Factoring remains one of the oldest types of financing dating back to the Babylonian era.
Here are the Top 4 Reasons Why Companies Use Factoring:
Factoring helps companies create fluid funds by selling their accounts receivable, thereby creating sufficient working capital to purchase new inventory, hire employees, make payroll and meet other expenses required to operate and grow the business. In many ways, factoring can act as an insurance policy so that payroll and other obligations can be met quickly, alleviating cash flow pressure.
Here is where factoring can help. While financial performance is important, factoring companies tend to place most of their due diligence on the performance of the company’s accounts receivable, which helps to create a positive money stream generated during these tough times. Owners can then focus on running their company instead of being worried about their bank line of credit being in default.
Companies that currently do not qualify for traditional bank financing think that factoring is a brilliant way of generating liquidity. Factoring has come a long way, with more and more companies using a factor’s services for funding their receivables, maximizing their back office services, and for reporting tools. Perception may be everything, and fortunately, the perception of factoring continues to change for the better.