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When a company grows quickly, it tends to outgrow its limited working capital. Factoring is a tool, which provides the entrepreneur an opportunity to expand and speed cash flow. This is done by selling receivables to the factor and drawing an advance prior to the customer making payment. This can speed his cash flow by about 30-60 days or more.
STAR'S Factoring Product includes the following services:
1. Purchase of the receivables with or without recourse.
2. The debtors are notified to pay the factor directly.
3. The factor ledgers and collects the receivables. If the customers pay slowly, the factor will follow for payment.
4. Since the factor is buying the receivables, he is generally willing to make advances prior to receipt of funds from the customer. The percentage advanced is a function of the expected returns, allowances, charge-backs etc.
5. The factor provides full reporting as to the status of the customers (including aging reports twice a month) and the client's relationship with the factor.
6. If the factor buys the receivable without recourse, and the customer becomes insolvent, STAR will absorb the loss.
As a factor, STAR allows an entrepreneur to focus on the running of his business rather than worry about financing his daily cash needs. The factor relationship offers liquidity, and safety for a growing business. In addition, the entrepreneur can maintain a low overhead since he does not have to hire credit or collection personnel.
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