Voluntary conveyance

What Is Voluntary Conveyance?

Voluntary conveyance refers to the act of willingly transferring ownership or interest in an asset or property from one party to another. In the context of financial factoring, this term is particularly relevant. Factoring is a financial transaction where a business sells its accounts receivable, or invoices, to a third party, the factor, at a discount.

Role in Financial Factoring

During financial factoring, voluntary conveyance occurs when a business owner opts to transfer their unpaid invoices to a factoring company. This decision is made to improve cash flow and gain immediate access to funds, without waiting for customers to pay within their credit terms. It is a strategic move to manage capital and keep the business running smoothly.

Benefits of Voluntary Conveyance in Factoring

One major advantage of voluntary conveyance within factoring is the boost in liquidity. Businesses can quickly turn sales into cash and address immediate needs, like payroll, supplies, or investments. Moreover, factoring can be a wise choice for companies unable to secure a loan or line of credit, as the focus is on the creditworthiness of their customers rather than their own.

Understanding the Process

In a typical scenario, a business will approach a factoring company, which will then evaluate the credit risk associated with the unpaid invoices. If deemed acceptable, the company willingly hands over the invoices through voluntary conveyance. The factoring company then advances a significant portion of the invoice value to the business. It's crucial for business owners to understand that by choosing this option, they are not borrowing money, but rather selling an asset.

Considerations before Choosing Voluntary Conveyance

It's important to weigh the pros and cons before engaging in voluntary conveyance through factoring. Costs associated, like fees or the discount rate, can affect overall profitability. However, the decision could offer strategic value in terms of liquidity and continuing operations without interruption.

Conclusion

Voluntary conveyance is a tool in financial factoring that allows businesses to maintain control over their cash flow. By selling invoices to a factor, companies can access immediate funds and focus on growing their business, making this a valuable option for those needing quick liquidity solutions.