Factoring: A Solution for All Sizes
Factoring is often thought to be a solution for two types of businesses. The first: small, start up companies who are unable to get bank financing due to a lack of credit worthiness and credit history. They need cash to grow and quickly receiving payment for new sales is a huge bump to their working capital. The second: floundering companies who are desperate for liquidity and looking for quick cash to save their businesses.
We see both of these types of businesses and can often help them. We have seen small businesses gain the cash flow they need to grow rapidly. They often graduate to other forms of financing once they are a little more stable and established. We have seen struggling businesses power through tough times with a little extra capital. They often turn around and start moving in a new, positive direction.
What is often overlooked is that factoring can be a great solution for companies of all sizes, including large or established businesses. Growth happens to companies of all sizes and a growth spurt at any level often leads to a cash shortage. Factoring can be a great way to smooth out these cash flow hiccups. If a company is taking on new customers, a factor can help ease communication with the new debtor, assess the credit risk and speed payments. A factor can also help streamline all invoicing and collecting activities. Many larger businesses obtain capital in numerous ways and often factoring can fit nicely into that puzzle.
There are many reasons why a company can benefit from factoring, and it is important to note that these same benefits can apply to a large and established business as well.