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Political and Economic News

Political and Economic News

Economic and Polictical News and Opinions

A New Type of Finance: How Debt Factoring is Changing the Financial Landscape

admin, · Categories: Financing Solutions

Most of the businesses today, particularly small-to-medium (SME) enterprises are shunning away from the traditional forms of financial funding. Hence, they are turning to debt factoring for their financial needs. Debt factoring is basically a form of commercial finance through which a business can obtain cash advance by selling its debts or rather accounts receivables. The third party, known as a ‘factor‘ provides funding to a business that sells their unpaid invoices, commonly provide between 70% to 90% of the monies owed by customers. This article therefore expounds on this as a new type of finance: how debt factoring is changing the financial landscape.

accounts receivable finance

A business enters into a factoring with a lender, keeping in mind that both the parties are secured against the unpaid invoices. Gauging on the debt history of a business, the lender will calculate the amount of money it can finance the business. When approved, the two parties come into agreement and finance is issued within 48 hours in most cases. This a quick way to obtain funding for a cash-strapped business unlike the use of traditional funding methods. A business is encouraged by the instant access to cash funds, which is as valuable as the payment of the 2-3% fee for the invoice value.

 

The instant cash gives a business a smooth time in keeping its business afloat and going. For small businesses, this cash can also be used for expansion and facilitating growth. Otherwise, for companies or large businesses with employees, this is a good chance to maintain their payroll lest they lose value in the competitive markets. The instant cash could also be used to increase supplies, employ more staff and even take an advantage of prospective opportunities, hence a contra-indication of how debt factoring has changed the financial landscape of businesses today.

 

In debt factoring, business has taken another shape especially on managing books of accounts. Arguably, a business that utilizes factoring greatly relies on the lender to manage their sales ledgers and in collecting debts accounts. This will help to cut down the costs of administration and other related expenses. Similarly, a business renders itself the bonus of the hassle incurred when collecting bad debt. When there is difficulty in getting debt owed to a business, the factor simply tries to recover the debt from clients in a more courteous and professional way. Hence, the customers of a business are often made aware of whatever arrangements a business might engage in with a lender.

 

As most of the debts owed to a business usually comes at unpredictable times, while some relenting to two or three months from date of invoice, the smoothness of cash flow is not experienced in such cases. Hence, by debt factoring, the lender will be contracted with the invoices, and they will use the most effective way to ensure that the clients pay the amounts owed in a reliable time, of course without prompting a disappointment. The side note of debt factoring simply relies on the theory of money borrowing on debt security. This is simply as a bank lending a business money which is secured against the outstanding invoices withheld by the business.


Therefore, debt factoring has got to become an easy and quick way to turn invoices of a business into cash. This is as much as the credit worthiness of the business is concerned. Hence, a total change in the financial landscapes of how businesses operates.

There are many types of debt factoring, for examples I recommend you check out Invoice Funders.

How Is The Global Economy Doing In 2014?

admin, · Categories: Economics

world economy

The global economic meltdown that was experienced across the world in 2008 had very serious implications on the US economy and it has taken almost five years for the country’s economy to recover. Most American economic forecasters have rosy expectations because the last five years have been very promising and 2014 is not in any way different. I tend to agree with the optimistic forecasters because there are signs that 2014 is going to be a great years in terms of economic growth. The ever improving consumer confidence and the buoyant stock markets are perfect signs of good things to come. I will try my level best to explain why the world economy will experience tremendous growth in 2014.

To begin with, the 2013 annual share index gain was the biggest in over twenty years and it is expected that the same rate of growth with be maintained. The 30% rise that was recorded n 2013 was a sign of good things to come for America’s S&P 500 share index. The global economic trends are in most cases influenced by America and therefore the global economy will also benefit from America’s rising share index. It is estimated that the global growth will be close to 5% in 2014 and this largely depends on America’s performance. The purchasing power of a particular country is in most cases used to determine the county’s economic growth. The global growth will definitely improve in 2014 because this has been the trend in the last few years. There has always been upbeat expectation every financial years especially after the financial crisis came to an end but it is important to point out that some of the expectations are never met.

Major world economies such as Britain and Japan have been on the recovery path and the future looks bright for the rich world. The eminent rise in Japan’s consumption is nothing to worry about because the country’s economy can cope with it. The large part of global economic recovery is attributed to America although some credit should also be given to Europe for their effort. The financial crisis hangover is still being felt in the Europe but the Americans have completely dealt with that situation. Most European nations are still performing poorly when it comes to reducing their private debt and that is why their corporate and household balance sheets are not in good shape.

The strong foundations in America are the reason why America is experiencing tremendous growth compared to the rest of the world. America has once again become very competitive because of its cheap energy and that has led to its in house revival of prices. Years of a relatively weak dollar and wage restraint have also been major factors when it comes to the Americas economic revival because they have led to higher investment, stronger consumer spending, higher share prices and faster job growth. The recent spending cuts have also had a significant impact on the economy. The recent trend rates and federal allocation are some of the major reasons why America’s economy is likely to grow by 3% in 2014. The real economic facts on the ground convince me to be more optimistic about America’s economic growth in 2014.

If you are interested in exploring the changing face of debt in line with the economy, I suggest you read this.