Business requires cash or capital to maintain equilibrium in the market. It is often found that business owners face financial crunch as businesses are basically relied on credit format. The flow of cash in any business is very slow and the owner has to wait for 30 to 40 days to receive the payment. In the meantime, he or she has to pay employees’ salary, the rent and suppliers. If the owner does not have adequate fund up his sleeve or in the bank, his business will go nowhere. In such a situation, the business loan is the only option left, which is difficult to obtain and come with high rate of interest as well. What do you do? Don't panic! Because factoring companies today are managing finance for you in the form of purchasing your invoices, which is usually called invoice discounting. This is considered as the easiest way to obtain cash in ten days.
How does invoice discounting work? Invoice discounting or so-called invoice factoring is a process in which the business owner sells unpaid invoices to a factoring company at a discount. This ensures that no business will face sudden financial crisis at the crucial point of time. Now a question may come in your mind - why does a factoring company give discount on your unpaid invoices? The discount that the factoring company provides when purchasing your invoices is their profit. On the other hand, receiving cash instantly for your invoices helps you meet emergency expenses, launch new projects, pay for costly advertisement for brand promotion, meet employees’ demand, maintain cash transaction with suppliers to get heavy discount and expand your business.
It is pertinent to note that the discount rendered on invoice discounting revolves around 1.5% to 6% for every ten days until payment is due. Invoice discounting is a profitable option for the business that earns at least 15% of profit in the products and services. The factoring company can purchase your invoices in two installments, in which the first installment covers up to 85% of your invoices. The remaining 15% will be reduced once the customer actually pays the invoice.
Whether you are running a small or medium size business; you will never fall short of cash once you adopt the invoice discounting option. Such an option is basically made for business owners to prosper in the market.
Brijendra Verma is the webmaster of heskethboyd, the UK's leading finance services provider like invoice discounting company. this company has taken the UK finance market by storm by the application of modern finance business thinking and the latest search engine marketing techniques. For more details visit http://www.heskethboyd.co.uk