10 reasons why factoring can enhance your business



1.There are four factoring options to choose from.

oNotified factoring (where the factoring company is disclosed to the buyer)

oConfidential factoring (where the factoring company is not disclosed to the buyer)

oRecourse factoring (the risk of non-payment lies with the seller)

oNon-recourse factoring (the risk of non-payment lies with the factoring company)

These four options are given different names according to the type of business operation, for example, export factoring, manufacturing factoring, logistics factoring, etc. They are further fine tuned according to industry specific requirements.

2.Your business incurs no debt. With the introduction of a factoring company, you are selling an asset, not taking out a loan. Your monthly balance sheet positively reflects this.

3.Your business is provided with an improved cash flow. As an example of a typical factoring agreement, against the value of the outstanding invoices, immediate cash up to 85% is provided by the factoring company. This dramatically improves current cash flow.

4.Your business is provided with cash even on new invoices. As an example of a typical factoring agreement, within 24 hours, up to 85% of the amount of the invoice is paid to you. The remaining 15% minus a small service charge (varies from 2% to 10%) is paid to you when your customer pays after 30, 60, or 90 days as per your invoice payment terms.

5.Your business is provided with extra money in the form of discounts. Suppliers give handsome discounts for over-the-counter cash payments or payments made within a few days. Take advantage of these discounts!

6.Your business is provided with professional and competent back office functionality. The factoring company can efficiently administrate activities such as preparation, delivery, maintenance, and collection of invoices. It can maintain detailed records of all the transactions and also keep in constant touch with the customers via traditional mail, email, fax, and telephone.

7.Your business is provided with more time to concentrate on sales. As all the back office functions are taken care of by the factoring company, your business gets more time to generate new leads, pursue new contacts, close new deals, and thereby fuel the growth of your business.

8.Your business is provided with the promise of sustained growth. As your sales grow, your funding also grows proportionately, ensuring the sustainable growth of your business.

9.Your business is provided with all the control that it previously enjoyed. A professional factoring company will typically have a courteous and highly trained, multi-lingual staff, who update you on a daily basis. Thereby, your business is always under your control.

10.Your business is typically provided with extra benefits such as free purchase cards. Many factoring companies offer free purchase cards which as a bonus provide discounts at numerous outlets.