In another bold move to assist the economy the US Government released its intention to start Factoring US Auto suppliers invoices to the automotive sector.

NY Times (03/19/2009):

DETROIT " The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The program will provide supply companies with much-needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need, the Treasury announcement said.

It is too early to say exactly what the details of this latest new is but President Obama has shown time and again that he is going to push through this recession and nothing is going to hold him back.

I had predicted that Accounts Receivable Factoring is going to be a major financing method of our economy revival and this proves how accurate that is.

Not everyone is familiar with Accounts Receivable Factoring so I will give you a quick overview. In it basic form, Accounts Receivable is a Line of Credit for Businesses which advances companies funds based on their Invoices that are outstanding.

Most Factoring facilities will advance from 80% up to 90% of the outstanding invoice face value. The cash injection can be used for what ever the company needs the money for " payroll, supplies, inventory whatever. Once the end customer pays the invoice then the reserve will be paid to the company that factored the invoice less the finance fee.

Most Factoring facilities will charge from 2% to 4% per month depending on the industry, credit rating of the customer and the advance rate,

A counterpart to the Accounts Receivable Financing is Purchase Order Finance. This is essentially Factoring or borrowing against future orders. There are strict guidelines to how this works, but if you sell a product that you purchase in finished condition and then sell it to a third party you may be a candidate for Purchase Order Finance.

This option works best for distributors but Accounts Receivable Factoring can work for companies in nearly any sector. If your company needs financing like this, the best option is to speak to a Professional Commercial Finance Broker because they will be up on all the trends and latest programs available through the various lender channels.

Best of all, most Professional Commercial Finance Brokers will be paid by the lender so you are not normally required to pay them for their services so it really is in your best interest to consult with them.