Invoice discounts are becoming increasingly popular for conducting business today. Many companies use this strategy to obtain funds in order to increase their working capital. Typically, the discounts, the company has the money instead of selling goods. This is a loan system that allows companies that do a lot of sales, but not a lot of money to improve the cash situation is soon to get money from their sale.
The updating is done by borrowing a portion of the amount of accounts receivable of the company. The finance company will generally allow the company to borrow 80 percent of the value of their claims. These statements represent all amounts owed by customers of the company (these debts can be collected today, but can be picked up for 90 days). Note that many companies offer discounts to customers if they are to pay their bills on the date indicated on the basis of their agreement. This encourages customers to pay faster. This is also known as the discount, but different from the update described in this article.
With the reduction of the burdens of the company borrows money from a financial institution called a factor or a factoring company. Your accounts receivable are used as collateral for loans. This means that the company borrows money from these factors to ensure that financial reports are clear, especially when it comes to accounts receivable section. This funding will allow the company to generate more sales. It is then for the company to repay money borrowed from the factoring company.
This configuration is different from the invoice factoring transaction is unique among business and financial institutions (factoring in the client works with the factor in many cases). The discount is a business practice that many companies use today. They prefer to allow their financial institutions the ability to receive prompt payment of their sales.
This situation can be better than the bill factoring, discounting the settings as with the company’s customers may never know that the company uses in their bills as collateral. After factoring, the customer knows that the bill was sold to a third party. This type of financing is not a company. E ‘suitable for companies that make a lot of sales, but you do not need that money to continue or expand.
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