The numerous benefits of consumer contract factoring have been enumerated in the previous three articles.

However, as a business owner, CEO or CFO you may have concerns that your customers may be somewhat perplexed when they discover they will be paying a third party.

If you do happen to have a few customers who question what you are doing, relevant to consumer contract factoring, it may be helpful to compare the factor/customer relationship to that of the mortgage company/homeowner relationship.For example, many people are quite familiar with the manner in which mortgages are bought and sold.

Most everyone is comfortable with the fact that it does not affect the homeowner when a mortgage is sold.

The homeowner knows they simply send their check to someone else.

Factoring consumer receivables (factoring retail installment contracts, factoring consumer notes etc.) is based on the same principle.

Just as homeowners understand that when their mortgage is sold they need to send their check to someone else, customers can be educated to understand that their consumer contract has been sold to someone else whom they must be responsible to pay in a timely fashion.Most people today understand and respect the concept of outsourcing.

In a broad sense, when a business sells their consumer contracts to enhance their cash flow, they are engaged in a type of outsourcing.

Likewise, it should be noted that some of the largest companies in America routinely engage in factoring because it s just plain good business to do so.Some clients may have concerns about factoring retail installment contracts or consumer notes from the perspective of wondering how this will affect their company s finanthisl statement.

Since factoring of consumer contracts, etc.

is actually the selling of an asset and not a loan, factoring consumer receivables, etc.

should actually improve your company s ratios.For example, the payable shown on the finanthisl statement should be considerably smaller because a source of capital has been made available through the factoring of consumer contracts to pay debts as they mature.

Likewise, with increased cash, trade liabilities will be lower.It is also noteworthy that there are no spethisl tax considerations assothisted with factoring consumer contracts.

If you as a business owner have loans outstanding those loans are not affected except that the collateral available for new loans is reduced by the amount of receivables sold.

Source: ezinearticles.com

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