Will My Business Or Company Benefit From Factoring – When To Consider Factoring – Does Your Cash Flow Finance Increase As Your Sales Grow? With Factoring, It Can!
Factoring can improve profitability as the business can buy in larger quantities at reduced costs, pay suppliers earlier, and take advantage of early settlement discounts that are available.
Factoring is designed for small to medium-sized businesses that generate sales on credit terms, but have insufficient assets (e.g. property) to increase their current borrowing. Traditionally, Banks have used historical balance sheets to secure finance for future sales growth. Factoring provides a higher level of funding than an overdraft when using your outstanding debtors as security and rewards your business by providing increased access to funding as sales grow and if you grow faster than expected it will keep up with you! Factoring will deliver cash and time for you to focus on other aspects of your business.
When you make the decision to pursue a Factoring facility, you should have a clear understanding of your goals, as well as the results expected from the Factoring Company. This will allow you to take full advantage of the comprehensive range of Factoring services available in the market. We often come across the following examples for reasons why companies choose Factoring:
- To take advantage of supplier discounts: Many suppliers offer discounts of 5% or more for payment within 7 Days. This discount more than offsets the cost of Factoring
- Remove some of your customer’s power in the relationship: Our clients are much less at the mercy of the customer when it comes to payment
- Avoid offering customer discounts: Some very large corporations take significant discounts; 5%, 10% on payments made with 14 days. In many cases Factoring is a cheaper alternative
- Factoring allows the business owner(s) to keep a greater share of their equity as the business grows: All traditional Banks/Lenders cap the amount they will advance as a percentage of the asset value (and this could be business or personal assets). If a business reaches this ceiling, the shareholders will need to find funds from elsewhere. Factoring, releases working capital from outstanding invoices instantly without reducing your equity or bringing in extra maybe more expensive “risk capital” from outside the business
- It assists with mergers and acquisitions: Factoring is widely used in the UK as a popular source of working capital when acquiring another company or a Management Buyout
- Boost stock levels: obtaining new customers is difficult enough but holding appropriate stock for immediate use can make the difference
- Match cash flow to business performance and growth: businesses instantly have working capital to meet the peaks in working capital demand
- Upgrade equipment and produce and sell more goods or services: unleash you businesses potential
It may just be that you are a growing business. Factoring is a particularly viable alternative for a growing company and Factoring unlocks cash tied up in a sales ledger. In such a business environment, control is essential because managerial and financial resources are constantly being challenged. Depending on the type of Factoring chosen it can include sales ledger administration, bad debt protection, domestic or export debtors and piece of mind of having a credible company behind you working with you to grow your business.
Factoring can ease cash-flow problems and can provide some predictability in a rapidly changing situation to. The increased availability of working capital can alleviate cash-flow problems when a company takes on new customers, experiences a slowdown in collections (customers tend to pay quicker when they know a Factoring Company is involved), suffers an unexpected bad debt, has heavy capital investment program or just needs to cover a unforeseen cash requirement.
An acquisition, for example, can expose a firm to a new and unfamiliar customer base, thereby creating a need for enhanced Invoice management and since granting trade credit is comparable to making an investment in another company, Factorings credit protection helps prevent unsound investment decisions.
Factoring Unlocks Cash Tied Up In A Sales Ledger
There are many instances where we have been able to source the Factoring service that our client needed when their banks have repeatedly let them down. In part, this is due to the fact that we have the whole market to choose from and can source a range of Factoring funding options that many banks simply do not have access to.
We also understand the commercial pressures that many of our clients are under which allow us to suggest complimentary solutions like Stock, Trade or Asset Finance solutions from different vendors.
For a no obligation conversation please contact us.