What Exactly Is Factoring Panama?

Who provides this service?

Factoring Panama is a financial service generally completed by large banks or perhaps very liquid companies to supply funds to businesses or people who require immediate cash financing. This is achieved by purchasing Accounts Receivables or perhaps invoices at a discount coming from businesses or people who need instant cash. For example, December is really a time when individuals splurge in electronic items using credit cards. If you possessed a web-based store, you'd like to cater to everybody who would like to purchase a laptop by selling the invoice to a "factor" or perhaps a business or a financial institution that buys receivables.

Explanation with numbers

If you place a mark-up of 20% on all your goods, and the "factor" buys your invoices at 5% discount, technically, you will still be making 15% from your financial transaction. Not just that, you're able to get instant cash through the "factor", get rid of the responsibility of collection because the "factor" assumes all of the credit associated risk after buying my invoices, and you are able to accommodate more people who want to purchase laptops. This is the way Factoring Panama works. This particular financial service is not new since it has been around since the 80s and also this is really a way for cash-strapped companies to improve cash flow. Additionally, availing Factoring Panama doesn't mean you will have debt. Because you have sold your own invoices to a "factor", without recourse, signifies that the credit risk changes to the person who bought your invoices.

Clarification

Factoring Panama is often wrongly recognized as comparable to discounting invoices or accounts receivable, wherein they turn out to be collateral to funds that is lent to you by way of a financial intermediary. Factoring Panama differs since you do not have financial debt. However, as a merchant or perhaps business person, you need to investigate your clients' credit before selling them something because the "factor" will certainly decide to buy the bills according to your own clients' history of credit or rating if it is available. Good-paying clients' invoices will certainly be purchased by "factors".

In Summary

In doing business, always remember that cash is important. No matter how large the sales are typically certain time period, if you're not able to collect the funds immediately, then business won't grow as fast. Whenever much more merchandise is turned over and also clients are capable of paying faster, subsequently that is a good sign that your particular company is actually performing well. If your own capital revolves rapidly, it is always a good thing, but if it does not, there are financial services such as Factoring Panama just to save the difficulty of needing to wait patiently a long time for the capital to return. These services are readily available by the majority of Panama Bank.