Ever Considered Invoice Factoring?
June 30, 2007 – 4:36 amBeing in an online business and working in the business field in real life, I understand too well when payments are delayed and the company is put in a tight spot. However, I often wondered how a company can pull through such tough times when they are holding a stack of invoices without seeing the cash.
For Chinese style companies, the company would write post dated checks to certain groups of people in exchange for 90% of the cash. Of course, this isn’t legal but desperate times call for desperate measures and companies are willing to take 90% of the money because it is CASH.
Today, I came across the International Factoring Association at its website http://www.factoring.org/
Accordingly, members of this association are companies like banks and other financial institutions that provide financing in the form of Accounts Receivable Factoring whereby they will purchase invoices or other accounts receivable at a rate of 95% or so just like the concept cited above.
However, this is a legit way and it helps companies pull through the dry spell. Cash on hand is always better, even if it is less than what they should receive.
The website of the International Factoring Association allows companies to submit their factor search information and match the information with suitable financing institutions. I think it is great that companies are provided with financial relief this way.
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2 Responses to “Ever Considered Invoice Factoring?”
Thanks for the great article. Question: you say “Chinese style companies” use the postdating check method. Does this happen in China or does it happen somewhere else (like the U.S.)? Is postdating check really illegal?
Thanks,
Greg
By J. Numbers on Jun 30, 2007
Hi Greg,
Thanks for the comment. Great question.
What I meant was, companies in Malaysia run by Malaysian Chinese people. I am aware that they issue postdating checks in exchange for cash. Maybe 10% less or so.
I don’t think issuing a postdating check is illegal per se but it is illegal when a loan is taken out against one. I may be wrong, though.
The people who give out the loan for the postdating check are unlicensed so that makes them illegal “money lenders” too.
P/S: I am sorry I have to remove your links to respect my sponsor. Thank you for your understanding!
By Cyberpartygal on Jun 30, 2007