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Benefits of Factoring
Growth Companies | Successful Business owners turn more and more to factoring | 03-06-2006
| Successful Business owners turn more and more to factoring, (accounts receivable financing) to provide the cash, to enable expansion and continued existence, without the restraints of a conventional banking relationship.
· Factoring fuels cash flow.
· Factoring relies on the strength of your business's customers.
· Factoring is accessible to most growth companies.
· Factoring gets quick results.
· Factoring is flexible.
In many situations, factoring is more appropriate than bank financing, because factoring is based only on the accounts receivable. A client’s ability to raise cash by factoring is based on the total accounts receivable, rather than on traditional measures of financial strength and stability. Factoring provides continuing cash flow without the requirement of periodic payments or interim payoffs.
New sales continuously create new power to obtain cash, and the business does not have to deal with renewal of loans or worry about maturity dates. Factoring gives a business increased access to cash as sales and receivables increase and there is no maximum amount beyond which the factor must stop providing cash. The more sales a business makes, the more cash it can draw. The factor does not focus on the business debt/equity ratio to provide funds, as banks do.
Factoring offers a reliable, continuing source of cash without the requirement of making separate loan applications. In addition, factoring avoids the necessity of obtaining funds from venture capitalists, who receive an interest in the business and generally have a say in how the business is run. The business owner saves valuable time waiting for a loan board to grant or deny his or her loan by factoring. Loan boards’ decisions are influenced by many considerations, and the outcome is often unpredictable. With factoring, periodic delays and negotiations are eliminated, allowing the business owner time to do what he or she does best – run the business.
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