What is the debtor's financing?
The debtor's finance is a service that companies are waiting for payment from customers who can get money in advance from a third party in return for a small fee. In most cases, the company will have to return some of the money unless the customer pays. There are various forms of debtors' financing and which of them will choose from, whether the company wants the company that the customer knows that the service is used. This is where a company that sells profit products faces problems because it has to pay for deliveries quickly, but faces delay before receiving payments. This is a special problem for small businesses that have less market power and therefore can often negotiate unfavorable conditions with suppliers and customers.
There are two main types of debtors' finance. The first type, invoice discounting, is actually a short -term loan that carries an interest fee. Company borrows money in advance with understanding that he will use the money he eventually gets from the customer to repay the loany. The customer will not be aware of this process. In most cases, the financial company will have the legal right to entertain payments from customers lending the company if it fails to repay the loan.
The second form of financing the debtor is the debt factor. This effectively includes the sale of debt. The financial company immediately pays for outstanding money, a minus fee. He then collects money from the customer. This has the advantage that the customer can respond more to the requirements of the financial company for fast payment, but has the disadvantage that customers are aware of business communication, which can give the impression of cash flow problems.
Most types of financing of debtors include a clause of disability. This means that, if the cordless person has not paid by the date, often 90 days of the invoice issued, the company must repay the relevant amount of the financial company. Business then takes control of the collectionPayments from the customer. In some cases, the financial company does not use the system for use, so it accepts some credit risk. This usually means higher business costs and may mean that a financial company requires customer credit inspection.