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What is working capital financing?
Working capital financing is a form of corporate credit based on securities such as accounts receivable and stocks. It is a flexible form of financing that allows you to release maximum liquidity based on your current sales compared with your borrowing requirement. This is different from other forms of credit which focus on historical figures such as balance sheet ratios. With accounts receivable financing you can dispose almost immediately after invoicing of 70 to 90 percent of the invoice amount. In most cases ING Commercial Finance will also take over your credit management including debt collection. For this you pay interest and a bank commission.
When is working capital financing of interest for your company?
Working capital financing of ING Commercial Finance is of interest for all companies working with a procurement or investment trajectory before they can sell. These may be trade and manufacturing companies, but this form of financing is also suitable for service providers. It is a very flexible form of financing whereby the unused part of the loan automatically moves with the activities and sales, due to the fact that funds locked up in stocks and/or receivables, can be released immediately. A condition is, however, that the sales are above 2.5 million euros and that a company supplies on account to corporate customers. This offers companies the financial scope to do business, based on solid securities.
Is working capital financing an accepted form of financing?
In Europe, following the United States where it has been used for a long time, working capital financing is the fastest growing form of company financing. It offers businesses a flexible form of financing based on existing security such as receivables and stocks. This way there is less emphasis on historical figures as found on the balance sheet, whilst a company is provided with financial means to finance its future operations. Because invoices can be financed in advance immediately, the loan increases automatically with the company’s borrowing requirement. Working capital financing also provides a bridging loan to, for example, companies that have strong seasonal peaks.
Is there a maximum amount against which accounts receivable or stocks can be financed in advance?
As the only independent working capital financier in the Netherlands, ING Commercial Finance does not use a maximum financing amount. Therefore, in case of an explosive growth, there is no need to fear having to wait for your money in expectation of a new credit limit. This means that your loan will increase in line with your company, stocks and sales.
What is the advantage of working capital financing compared with a bank loan?
Working capital financing allows you to release more liquid means than with a bank loan. By directly linking your receivables and stocks, this is a very flexible form of financing. At the moment you need more money because you have purchased more stock or when your receivables increase, you will automatically have more credit at your disposal. A bank often sets a fixed credit limit based on the average figure over a given year. Especially companies with strong seasonal influences thus have too ample a credit scope whilst being short of credit during seasonal peaks to pay the direct costs.
Do you also get an overdraft based on foreign accounts receivable?
Yes. Thanks to the international network that ING Commercial Finance is part of, we also provide loans based on foreign accounts receivable. Besides, we can take over the payment risk of foreign debtors and the credit management including debt collection.
Do my customers know that I have put out factoring to ING Commercial Finance?
In case of an open arrangement your customers will pay the invoice amount to ING Commercial Finance. When you opt for a confidential arrangement, your customers are not aware of our collaboration. In that case you will do the credit management and debt collection yourself. A condition is, however, that your accounts receivable administration is well organised. In an open arrangement you can leave the credit management to us.
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