Nov 14
2011Invoice Factoring offers Overdraft Protection
Filed Under (finance investment) by admin on 14-11-2011
Banks provide something called overdraft protection for their clients. This can be a great thing for those who know the money will be in their account in a few days. There are fees associated with it though that can actually be worse than going for something more helpful to a business.
It is possible to get invoice factoring set up in a maximum of seven days. It can sometimes be quicker depending on you. If you bring all of the paperwork with you that the company needs you can get your factoring set up quicker.
You have an option of going with overdraft protection, bank loans, or factoring. There is usually a question as to which one will be better. We can usually dismiss loans fairly easily from a business plan when you have poor incoming money and need money quickly. Bank loans take a lot of time along with a review of your business. Banks tend to stay away from the riskier clients when it comes to loans. Overdraft protection is also reviewed based on your account. In fact on an annual basis overdraft will be examined to see if it should be more or less than the previous year. Invoice factoring grows with your business.
There is a fourth option called invoice discounting. It is close to factoring, but there is one major difference in that you keep the ledger with discounting. Discounting can also be slightly more expensive than factoring, which is another reason you may wish to choose the original concept we are discussing here.
Factoring does ask you to give up credit control, which can be an issue for some owners and employees. Your contract can vary in terms of length. In other words the provider will decide what is fair as far as recouping the money is concerned. You could also consider extending the agreement if that is something the company is willing to do. There can also be early exit charges if you decide you want to leave the contract early.
When the contract is over you can end the financing arrangement. However, you should usually give three months notice of ending the agreement and find out if there are penalties if you want to end it early. Most of the time with the financing options you only get a partial amount of the invoice such as 85% but you also have fees to pay, which means you tend to pay back the full amount of the invoice and sometimes more.

