Accounts Receivable Factoring and Credit Insurance

Achieving Cash Flow Management Through Accounts Receivable Factoring and Credit Insurance

Accounts receivable factoring is another mode of receivables management and working capital funding to eventually increase the cash flow. Accounts receivable factoring involves buying and selling of accounts receivables in order to obtain immediate cash or working capital.

Accounts receivable factoring helps in acquiring cash for the product or the services rendered. It results in immediate cash inflow without creating any debt or transferring the business ownership. Accounts receivables are the most values assets for any company. It is one of the modes for increasing sales and expanding business. The cost varies, for example the payment can be  80% of the invoice value. The 20% of the value is kept as reserved and is paid after deducting the fee once the amount on the invoice is due.

Jamaican Exporters can access EXIM’s Trade Credit Insurance (TCI) which protects their receivables against non-payment by local and overseas buyers.  The policy is tailored to suit your specific needs, with insurance premiums at rates you can afford.  With TCI you can recover up to 85% of your receivables under commercial cover, and up to 90% under political cover.  All policy holders are eligible for post-shipment financing up to 80% of invoice value. (See http://www.eximbankja.com/products)

Not only does ECI protect you against the non-payment of receivables by your foreign buyers, but the policy can also be used as collateral when applying for post-shipment working capital financing – IPDF.

 BRIDGE FINANCING FOR INSURED RECEIVABLES- All policyholders can apply for post-shipment financing of 80% of invoice value of all eligible transactions, where the policy is used as collateral.  Loans will be available for 120 days at a rate of interest ranging between 10% and 11.5% per annum. See http://www.eximbankja.com/products

This practice if accounts receivable factoring is most suitable for small and medium business owners. Due to accounts receivable factoring small and medium business owners are able to generate cash and avoid the debt trap. It also helps in representing strong financial status and avoids interest on any loans if otherwise taken.

In addition to the Exim facility, NCB offers Receivables Financing. This is a  line of unsecured credit that gives SMEs, who provide services goods and services to any of over 30* preapproved organizations, access to funds to fill cash flow gaps between delivery of goods and services and collection of receivables. The terms are as follows:

Ø  Unsecured line of credit, no collateral required

Ø  Get up to 75% of the value of your receivables

Ø  Maximum of 1 year to repay

S See: http://www.jncb.com/businesses/sme/businessloansacreditfacilities

www.easybooks.ca

Accounts receivable factoring also provides relief from non-paying clients or slow paying clients. It generates more sales due to increased orders. It also offers flexible funding program to help heighten the sales graph and take vendor discounts due to availability of cash.

This practice of accounts receivable factoring generates cash to fund the payrolls and taxes due. The funds thus generated also help to increase the inventory or buy new equipments, tools, etc to flourish the business.

The availability of cash helps small business owners to negotiate for discounts from their vendors and suppliers. It also helps to reduce book keeping, depositing checks, monitoring collection process, and preparing reports for collections. Brokers or agencies also provide their services for accounts receivable factoring. They help the business owners to manage their collections, payments, generating more cash and managing their cash inflow process.

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