For companies who wants to expand their businesses overseas finds factoring much better option because of their experience in dealing with overseas suppliers which makes their international business efforts much easier.
Account receivable financing: It is an arrangement in which a company or a business uses its customer invoices or money owned by customers as a collateral(assets) in an agreement. In account receivable financing the collateral is just the base of the loan and beyond the collateral there is still recourse.
Accounts receivable VS factoring is often used together synonymously the difference in factoring there is a sale of the financial assets where the receivable is sold and it is not a loan. While factoring is a limited recourse financial transaction where it is possible for the receivable to be the only collateral.
In Account receivable financing the receivable is used as a collateral for the loan. If the receivable is sold it is removed from Account receivable and you get the cash.
Pricing of account receivables by the Factoring companies is based on several elements. The invoices owned by small companies or business are of less value than the accounts receivable owned by the large companies or organizations.
With accounts receivable financing companies or small businesses can focus on their business development and growth without having to worry about lengthy waits to get approved for a loan, scheduling the repayment, and bill collection.
Purchase order financing: It is different from factoring from the fact that it gives the ability to provide your clients with the goods from your sources before the invoice is generated. Purchase order financing can be your solution to help your business grow and deliver your orders if you need capital to deliver a large purchase order. The benefits of using Purchase order financing is that it is not a loan, and allows you to take on a bigger orders, PO financing pays your suppliers by giving them payment. For many business cash flow problems exists and they just don’t have enough money to fulfill clients orders. Turning down a client’s order just because they cannot afford the supplies to meet the client’s needs would not only cause a loss of revenue but also tarnish the reputation of the business. If a business needs cash to fill a single or multiple customer’s orders Purchase order financing is the best option.