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Accounts Receivable Financing - On
accounts receivable lending, a separate account is established
with a commercial bank, whereby remittances from your customer
are deposited in that account. The commercial finance company
then has a simultaneous deposit to your regular account, less
the amount of the daily interest. At no time will your customers
be made aware of the fact that you have their accounts pledged
for a receivables loan, but the principle of dominion under the
Uniform Commercial Code requires that remittances be deposited
in the control of the lender. Generally speaking, the
record-keeping process for accounts receivable loans is not
cumbersome and is usually based on a photocopy or carbon copy of
your existing sales records.
Factoring
-Line of credit without the limitations of a typical bank line
of credit. The oldest way of loaning against receivables is
called factoring. Technically, it is not a loan against the
receivables because the factor actually purchases the
receivables and in some cases there is no further recourse for
lack of payment on the receivable. With Some Factoring services,
the borrower is not responsible for collection of the
receivables. |
