- Factoring has a long-standing history and is nowadays widely used as a preferred business financing solution in many industries. It is – simply put – the process of selling your accounts receivable (invoices) at a discount.
- Factoring is not a loan or equity financing. It does not create any debt, so you are never burdened with any fixed costs or periodic payments.
- It is a cash flow solution that doesn’t involve borrowing or giving up any ownership in your business, and since there is no debt or equity involved, it is a lot more flexible than most other forms of business financing.
- In fact, it works just like an open, interest-free credit line that can grow with your business as you need it, without you having to re-apply ever again.
- Any business that is not a “cash & carry” can benefit from Factoring, as long as an invoice is generated, and a verifiable product or service is delivered to a creditworthy business or a government entity.
Ask yourself 6 questions
- Is your business sometimes short on cash, i.e., is your A/P cycle shorter than your A/R cycle?
- Can a better cash flow help you take advantage of supplier discounts or generate more sales?
- Could you accept more or bigger orders or hire more people or better stay on top of your operational expenses or payroll, if you only had more working capital available?
- Would your business benefit, if your customers paid their invoices sooner or even on a C.O.D. basis?
- Is your income affected by seasonal slowdowns?
- Is your business growing at such a rapid pace that your cash flow can‘t keep up with the growth?