The Benefits of Consumer Receivable Financing Part 2
Author: Anthony Cicone
Author: Anthony Cicone
The previous article on the benefits of consumer contract financing was concluded by citing three specific benefits associated with factoring consumer contracts (ie. financing consumer receivables, retail installment contracts, consumer notes, etc.). Those three benefits were: bad debt elimination, consumer contract processing and meeting increase demand. There are many other benefits associated with consumer contract financing which will be mentioned in this article.
~ You can take advantage of early payment discounts. Consumer receivable financing may very well allow you to take advantage of early payment terms offered by your suppliers. By enhancing your cash flow through consumer receivable financing you may be able to save two percent of your raw materials cost because you will have the cash to pay bills withing ten days. This in turn can reduce your financing costs.
~ You can take advantage of volume discounts. Another advantage, for example, of financing your retail installment contracts, is that you will be able to buy in greater volume from your suppliers because of your improved cash flow position. By cashing out your retail installment contracts withing days after the contracts are written, rather than waiting one, two or even three years or more to be paid, you will be able to experience first hand the time value of money. Thus, you will be able to take advantage of volume discounts offered by your suppliers. ~ No loss of equity. By factoring your consumer notes to provide the capital you need for growth, you will not be giving up any equity in your company. Many companies find themselves looking for venture capital, sometimes because they think this is the best or only option they have. However, while venture capital certainly has its advantages, with venture capital you will have to give up equity in your company, as well as take on unwanted partners. Unwanted partners and loss of equity can be avoided entirely by selling your consumer notes; but, maintaining complete ownership of your business.
~ You don't incur any debt. When you factor consumer contracts (consumer receivables, retail installment contracts or consumer notes) you do not incur debt because factoring is not a loan. This keeps your balance sheet clean, and thereby puts you in a more favorable position than you would otherwise be in, should you opt to apply for a loan or line of credit, sometime latter on in the life of your business. Likewise, should you ultimately decide to sell your company, your balance sheet would not reflect debt, since once again, factoring does not involve a loan.
~ Factoring consumer contracts enables you to more effectively build your credit. For example, once you begin financing your consumer receivables, your cash flow will improve. This will enable you to begin to pay your bills on time, and this in turn will position you to establish and/or improve your credit. The logic of this process would be to improve your chances of getting credit terms from suppliers, as well as improving your ability to acquire conventional financing in the future. About the Author:
Dr. Anthony F. Cicone, the owner of Access Funding Center, Inc. (
http://www.accessfundingcenter.com) received his certification in the cash flow industry on Feb. 14, 1996 through the International Factoring Institute, Center for Business and Professional Development at the Open University. At that time, Dr. Cicone was conferred a Diploma as a Certified Factoring Specialist (CFS).
On April 2, 1996, Dr. Cicone was enrolled as a member of the National Association of Factoring Professionals.
On May 14, 1999, Access Funding Center, Inc. was incorporated in the state of South Carolina.
Dr. Cicone was named "top grossing broker" for MFSI, for 2002
Dr. Cicone has been the subject of several articles in the American Cash Flow Journal. Dr Cicone also actively contributes articles to the American Cash Flow Journal.
In January of 2003 the American Cash Flow Association designated Dr. Cicone as a Master Consultant in the areas of Consumer Receivables and Unsecured Business Loans.
Also in January of 2003, Dr. Cicone achieved the highest level of recognition in the cash flow industry when he was named to the Million Dollar Club.
In July 2003, Dr. Cicone became the founding president of the South Carolina Chapter of the American Cash Flow Association.
The Benefits of Consumer Receivable or Contract Financing Part I