Invoice Financing
Categories: Banking, Company Management
See: Factor.
You run a company that sells foot powder. Your big customer, a bowling shoe rental emporium, buys $5,000 worth of product. You ship out the cases of foot powder and send a bill. Now you have to wait until they pay. They have 30 days to send the money...but if they're late, you might not see the cash for six weeks, or even a couple of months.
Meanwhile, you could really use that $5,000. You know...to pay salaries and buy supplies and pay rent on your factory. That kind of thing.
So...what do you do? Well, one option is invoice financing, i.e. using your accounts receivable as collateral for a loan.
You borrow $5,000 with the promise that, when you receive the money from the customer, you will use the cash to repay the lender. You're getting the money now that you would otherwise have to wait a few weeks to receive from the bowling shoe place. It's a short-term loan, using the account receivable as a way to prove to the lender that you're good for the cash.
Related or Semi-related Video
Econ: What is Derived Factor Demand?11 Views
And finance Allah shmoop What is derived Factor Demand All
right people We all know our basic supply and demand
curve right The supply curve slopes upward reflecting that firms
will want to make mohr things the more they can
sell them for and the demand curve slopes downwards showing
the consumers want to buy more things that cheaper They
Khun get him That's the consumer marketplace right there Derived
factor Demand is am or less the same but just
the opposite Derived factor Demand is the demand by firms
for factors of production to make products which is dependent
on consumer demand for those products derived factor Demand takes
the supply and demand curves down the rabbit hole flipping
everything upside down Well where are we not in Wonderland
here and not in the consumer market either All right
now we're in the labor market There we go In
the labor market the people who were demanding are now
supplying and the firms that were supplying are now dim
ending at little topsy turvy There Here people are supplying
their labour which means in the labor market workers own
the upward sloping supply curve like in order for consumers
to make money to buy all that stuff in the
consumer market Most of them have to sell their labor
right Justus The buyers air now sellers The sellers are
now buyers Firms which sell things on the consumer market
need toe by labor to help them make those things
that they're selling in the labor market Firms owned the
downward sloping demand curve that is the derived in derived
fact or demand is because the demand for one thing
creates the demand for the other like in the labor
market The demand for goods in the consumer market creates
the demand for workers to make that stuff in the
labor market well the labor demand was derived from the
market demand Yeah curious er and curious er So what's
the factor in factor demand Well derived factor Demand applies
to the labor market but also to all inputs in
general For firms factors of production are the inputs they
need to make the stuff they're selling And one of
those things that they're selling includes labor just like consumers
have The consumer market firms have their factor market the
main factors of production that firms need to make things
while things like the land and labor and capital in
raw materials and intelligence demand for flower in the factor
market is in part derived from the demand of qassem
in the consumer market the firm demand for battery engineers
well it's derived from consumer demand for longer lasting batteries
and or cars that don't run on Dead Dinosaur Group
because having your phone die or your car at the
worst time is well the worst demand for rubber on
the rise by firms during the baby boom era Yeah
you bet Maybe because the increase in supply babies led
to an increase in the demand for rubber duckies and
or toys that bounced which increased factor demand for rubber
Well maybe firms were making something else with the rubber 00:02:58.325 --> [endTime] Who knew Shmoop