Whilst factoring may suit any type of business at any time, there are a number of key ‘Triggers’ to look for which would indicate if factoring is beneficial to your business.
‘Triggers’ To Look For
| Turnover growing rapidly | = | Finance sales to reduce cashflow pressure |
| Overdraft under pressure | = | Immediate release of working capital |
| Gearing too high | = | Use debtors as better leveraged asset |
| Too much cash tied up in unpaid invoices | = | Need to reduce debt turn |
| Improve credit control | = | Outsource to release time & resources |
| Looking to do MBO/MBI – Deposits for Capital Items or Properties | = | Cash injection against debtors and future sales |
| Customer wants to reduce personal security | = | Unlock sales ledger asset |
| Seeking to break into export markets | = | Need to compete on open A/c terms |
| Start up / insufficient capital base | = | Use sales to fund growth |
| Using competitor services | = | Potentially improve service. Increase funding levels |
| Customers paying on extended terms | = | Ability to pay staff and creditors on shorter terms |