On-the-way Money
On-the-way money refers to funds that are expected to be collected in the near future but not yet received, such as accounts receivable, notes receivable and other receivables. It is an important source of cash flow for finance-needing companies. In particular, small and medium-sized enterprises are more dependent on accounts receivable to supplement cash flow.
Marginal revenue holds the source of financing on-the-way money. Usually, in order to raise on-the-way money and to protect it from potential losses, businesses create a variety of practices, establishing deposit banks or guarantee companies and signing relevant loan agreement, such as factoring and discounting.
Factoring is a kind of financing services for on-the-way money and it is mostly used by small enterprises. It requires the debtors credit standing, agreement of both parties and a third-party, who is responsible for setting the rules and guarantees responsibilities. The credit discounting also requires a third-party intermediary, which both debtor and creditor trust, who will evaluate the accounts receivable and make sure both parties interests are balanced.
It is possible to borrow funds against on-the-way money. Businesses are able to sign an accounts receivable loan agreement with a financial institution, allowing the lender to collect the funds owed when the client payments are due. They may also access more money than their receivables are worth, and still pay interest on the value of the loan.
Business owners are using on-the-way money as a way to improve their cash flow. With this type of financing, they can access money quickly, without missing any payments. They can also access larger amounts than their immediate funds are worth, although they will pay interest on the amount borrowed.
On-the-way money is an essential aspect for many businesses. It helps them bridge the gap between the time where bills are due but the funds from their customers have not yet been collected. Businesses can generally choose from a range of different financing options when to access on-the-way money, from factoring agreements to accounts receivable loan agreements.
