When should I Factor?

Factoring can assist, in ways you won’t resist

Many business owners aren’t aware of the benefits of factoring their accounts receivables. This can be a very effective way to grow your business without taking on debt or giving up equity. Factoring includes credit request services, accounts receivable management, credit insurance and additional capital when your company grows.

When should you factor?

1) When the bank is not an option: If you’re finding it difficult to get financing from the bank, you can factor your invoices in order to receive quick cash. The Bank requires historical information and equity requirements where factoring relies heavily on the strength of the customer to qualify for funding.

2) When your customers are credit worthy: We do evaluate your company’s creditworthiness and the owner of the company but we don’t rely heavily on this information to provide the funding it’s only part of the story. Factoring allows for past bankruptcy, no credit and little credit history. More importantly we assess your client’s credit worth to determine your credit limits. In order for factoring to work successfully, your clients must be credit worthy and able to pay within 30-60 days. Depending on the situation and credit of the customer longer terms maybe acceptable.

3) If you are a new company: If you are a startup company and producing invoices with terms greater than required for you to pay suppliers including payroll, taxes, rent and inventory, factoring may be a good option for you. It provides a way to maintain your ongoing cash flow and the opportunity to grow your company. There is no debt associated to factoring as it is a sale of an asset so it won’t negatively affect your balance sheet. Once you have some profitable history you’ll be in the perfect place for a line of credit with the bank.

4) If you’re a growing company: If your company is growing where you have to pay your employees or your suppliers and you can`t wait for your invoice payments (30-60 days) factoring may be an opportunity for you. It allows you to get paid upfront without being slowed down or delayed by your accounts receivables. You can double and triple your sales and continue to access more capital as account credit limits are directly related to your outstanding invoices.

5) If you have payables: Factoring will keep your credit strong by paying your suppliers on time, building your credit limits and help minimize any additional interest costs and allow you to take quick pay discounts.

6) If you have tax arrears: If you have tax arrears it is crucial to eliminate the interest and penalties. If the full payment can’t be made up front with the funds from factoring, we can help negotiate terms for a payment plan.

Factoring is a great option that offers flexibility, maximum amount of credit based on receivables outstanding and provides additional support with invoice management as you grow your company. If your sales are increasing factoring can grow with you. Factoring can take you from where you are in your business, to where you expect to be in the future. There are more ways to finance your business than traditional bank products so go after the business growth and dream those big dreams.