Receivable funding, or “factoring,” has been practiced for
many years, and is a very viable method for retailers, especially, to manage
their cash flow.VISA is one of
the largest factorers in the United States.When you buy a $100 sweater from your local department store
and charge it on your VISA card, the store collects $95 right away from
VISA.VISA pockets the $5 (or 5%)
difference.
In this same manner, businesses can sell their receivables to an
investor, who will purchase them at a slight discount (5% is pretty standard,
but the percent may vary).Many
businesses set up monthly factoring so that they can better control their cash
flow.Instead of waiting 30, 60 or
90 (or more!) days to collect moneys owed to them, an investor purchases all
their receivables on a monthly basis.This is called flow forwarding.
A good cash flow broker will set up clients with an ongoing desire to
factor their receivables, as this builds residual income.Good prospects are retailers,
especially those who offer in-house financing, and medical facilities like
kidney dialysis clinics, ambulatory surgery centers, etc.
