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Green retail supply companies have higher operating costs than many of the other retail supply companies. It is essential to have a good grasp on all of the finances which make it possible to purchase the necessary materials and convert them into a green product which can be sold to the public. Borrowing money is something which factors heavily into the business plans of many green retail suppliers. It is not always possible for the companies to get short term loans which will allow them to have the operating expenses they will need to get their work done.

In many cases, the best way to get the money which is necessary is through companies which offer factoring services. Even green companies which would not normally resort to these kinds of tactics have been using them more and more as the loans from traditional banks dry up, they are forced to go elsewhere. Even with the economy on a supposed comeback, there is still a reluctance to make short term loans from banks to businesses. There seems to be no shortage of companies which will provide factoring services. In fact, when you look to find local vendors, you will find the numbers of these businesses are growing.

What is factoring

Those used to standard, traditional loans form the banks will likely not understand what is meant by Factoring. It is a process by which the lender will purchase your future income, accounts receivable, for a discounted rate. The rate which is available will vary from company to company. Finding a company which will charge you the least amount of money is important to have more operating expenses and a better profit margin altogether. Seeing as the profit margins in many green industries are pretty low to begin with, this part is especially important.

Why factoring is beneficial

One of the really great things about factoring is you will not be responsible for collecting the funds from the companies you deliver to. The lender is responsible for collecting all debts as accounts receivable. If the funds are not forthcoming, it is their responsibility to go through the process of collecting the revenue generated from the sale. Many companies prefer factoring because they never have to worry about making payments to a loan or chasing down companies which have made purchases from them to get a payment. Once the money is in your hands, it is the responsibility of the lender to collect all funds.

Who uses factoring services?

As noted above, the majority of businesses which use these services are green retail supply companies. It is also common in any industry which uses commodities which must be created for sale or for service. The concept is to get the money in hand which will allow the company to purchase the necessary items like equipment, materials or even pay for labor. Once the service or good is delivered, your portion of the agreement is over and you keep the money which is over the amount you spent out. It can be very useful in many green industries.

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This Financial Services article was written by Shannon Suetos on 11/11/2010

Shannon Suetos is the online editor at Resource Nation. She writes expert advice for small businesses and entrepreneurs.