- April 15, 2021
- Posted by: samdenis
As this is not a loan, there is no interest rate or RPO associated with the purchase of future receivables. The client sold future receivables worth 490K for 350K in advance and a 2% tax. The store is a hotel – stays are paid for by credit card or occasional check at the time of stay. AR is not used because it is not necessary. No one is charged in advance. Payments for the sale are made twice. I was told that it was not considered a loan – which is probably helpful, since it is a sale of future debts. I know I have to debit money for advance and loss on sale for fees – but what is the hacking to which I have to code the difference if I don`t have AR credit to compensate? Am I going in the wrong direction? I have to think about what`s wrong. Help! The sale of future debts is a way for a company to sell future business income to third parties and to instantly obtain cash.
As it is a matter of selling future profits, this is a business-to-transaction transaction transaction – not a loan. Since the sale of future receivables is not a loan, it is not regulated by most local, state or federal laws. Let us remember that the purchase of future debts is a kind of high-risk corporate financing and that the risk will be taken into account in the financing offer. As a result, rates for the acquisition of future receivables are often higher, if not much higher, than in the case of conventional business financing. In addition, interest rates on a traditional loan are calculated with an RPO, while cash advance rates are calculated using a formula called “factor rates.” A set of factors is a multiplier representing the total amount that the trader or small businesses must repay. For example, if a merchant receives $10,000 in financing from a business that acquires future receivables and repays it at a factor of $1.15, the merchant repays $10,000 x $1.15 – $11,500. Typically, a company that acquires receivables offers factor rates between 1.10-1.50. As this is a sale of future receivables, there is no savings for a prepayment that you would get with an APR loan product. This does not mean that you cannot save if you pay prematurely. Since this is a business-to-business transaction, the merchant may agree, before or after the financing, to reduce the total amount of amortization by an advance payment of funds.
Most of the factor rates offered by companies that acquire future receivables are in the range of 1.10-1.50. Simply pay $US 10,000 in advance in exchange for $10,800 in future sales revenue. Your business must be open for at least 3 months to be able to sell receivables on Simply Funding. No no. You don`t need to accept credit cards. We acquire all forms of commercial receivables, including cash, cheques and invoices.