anything as they are paid by the lender.

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