How to Use a Commercial Factoring Company to Finance a Business

Finance a Business

Factoring is designed to increase cash flow when funds are limited and accounts receivable are high. It is short-term financing to solve short-term cash flow bottlenecks. The cash-poor company sells its accounts receivable at a discount to a commercial finance company known as a factor. Cash is made available to the entrepreneur as soon as proof of shipment is provided or on the average due date of the invoice. Most factoring arrangements are made for one year.

Factors make their money by acquiring a company’s invoices and collecting on them, charging the business a fee. Unlike banks, factors buy, pay for, and own the receivables outright. If your creditors don’t pay, the factor may incur a loss. Some factors require that the entrepreneur establish a reserve for bad debt of approximately 5% of the account. If the account is not collected within 120 days, the factor will draw against the reserve. If the receivables eventually are collected, the factor’s return on investment exceeds that of conventional lenders.

Many business owners use factoring when their banker turns down a loan request that they had tried to guarantee with their accounts receivable as collateral. Under factoring, accounts receivable are not used as collateral against a loan but instead are sold directly, at a discounted value, to a factoring company. For example, if the factoring company uses a one-time charge and discounts 6%, then for every $1,000 in receivables, the seller receives $940.

Some factors discount according to a schedule, paying a smaller percentage up front and then paying an additional percentage depending on whether the receivables are collected within 30, 60, or 90 days.

The factor takes over the entire collection procedure, including mailing the invoices and doing the bookkeeping. Each of your customers is notified that the account is owned by and payable to the factor.

If you are a new business and your accounts receivable are evaluated as marginal credit risks, you may not be able to find a factor that will accept your accounts receivable. Let’s face it: although they take greater risks and are more liberal lenders than commercial banks, factors need to be assured that your customers will pay their bills. They will execute substantial credit checks on each debtor and carefully analyze the quality and value of the invoice before buying it; they look to the strengtMof the receivables and creditworthiness of the invoices that you are selling them. Factors will also establish credit limits for each customer.

Factoring is not the cheapest way to obtain money, but it does quickly turn receivables into cash. The advantages of factoring are receiving a cash injection quickly, paying bills in a more timely manner, obtaining more credit, and fostering better growth than traditional borrowing. Also, the fee is an expense and offsets taxable income. Essentially, the entrepreneur is buying insurance against bad debt.

The chief disadvantage of factoring is the high cost of money relative to traditional borrowing. Also, to many entrepreneurs, factors receive outrageously high returns. A business concerned with cash flow but not with collection might want to pursue the less costly route of using accounts receivable as collateral for a commercial bank loan.

Overall, factoring can be compared with using a credit card for your business. Factors work best with businesses that have cash flow problems because of long delays between making and selling goods and then collecting cash. Start-up ventures, emerging businesses, and service companies are prime candidates for factoring. For recommendations and references about which factoring companies to use, talk to your trade associations, to members of the infrastructure, and to other entrepreneurs in your industry.

 

Instant Loans – Funds by Applying Online and Gaining Quick Sanction

Funds by Applying Online

When you need to go to office everyday, you have very little time for other things in your life. This thing may also happen when you are facing the problem of credit scarcity. What can be done in such a situation? Such a person can apply for instant loans without any apprehensions. With the help of this fiscal service, the borrower would get hold of funds by applying online and would be gaining quick sanction.

The mode of financial transfer that is followed here is electronic wiring, this would make the documentation completely nil. One would not waste his time in any undesirable filling and faxing of papers in this process of money lending.

If you want to apply for instant loans, you can put into use the free of cost and no obligation application form that would be given on the website of the money lenders. You should fill this form with your authentic personal information. The borrower would get a rapid approval, as and when the process of verification would be over. In as quick as 24 hours, the money would get transferred into your bank account.

Depending on your settlement ability as well as monetary ability, you can grab small cash advance that falls in the range of £80 to £1500. You have to pay this credit aid back in the comfortable repayment tenure of 1 to 30 days. One can do a number tasks that hold importance for him. You can pay the credit card installments, can pay the household and utility bills, can get small house modifications done, can send the car for a repair job and so on.

There is no need for you to give credit confirmation. IVA, arrears, insolvency, bankruptcy, foreclosures, CCJs and so on are no-issues at all for the lenders.

