Factoring




Factoring is a form of commercial finance where the business generates working capital by selling debts which are owed to it at a discount. It is a form of off-balance-sheet-financing, ie it is neither debt nor equity based, so it is often easier to obtain than other forms of finance. It is particularly appropriate for businesses with a limited track record and/or those experiencing rapid growth.

The big advantage of using this method of business finance is that your business does not have to meet the often strict criteria of banks to get the working capital it needs. Your business can grow as fast as it likes and not hit a financial brick wall due to over trading. The facility will grow with the business.

Another advantage is that with such a facility in place you can concentrate on finding new business and 'doing the business', instead of chasing around trying to find more and more finance. You don't have to worry about whether you are growing the business too quickly and over-trading. The whole idea of any cash-flow based finance system is that you can't over-trade.

So, if what you want to do is 'put your foot to the floor' and grow your business, then give serious consideration to this kind of business finance, or one of it's variants. It could be the key to unlock the rapid growth you've always dreamed of.

For smaller businesses that don't qualify for a full facility, or micro factoring could be the answer.

Bear in mind that in a factoring or invoice discounting situation the factoring company has recourse back to you for bad debts - that means that if one of the invoices you factor or sell turns into a bad debt, you are obliged to either re-imburse or re-purchase that account. Click here for more information about dealing with bad debts.