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Get Your business Credit Line Increased Via Accounts Receivable Factoring
Traditionally, a good number of businesses based on the United States were given access to various types of business credit. An example is the bank credit line together with personal and business assets. Then there is non-asset based credit, such as credit cards used by many small businesses. Then there is trade credit, which is the kind of credit supplied by vendors only and can only be used when you are purchasing raw items or during inventory and resale. Next is equipment leasing and the last one is one that many business owners do not know exists - accounts receivable factoring.
It is much easier to grow your vendor credit lines than asking a bank to extend credit. Most businesses purchase 80 percent of their goods from just a few vendors. What is the importance of properly managing business credit towards vendors? You can increase your bottom line by presenting your business in a light manner. Your company may look financially unstable or unhealthy when you continually pay past your credit terms and this can cost you money!
The offer of 2% net 10 is the standard offer in most industries, which translates that if you pay within a net of 10 days you get 2% off the invoice. In some cases, if you call your vendor and ask, you might be able to get a four percent net 10. Truth is, it is advantageous to get hold of competitive vendors and ask about their terms.
The other way to take advantage of early payment discounts from your vendors offering these terms is via accounts receivable factoring. Before you request for an increase in credit lines with your vendors it is important that you establish an impressive credit standing first. Any businesses that takes advantage of these kinds of terms every month is more apt to be noticed by the credit department. In comparison to bank credit, vendor credit lines grow faster because vendors tend to size up their customers based on their capacity to pay and volume. A history of paying bills on time may open the doors for you to negotiate for better prices.
Few businesses know the value of tapping into their customer's credit. Small businesses can take advantage of the customer's credit through accounts receivable factoring because this allows them to acquire advances against the amount their customers owe them. The way it works is that a factoring company establishes accounts receivable credit lines based on the credit of the customer, so it is not based on your credit, but on their ability to pay. cash flow is king these days, so if you begin using accounts receivable factoring, you could even negotiate better terms and pricing from all of your vendors and suppliers and vendors.
accounts receivable factoring increases cash flow and enables a small business to stay debt free, so they could then, for example, go ahead and take advantage of early payments to vendors with two percent net 10 terms. It offsets the percentage points lost on factoring, and way better than credit cards or going to the bank for a loan.
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