The Newest Accounts Receivable Factoring Company: The US Government

In another bold move to assist the economy the US Government released its intention to start Factoring US Auto suppliers invoices to the automotive sector.

As seen in today’s NY Times (03/19/2009):

DETROIT ” The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.

It is too early to say exactly what the details of this latest new is but President Obama has shown time and again that he is going to push through this recession and nothing is going to hold him back.

A few days ago I stated that Accounts Receivable Factoring is going to be a major part of the new economy and this turns out to be right on track, but a little sooner than I expected.

Not everyone has heard of Accounts Receivable Factoring before so I will give you a brief outline of what it is. Accounts Receivable Factoring or Accounts Receivable Financing is a Line of Credit that uses your outstanding Invoices as security.

Typically the advance rate of Accounts Receivable Factoring is between 80% and 90% of the invoice face value. This cash advance can be used to pay for payroll, utilities, machinery, rent or what ever the company needs the funds for. Once the end customer pays the invoice, then the Factor will remit the balance of the payment received from the customer to the company that generated the invoice less the factoring fee.

Most Factoring facilities will charge from 2% to 4% per month depending on the industry, credit rating of the customer and the advance rate,

Purchase Order Finance is a compliment to AR Factoring for companies that need a little more financing. This will allow companies to borrow against orders to be filled. With this financing, there are strict guidelines to follow as companies that are in the manufacturing sector often can not use this finance option.

This option works best for distributors but Accounts Receivable Factoring can work for companies in nearly any sector. If your company needs financing like this, the best option is to speak to a Professional Commercial Finance Broker because they will be up on all the trends and latest programs available through the various lender channels.

Generally speaking, the service of the Professional Commercial Finance Broker will not cost you anything as they are paid by the lender.