An unsecured loan is something that should be handled with care because it can quickly cause financial disasters if go unchecked. If you must get an unsecured loan the best way to go about it is to start your search by doing your own research. Research about rates, penalties, late payments, and everything that can effect your credit. This will not only help you choose the loan that better fits your needs, but also let you know exactly what to expect throughout the life of the loan.

One of the most over looked and most obvious mistakes made by loan seekers, is being able to make payments on time. If you are looking for a loan especially an unsecured loan, be sure to borrow a little extra to cover payments if thing go south. By adding, ideally, 6 months of the monthly payment to what you need, you may pay a little extra, but you have security if you come up short one month. This will help you to avoid costly late payments and fees.

An unsecured loan can be the perfect tool to help your business or for personal expenses, but unlike secured loans it requires strict monitoring. Be sure to do your research, choose the best type of loan for you or your business, have a long term repayment goal, and stick to it.

NON RECOURSE FACTORING

Think of it as selling your invoices at a discount to the factoring company. This is when you the business owner turns over all legal responsibilities of the invoice to the factor. Leaving the factoring company with the risk of never being able to collect from the customer. You do not have to repay the advance or try to collect payment from the over due customer. Non recourse factoring is more expensive because of the higher risk and usually requires you to pay interest for a set period of time. This helps the factoring company recoup some of there lose if they are unable to collect the debt.

RECOURSE FACTORING

This is the opposite of Non recourse factoring. You can think of it as a loan until the customer pays the debt. The factoring company will try to collect until the due date of your advance. If they are unsuccessful, it will be your responsibly to collect from the customer and repay the advance to the factoring company. There are less requirements and fees associated with recourse factoring because of the lower risk.

TIPS TO HELP YOU DECIDE

If you have been working with a customer for a long period and are confident they will pay, it is in your favor to use recourse factoring. On the other hand, if you and the customer have a new partnership then you may want to use non recourse factoring or give it some time to gauge there ability to pay. You should also consider bundling your invoices to save on fees.

While receivables financing is a great tool, you will have much to consider if you ever need to use it. Make sure it is your last option because you will still lose a portion of your profit for the quick cash advance.

FACTORING COMPANIES

First we will take a look at selling your accounts receivables to factoring companies or what is called accounts receivable factoring or accounts receivable funding or accounts receivables financing. There are many companies that offer this service as there sole business practice and some that has it as a side service like a bank for example. Usually there is a minimum to work with the latter, some where around $5 million in annual sales revenue. The first thing you should know is that you will be selling your accounts at a discounts of the face value. The discounts is dependent on your customers credit and the age of the invoice; the average is around 5%. The older the account the less you will be able to get for it, companies usually do not buy receivables that are more than 90 day old as it is likely a noncollectable account. The second thing is should you opt for non recourse factoring or recourse factoring.

When dealing with a factoring company you can expect to pay a fee for their services. Most companies charge anywhere from %2 to %6 of the total invoice or invoices. Some companies will collect payment directly from your customers and send you what’s left after taking there fees. This can be a good thing for you; it frees you of trying to collect from that customer. There will also be other fees outlined in your agreement so, be sure to read it carefully or have your attorney look at if for you. After you have agreed to the terms you will receive the money within a few days depending on the company.

TRADING ACCOUNTS RECEIVABLES YOURSELF.

Unlike selling your receivables to a company, you auction them in a marketplace similar to Ebay to investors. A receivables marketplace gives you more control than a factoring company. You will still have to sell your accounts at a discount, but you will have more say in how much of a cut you are willing to take.

You will not be selling accounts to individuals, but to commercial entities that has passed the membership process of the marketplace. This process includes a background check, legal paperwork and a minimum in investing capital. This is a secure alternative when looking for receivables financing ( receivables funding ). There are fee to use the marketplace which includes registration, posting, closing transaction and administrative fee.

Both are great avenues to getting to cash flow you need for your business when you need it. Do your research before deciding which way you will go. Be sure this is the last option for your business because you will be taking a lost for the benefit of immediate cash.