All companies have one thing in common. You are often faced with working capital cycles. Of course, they have a bank to fund this requirement. The main aspects of working capital financing are raw materials, finished goods, accounts receivable, etc.
Banks have different financing ratios for each working capital category. There are many companies that provide the reliable collections & receivables management services.
Accounts receivable factoring is one of the safest methods of financing, because it is done after the contract is fulfilled. This is where more than just your credit rating becomes important.
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For this reason, banks and factoring companies offering such services insist on the creditworthiness of your customers. We will look at the concept of leverage and look at the benefits of this tool.
Typically, companies collect invoices and invoice payments during the execution of the contract or delivery of goods. The customer honors this invoice by accepting it for payment. Market pressure leads to the fact that you provide a loan period to realize these accounts.
Until you become aware of these accounts, report them as accounts receivable. The bank finances these claims by setting a certain limit called margin. Banks do not finance claims that last more than 90 days. This is a universal norm around the world.