Student Finances Need Not Be a Minefield

Students are increasingly finding it expensive to get a college or university education with increased tuition fees and living expenses. Thinking about student financing can also be time consuming and requiring extensive research to get the best deal and finance package to suit the student’s needs. For those students who feel they can put off thinking about financing for “later,” they may just find they make decisions which can be costly for them.

Being a student can be a very memorable period of an individual’s life, but it can also be a time when the student is constantly thinking about student financing and mounting student loan debts. A student need not be broke all the time, and carefree student days also need not be relegated to history. Instead, with a bit of financial planning, a student can have a good time without worrying about incurring large student debt.

There are institutions that are ready to help a student look at his/her financial requirements and compile an appropriate finance plan. Students who are fortunate to have financial support from parents could also benefit from obtaining additional information. However, for the majority of students heading off to college and university, the issue of student finance and student loans becomes a looming reality.

Student Debt

Going to college or university may well be getting more expensive, but it is also becoming a requisite for many students. Many believe that getting a degree or vocational qualifications will enhance their prospects in a competitive and increasingly global job market. However, this desire to undertake studies comes at a price which increases each academic year.

According to Changeboard, more than 50% of all graduates in the USA will have student loans totaling $20,000 by the time they graduate. This statistic is reaffirmed by The National Centre for Education Statistics, who reports that two thirds of all College students have student loans after graduation with an average of $19,237. Additionally, a quarter of undergraduates borrow more than $25,000 and one tenth borrow more than $35,000

In the UK, the picture is reflective of the changing times in the UK education system. According to university research organisation Push, the average student graduating in July 2017 will find themselves with nearly £22,000 in debt. Many will be paying student loans well into their 30s and in some cases, even into their 40s.

Planning student financing can help to manage student debt better. Many students are now coming out of colleges and universities with increased levels of debt and are starting their working lives saddled with debt they incurred as students.

For many students, working part time and studying full time has become the norm, despite protestations from professors and other teaching staff. Teaching staff believe that holding down working commitments impacts the grades and overall learning experience for students.

Sources for Student Funding

The following highlights potential sources of funding for students

  • Private student loans (account for nearly 25% of all student loans in the USA)
  • Federal Student loans
  • College scholarships
  • Parents and friends
  • Personal savings
  • Working during studies
  • Charities
  • Religious institutions
  • Bursaries
  • Employer sponsorship for vocational and further degree qualifications
  • Global institutions like the Soros Foundation, World Health Organisation, AMIDEAST, and the United Nations

Where scholarships are concerned, the student may find that s/he may need to submit and an essay or other written pieces of work. Each institution awarding a scholarship will have the necessary details and background and qualifying requirements.

The onus falls upon the student to get the best student financing information and deals. Therefore, planning and preparation is imperative, even though the student may be tempted to leave this to the last minute. The downside of leaving financial planning for studies to the last minute will mean decisions will be made in haste and may not serve the student in the long run.

College Loans

Further information for students in the USA and UK can be found below:

  • Student Federal Loans
  • The Student Aid website also contains a checklist for prospective students and their parents
  • Direct Consolidation Loans

Information on student financing in the UK can be found from the following sources:

  • Student Loans Company
  • Direct Gov

There are many financial companies offering cheap student loans, but as a word of caution, students pursuing this option may be best advised to read the small print before signing on the dotted line.

As the student population continues to explode globally, so will the number of financial and non financial, reputable and non reputable companies offering an array of financial services and products to the student market. A student who engages in financial planning, research and preparation will be the one who succeeds in the long run.

Student Finance England Loan Deadlines 2016/17: When Students Should Apply for Non-Means Tested & Income Based Loans

Students planning to start or resume full-time courses at colleges and universities for the 2016/11 academic year may find it useful to apply for Student Finance England loans earlier rather than later. Those that hit government deadlines will stand a far better chance of being paid their loan on time for the start of term. What are the deadlines for student finance this year?

Student Finance England Deadlines for Non-Means Tested Loan Applications

If a student is making an application for finance that doesn’t need to be means tested then they are being asked to apply by the 23rd of April 2016. These applications are based on circumstances where the parental/household income will not need to be checked during the loans process.

