Providing Smart Cash Flow Solution To Every Business via Factoring
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Every business is looking for regular cash flow. Despite their best efforts, regular cash flow is difficult to get. Late payments and long invoice cycles create financial bottlenecks. That’s where factoring comes in, a financing solution that turns unpaid invoices into cash.
Whether a striding startup or time-honored enterprise, factoring helps both and gives them uninterrupted cash flow.
What Is Factoring And Why Does It Matter?
Factoring opens the gateway for businesses to sell their unpaid invoices to a third-party company, also called as factor, in exchange for instant cash. Rather than waiting for weeks or months for payment cycles to come, businesses can avail up to 90% of their invoice value upfront. Once the buyer pays, the factor releases the remaining amount after taking a small service fee.
Factoring is more preferred over traditional loans, as it leverages outstanding invoices, meaning no debt, no collateral, just accelerated cash flow.
Types Of Factoring Solutions
In factoring, there isn’t just a one-size-fits-all approach. Businesses can choose from different models based on their needs:
Recourse Factoring
The business remains responsible for unpaid invoices, making it a cost-effective but slightly riskier option.
Non-Recourse Factoring
The factor/financier assumes the risk of non-payment, offering businesses financial protection but at a higher service fee.
Domestic and International Factoring
Domestic factoring serves businesses operating within the same country, while international factoring helps exporters manage cash flow from global transactions.
Factoring vs. Invoice Discounting
While factoring involves selling invoices, invoice discounting is a loan backed by unpaid invoices. Factoring is often simpler and quicker.
TReDS Helps In MSME Factoring
TReDS (Trade Receivables Discounting System) is RBI-regulated digital platform that enables MSMEs to auction their invoices to financiers, ensuring competitive rates and faster access to funds.
- Regulatory Protection: TReDS platforms operate under RBI guidelines, ensuring security and transparency.
- Competitive Bidding: Multiple financiers bid on invoices, offering MSMEs the best financing rates.
- Faster Approvals: Digital processes speed up financing, reducing waiting times.
- Lower Costs: Competitive financing rates mean MSMEs get cost-effective funding.
- Better seller Relationships: Sellers get funds on time, leading to a more stable supply chain.
- Improved Cash Flow Management: Buyers can optimise working capital without immediate payment obligations.
- Low-Risk Investment: Safe and secure transactions with reputable sellers and buyers significantly reduce investment risk.
- Portfolio Diversification: Competitive returns on financing MSMEs and enterprises.
Factoring unlocks opportunities for MSMEs, enterprises, and financiers alike. Whether you are looking for greater cash flow stability, or want to have better control on your finances to focus on growth, factoring helps one and all and allows for better functioning.
