The seafood factoring is simply the outstanding invoices of the sales to the facing company or the bank. Nearly most of the business-to-business companies that are in the seafood industry have clients with creditworthiness who can be eligible for it. Usually, the companies that do business to consumer services are not good candidates for the factoring. With such factoring, it is possible for the business to get around 96% of the invoice principal value.
What is seafood factoring?
The factoring is the pending invoices sold to a factoring company or even the bank at the discount for which the cash is provided. With the help of such a factoring solution, it is possible to monetize the invoices in less than 48 hours and nearly with 98% of the face price. Such factoring is important mostly for the business-to-business companies that are surviving in the seafood industry. Such type of sale is usually done on the recourse or also based on non-recourse.
In the case of the former, the invoice is usually charged back to the client in the stipulated time if it is not paid off well. With the non-recourse factoring choice, the company is completely responsible for the collection of the invoice irrespective of the time frame. Besides, the client can also be charged a fee while there is an outstanding invoice.
The charge of the factors can be from one to five percent of the whole service. This type of fee is said to be the discount rate. Besides, the factors can even hold the invoice percentage as the reserve till the whole invoice gets paid off well. Reserve is like heading back in the transaction of the seafood since it includes more of the physical goods. There could be the possibility of the short payments, billing amount that was inaccurate and the credit memos.
Understand the seafood factoring working
Companies like the business factors usually would monetize the invoices in four easy ways. The steps for the same are:
- The seafood company would offer the factor only with invoice copy which it wants to factor
- The invoice then further gets approved by the buyer
- The advances of the factor are a set of the outstanding invoice value
- Once the invoice gets paid, the business can get the remainder of the discount rate and any kind of additional fees
- It is the seafood factoring that lets the seafood company get the working capital quickly by simply selling the outstanding invoices to the factoring company at a good deal. This way the business-to-business companies shall be at a less risk profile for their respective clients.
Producers and Suppliers, Distributors, Importers and exporters, Wholesalers, Seafood processing businesses, and some other companies in the industry are the known business to business companies that can avail the benefits of seafood factoring. It is one of the best working capital substitutes for such companies and for those who have less credit profile since it is just a startup.