Accounts Receivable Financing Tax Write Off And What Does It Cost

Accounts Receivable Financing Tax Write Off And What Does It Cost

Accounts Receivable Financing,​ Tax Write Off and​ What Does it​ Cost?
Banks wont lend money to​ a​ business seeking to​ acquire larger contracts because its not viewed as​ an asset. ​
So if ​ you​ are a​ small start up company,​ funding for expansion may be hard to​ obtain. ​
Accounts Receivable Financing could be the​ key to​ funding for a​ start up with desires to​ bid on​ large Government or​ Corporate contracts.
So what is​ Accounts Receivable Financing? it​ is​ the​ selling of​ your accounts receivable invoices for cash versus waiting 3060 or​ 90 days to​ be paid by your customer. ​
Accounts Receivable Financing is​ also know as​ Factoring.
Securing the​ services of​ an Accounts Receivable Financing Company will allow a​ small company to​ bid on​ almost any contract within reason. ​
a​ small company would know in​ advance that the​ funds needed to​ produce goods or​ provide services are available once they win the​ contract. ​
In fact,​ some A/R Companies will advise you​ on​ which companies they will Factor Invoices from and​ which to​ avoid! Federal Government contracts are considered gold however not all Factoring companies can handle Government Receivables
One of​ the​ major concerns for most small business owners is​ how much does Accounts Receivable Financing cost? Between 1 to​ 5% generally speaking. ​
Since Accounts Receivable Financing rates depend on​ the​ creditworthiness of​ your customers,​ your average invoice,​ average payment cycle,​ and​ factoring volume,​ its hard to​ predetermine the​ exact cost of​ the​ money. ​
However,​ you​ should remember,​ whatever the​ cost is​ Its TAX DEDUCTIBLE and​ this is​ important. ​
This means that the​ cost to​ factor is​ offset by IRS.
Not all Factoring companies are created equally you​ cant tell that by looking at ​ their web pages. ​
a​ Cash Flow Consultant or​ an Accounts Receivable Broker can stir you​ in​ the​ right direction. ​
There are issues such as​ process to​ acquire funding,​ will the​ Accounts Receivable Financial company factoring company handle your collections,​ will they provide the​ funds through a​ credit card or​ will they wire the​ monies into your business checking account,​ will the​ Accounts Receivable Financial company factor with recourse or​ without recourse? Meaning will they take responsibility for the​ debt or​ will you​ the​ client take ultimate responsibility? the​ rates are different
Sometimes an A/R Broker has a​ choice,​ but not all the​ time. ​
For instances,​ there are not that many companies that provide Accounts Receivable Financing for health care or​ construction. ​
it​ all depends on​ what type of​ business you​ have and​ what your needs are.

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