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Discounting factoring is a financial mechanism through which an individual or a business (commercial, industrial, services, etc) could stimulate its growth in the short term through the sales of their accounts receivables to a factoring company.

Discounting factoring is customized based on the needs of each customer. However, keep in mind that factoring is not the only service that these companies provide. Factoring companies may manage your portfolio of customers and give follow-up to the accounts receivables. Each month or term, they will also provide your board with detailed reports of the data they collected. They may also help you better assess the risks you take by extending or issuing credit lines to your customers.

We are now going to talk about the financial, economic, administrative and strategic benefits of Discounting factoring.

Let us now mention some of the financial reasons that justify the use of Discounting factoring. For one, you will improve your working capital and your returns on sales. If you have a seasonal business, your cash flow will also increase. You will reduce leverage because you will be making better use of the existing resources and will avoid incurring in long term debt.

Economically speaking Discounting factoring is also positive. Your business will be running at a quicker operative cycle. Discounting factoring liberates dormant funds stopping you from incurring in yet more debt to fund new investments. Discounting factoring companies often cover the costs of non-collection once they have studied your case carefully. They will help you collect those uncollected invoices so that you can pay your suppliers on time.

Discounting factoring has also great appeal administratively speaking because the business owner can rely on the support of a professional and experienced team for the efficient collection of the accounts receivables. Additionally, the teams have the obligation of keeping the business continuously updated on their collection operations. Factoring companies also provide evaluations of the credit conditions of the company’s customers and prospects.

You can also justify Discounting factoring on the basis of strategic advantages. If you spend all of your time chasing after your debtors you will have no time for nothing else. One of the easily overseen advantages of factoring is freeing up your time so that you can concentrate on more strategic decisions and investments. You will have more time to dedicate to the development of your business.

When the company is less focused on collecting, it can be more focused on the customer resulting in the strengthening of links between his company and customers.

Last but not least, your company will look good to potential investors when the accounts receivables are handled so efficiently. You will have more returns and less debt

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When the Fed said that they were going employ all available tools to promote economic recovery and to preserve price stability they were not kidding.

As stated in the Wednesday March 18, 2009 edition of the NY Times:

WASHINGTON ” Saying that the recession continues to deepen, the Federal Reserve announced Wednesday that it would pump an extra $1 trillion into the mortgage market and longer-term Treasury securities in order to revive the economy.

This comes as sign of confidence that the recession we have all found ourselves in has fewer days than many people predicted. So long as the Fed keeps this aggressive determination toward fixing the credit markets.

Last fall the Central Bank held $900 billion on its balance sheet and just prior to this announcement it was sitting at $2 trillion which proved the strong measures that the Fed is prepared to take to get the economy back on track.

In todays NY Times it also stated:

Fed officials have said they hope to expand the program next month, possibly to include the huge market for commercial mortgages, and both the Fed and Treasury hope the program will eventually provide up to $1 trillion in total financing.

Okay, there is more money availableso what is the big deal? The Big Deal is that now there is more funding available for lenders to do more loans to residential as well as corporate clients including small business.

Who will make the first move though? This is the major sticking point to the whole things. Until the sales orders come in at a company they are not going to hire more people and start purchasing more raw materials, so who will go first?

The start of the chain has to be with the US and Canadian Governments to start buying and starting the order process with all sectors ” small, medium and large businesses. Then these companies will hire people who will then buy stuff, which will then put more people to work and so on

Since we are seeing such bold moves on the available funds, I am certain they are gearing up to do just that. Get the money ready and then start buying.

Next problem will be for companies to have the available funds needed to fill these orders. Even with the funds being available, most companies will not be able to get bank financing due to their financial performance over the last couple of years.

This is the time to speak to a Professional Commercial Finance Broker as they will have far more products available to them than the banks have so you can actually accept the orders and get them out the door.

My expectation is that Accounts Receivable Factoring and Purchase Order Finance will play a major role in our business financing so it would be a good idea to have your financing set up for it so you are not scrambling to find a funder when the orders are rolling in.

Wade Henderson is a recognized Expert in the Business Finance World with over 13 years Experience in the Commercial Lending Field and a strong reputation for getting the deal done. Visit his Business Finance Website to put his experience to work for you. You can get a unique content version of this article from the Uber Article Directory.

The world has been experiencing a failing economy now for a couple of years and regardless if you are in manufacturing, service, distribution or anything else that relies on one of these industries to survive, you have been affected by the cost cuts and staff reductions.

As in the NY Times on March 15, 2009 ”It’s a huge step in the right direction,” Giovanni Coratolo, director of Small Business Policy at the U.S. Chamber of Commerce, said Saturday. ”In this economy, having the least amount of risk for banks will incentivize banks to lend to small businesses. A lot of small businesses will benefit from this.” [http://www.nytimes.com/aponline/2009/03/15/washington/AP-Obama-Small-Businesses.html?hp]

So what is this going to mean? The SBA guarantees loans up to $20 billion a year in the US economy and yet is projected to approve less than $10 billion in 2009. What does this mean? It means that companies that want to get a SBA loan are not getting approved. The affect of additional funding to the SBA is not really going to do anything if we are currently using less than 50% of the available funding. How will this assist the economy?

The new administration is planning on buying up the slack? By Temporarily eliminating some upfront fees on some of the SBA loans and increasing the guarantee caps to the lenders for these Business Loans. Basically they are looking to off set some of the administrative costs and reduce the risk for the lenders of the SBA loans.

The question now becomes is this enough or just a token to say they are doing something that is left to be seen obviously but lets take a look at this from a business prospective.

Since the majority of this plan is increasing guarantees, is it going to be enough to allow the lenders to reduce their underwriting guidelines to allow more small businesses to access these funds? Lets take a look. We need to make a few broad assumptions here, but lets say that we are currently experiencing a 20% default rate on the SBA Loans being written today. And lets say that the traditional SBA lender will accept a 5% default rate on their Business Loans. Will an increase of 5% toward the defaulted Business Loans have any real impact on the mindset of the risk allowance calculations? Not likely. There are more variables and figures to enter into this calculation, but I am sure you see the point here, it is a start, but it is not enough to motivate SBA Lenders to approve more loans.

On the bright side of things though, this is an initial attempt by Obama to help small business, something that has been a long time coming. As with the major corporations, there has been much negotiation and debate on what to do, so we will have to keep an eye on the progress and analyze the effect to determine future actions.

There are so many alternatives to SBA or bank loans today that are offered by Commercial Finance Brokers as they access to funds for Accounts Receivable Financing, Export Factoring, Purchase Order Finance, Commercial Equipment Loans and Commercial Real Estate Mortgages. Be sure to do you checking around into the various options available to you as there is a loan available for most circumstances if you have the right Finance Broker.

Wade Henderson is a recognized Expert in the Business Finance World with over 13 years Experience in the Commercial Lending Field and a strong reputation for getting the deal done. Visit his Business Finance Website to put his experience to work for you. Visit the Uber Article Directory to get a totally unique version of this article for reprint.