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Capital business credit goes hand in hand with government stimulus programs. Stimulus programs are put into effect to help struggling economies. When an economy is struggling, banks and lenders tighten their belts and offer fewer loans to consumers. It does not have to do with the lack of wanting to do business but with rather having the money for the loan.
Capital Business Credit
Capital business credit provides a line of credit for a business. It is based on those businesses actual future earnings. There are credit services as well as factoring services. You can also borrow against capital for business equipment needed for the business.
Government Stimulus Programs
Government stimulus programs are put into place to help the economy. In March of 2009, fifteen billion dollars was earmarked to help small businesses. The government put this money aside to purchase SBA’s from local banks to help open up more money for local business loans. This is all in an effort to stabilize the market place and help to improve a failing economy.
Capital Credit Factoring
Factoring is referred to when a company borrows money against a line of credit that will be paid back by future earnings. In some business offices the billing is completed for the day and sent to the factoring company. The factoring company then loans the business the amount of that days billing minus a transaction fee or percentage. The customers that are being billed are required to send their payment directly to the factoring company for payoff. If the business receives payments they are to immediately hand them over to the factoring company for payment. If they do not then they usually are in breach of a financial contract and the factoring company can terminate the contract.
Capital Credit Services
Different services that are provided by factoring companies are billing services, accounts receivable services, asset based lending, supply chain finance, credit protection and some other specialized services. They provide these services not only to streamline the collection process but to benefit from quick payments. There is usually no more than a sixty day turn around on these credit services.
Factoring companies will benefit from government stimulus programs almost as directly as the company who was given the stimulus. If there is a business that has been using a factoring company to fund their day to day business and they are able to get a loan to cover the costs through a stimulus program then they can also pay back the factoring company. They will continue to business as usual
This can also be a bad thing for the factoring company, only because now that the money is no longer needed for the day to day operations the business might no longer need to factor their billing. This will slow down the factoring company’s income instead of the bank that had nothing else to lend.
Factoring and credit services go hand in hand and a stimulus to the market will affect the factoring services available and the rates at which they are provided.
