Factoring - an underestimated solution to boost your growth
Updated: Aug 6, 2019
Why should you consider using factoring?
Imagine how it would be to send an invoice to your customers, and have the money in the bank within 48-hours.
Factoring, or Account Receivable Financing, is known to be a very effective solution to support growth, improve liquidity and the cash flow position of your company.
Today, different businesses in a variety of industries are using factoring for different reasons. Initially, factoring was mostly used by small and newly started companies with irregular cash flows and with a great need for liquidity. They sold invoices to free up cash in order to fuel their growth.
Due to its flexibility, factoring is known to be a great solution and an established alternative to bank loans and other types of financing.
Are Canadian entrepreneurs missing on something?
According to FCI (Factors Chain International), Global factoring business today represents more than $3 trillion in volume. Sadly, most of the factoring, an overwhelming 90.7% of the total volume, is done in Europe and Asia Pacific. The North American market is underserved and represents less than 4% of the world’s factoring market, Canada being below 0.5%. Why is this? Some argue that this is mostly due to lack of knowledge about this excellent financing alternative. Certainly, we have a long way to go to reach the potential of this financial service.
What are the benefits of factoring?
When using factoring, your business gets its cash faster. No need to wait for your invoices to get paid. Normally, you need to offer credit terms of 30 days or more to stay competitive, or you might just have customers that are slow in paying. Here are some of the most important reasons for using factoring in your business:
Better liquidity and a short cash cycle is important to all companies. It gives ample room for new investments, growth, and potentially volume discounts from suppliers.
Before you offer payment terms to a new customer, we will perform a confidential risk assessment on your customers, serving as your credit department. Your outstanding invoices are monitored, payment reminders are sent according to your instructions, and collections are managed. This will lower your administrative cost drastically. Not to talk about how energy draining it is to call your customers asking for payment, or how difficult this can be if you’re closing a new deal with them at the same time.
Freedom and flexibility
We will let you decide which invoices you want to factor and when. You do not have to sign long-term contracts and can stop factoring when it suits you. With factoring you get your money fast, which means that you do not have to unlock capital to cover your supplier invoices. You also get a better opportunity to meet the demand for your goods or services.
Your credit capacity grows at the same pace as your sales. So no need to worry about imposed credit limits that won’t cover your needs.
Factoring helps you bridge the financial gap between customer and supplier invoices. There are however many more reasons why companies use factoring in their business. By doing factoring you can:
· Take advantage of cash or volume discounts from your suppliers.
· Have the freedom to act on new business opportunities. It will facilitate your growth by having liquidity available quickly in order to be able to act if a business opportunity appears on a short notice.
· You can offer your customer competitive credit terms. In the competitive business arena, being able to offer flexible and competitive credit terms to your customers can make the difference and get you the business.
And many more alternative financing solutions…
If you want to know more about factoring, and other alternative financing solutions, please contact us and we will guide you through the different alternatives to find the solution that works best for your company.
Take advantage of our 20-minute free consultation on how to improve your cash flow. Call us today!
Liliana +1 647 330 0331 or send an email to firstname.lastname@example.org