Student Loans Applications That Will be Based on Income Assessment

If a student is making an application that will be means tested then their application date is the 21st of May 2016. The finance given here may be based on the income of the household.

What do the Student Finance Application Deadlines Mean?

The recommended deadlines are based on giving a better chance that a loan will be paid in time for the start of the student’s academic year. There may be, as was evidenced in recent years, no guarantee that finance will be processed on time but hitting the deadline may give the best chance of this happening. Applying later may delay the payment process.

Should Student Loan Applications be Made Through Student Finance England, Student Finance Direct or DirectGov?

Online applications are now initially made via the government’s DirectGov website. Students can also download a paper-based application from the site’s student areas if they prefer not to apply via the Internet.

The official name of the UK’s student loans company has now changed from Student Finance Direct to Student Finance England. The base organisation remains the same and any student that has applied for a loan previously can use the same details for new applications.

What if the Student Hasn’t Been Offered a Place Yet?

The DirectGov website recommends that students try to meet the application deadlines even if they haven’t got a firm offer of a university or college place yet. Students can simply enter their first choice on the form and change it later if necessary.

Using a Student Finance Calculator May be Useful

Those that are unsure how much finance they may be qualified to be given can use the DirectGov student finance calculator. This gives an estimate (but not a guarantee) of options including student loans, grants, scholarships and bursaries. This may be worth doing to help assess income before starting college.

General Money Management Tips for Students

Those about to leave home to study for the first time may need to set up financial accounts and to think about budgeting their money. Choosing the best student bank accounts and other financial products such as credit cards can help with this process. Thinking about how they will manage their money at university may also give them a good start.

Student Finance: Setting up a Student Account with an Overdraft

On deciding to undertake further study at University, many students will be offered a wide range of financing options from banks and other financial institutions. Products include student loans, credit cards and overdraft facilities. The student overdraft can be a useful tool. However, it is also one which can lead to significant long term financial problems, if not used right.

What is an Overdraft Loan Facility

Simply put, an overdraft is a form of short term loan between the bank and an account holder. The overdraft facility allows the account holder to run a negative bank balance to a pre-agreed level, without incurring penalties. Overdrafts typically do not have repayment dates, as with standard long term loans, and may be seen as an “ongoing” source of finance. Many student overdrafts however, are required to be paid back within a specified period of time after graduation.

Setting up a Student Account with an Overdraft Loans Facility

Generally most banks offer an overdraft facility as a standard feature of a student account. In order to obtain the feature a student usually needs only to “opt in” when setting up the account in the normal way. In order to qualify for a student bank account, most banks will require proof of either current attendance on a full time course. Alternatively, proof of an upcoming placement may be accepted.

In choosing an overdraft there are a wide range of limits and options available, in the first case one should ensure that the overdraft is interest free and has no associated charges. Secondary conditions worth bearing in mind are, “can the overdraft be increased after the first year?” and “how soon does the overdraft have to be paid back after graduation?” Banks often offer a variety of incentives to sign students up to accounts with overdraft facilities, whilst one should take advantage of these offers, they should not be used as the basis for serious financial decisions. In making a decision, the terms and conditions of an account and its features are much more important.

The Pros and Cons of an Overdraft Facility

The major advantage of a student overdraft facility is that they are usually provided at a 0% interest rate, with no additional charges. As such the student overdraft is one of the cheapest forms of finance available, even when compared to an SLC student loan. As such, even if the extra finance is not required it may be worth considering the profit which can be made from using the overdraft limit to invest in an interest bearing investment, such as a cash ISA.

The overdraft facility does however, have its negative points. Like all overdrafts, the facility is a short term credit agreement. Technically a bank can call in an overdraft with very little notice, although this is unusual with a student overdraft.

Additionally one should also consider the penalties associated with an overdraft. Whilst regulators have taken a keen interest recently, penalties for exceeding overdraft limits can still be extremely high. Dependent on the terms and conditions, penalties may be applied on daily basis, leading to significant financial problems for those who misuse the facility.

Whilst an interest free overdraft represents a good cheap source of finance, many students often taking out multiple overdrafts, find themselves in the position of having to take out a student consolidation loan. A student consolidation loan is essentially a loan taken out, which consolidates the overdraft into a regular loan with repayments. Here, interest rates will apply and the prospect can become an unattractive one as personal debt it increased.