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Invoice Factoring - The Funding Trend

Posted by Aaron Zahedani on Wed, Aug 07, 2013 @ 06:21 AM

Forbes article gives insight into Invoice Factoring trend

invoice factoring

Are you looking to unlock the tremendous value of unpaid debts, as well as make the most use of your valuable assets? 

Invoice factoring is no longer a last resort answer to better cash flow, it has become the solution many businesses turn to. Cheryl Conner, a contributor to sums up the benefits in her article 'Money, Money" -- How Alternative Lending Could Increase Your Company's Revenue in 2013

Conner informs us that Morgan Stanley estimates that factoring produces $13-15 billion per year; and large companies such as eBay, Amazon and AmEx OpenExchange are regularly factoring their invoices. Many large suppliers practice 'factoring' every day, for example, when you are offered a discount for paying early, companies are paying you for your cash flow. Simply put, they are 'factoring' their receivables with you. A quick reinvestment of cash is more valuable than waiting 30 days for a small additional margin.

So why are  businesses turning to invoice factoring as the answer? One of the reasons is that banks and other traditional forms of financing seem to be considerably more cautious about lending in the current economic climate, and also, when looking at loan applications, they consider aspects such as:

  • Length of time a company has been in business

  • Amount of collateral needed

  • How long the loan is required

Many companies struggle to meet this criteria, none of which is required to factor your accounts receivable. In addition, factoring supports growth and increases cash flow by allowing businesses to:

  • Pay off unpaid debts before the debt needs to be paid

  • Reduce the credit cycle

  • Put cash back into the business quickly and efficiently

  • Take advantage of supplier discounts

Improved cash flow also means the ability to push your business forward and keep you afloat during seasonal drops in business. If factoring is a quick way to get cash during a cash crunch, why shouldn't it work when you are not strapped for cash?

What are some of the business pain points that have helped fuel the factoring trend?

  • The economic downturn has caused many businesses to have to implement new, tighter billing procedures just to help increase cash flow. 

  • For smaller businesses, day to day activities can push out a regular invoicing cycle meaning they can be short of cash flow to pay their bills

Factoring manages customer credit by investigating the creditworthiness of your customers. This in turn helps to avoid bad debt by establishing credit limits with your customers. Should your customers choose to pay late, factors can facilitate the payment  process, speeding up your receivable turnover and improving your cash flow. 

As a result of the growing trend to factor, the process has evolved and improved over the last few years so that factoring is, for many companies, the best way to finance.

  • The collection process has evolved into a professional and confidential  procedure.

  • Factoring a few invoices can allow your business to cover the costs of a large project you may previously been unable to undertake.

  • Many factors specialize in certain industries, for example staffing, or trucking

  • Factors understand the market and are able to offer support in order to reduce administrative costs and alleviate some of the stresses certain market sectors may find themselves under at certain times of the year.  

  • Invoice factoring has adapted, companies are more flexible to business needs, offering specialized packages, that reflect a professional approach and knowledgeable staff who have answers to difficult questions.

Does your business raise invoices on credit? You may well find that invoice factoring provides  the perfect answer for you. Call Bay View Funding and we will assess your needs, no matter what your market, and get you the best rates for your business.


Topics: Alternative Financing, Cash Flow, Factoring Receivables, About Invoice Factoring, Financing Government Contractors

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