It’s not always in the name…
For years factoring companies have gotten a bad name for all sorts of reasons. This has been due in great part to peoples misconceptions of what factoring companies really do and how they fill a void for many small companies with cash flow issues.
Historically, factoring was used to finance struggling businesses. Today it is used by startups for growth capital, companies seeking expansion, and some just wanting to take advantage of trade discounts with their suppliers. Factoring also makes purchasing new equipment and supplies possible. For today’s businesses factoring is a means to stay cash flow healthy. There are still some negative views of factoring primarily for two reasons: cost and customer perception.
Cost: Companies assume factoring has burdensome costs. In reality factoring costs have been on a steady decline since 2008 due to supply and demand. Today, there are more factoring companies than ever before resulting in lower costs as they compete for customers.
Customer perception: A company may worry that its business could suffer if its clients learn that it is factoring. The perception is that if a company has to sell its receivables it is struggling financially. While that may be true some of the time more often it is the opposite. There are hundreds of reasons why factoring is a viable source of funding in the U.S. Big box retailers, including Wal- Mart, have entire departments dedicated to working with their suppliers’ factoring company. These retailers recognize the value of factoring for its suppliers and are motivated to work with companies who do factor. As more companies take advantage of the factoring benefits the face of factoring will continue to change for the better.
American Receivable Corporation www.americanreceivable.com is an expert in small business finance. They provide factoring programs for companies experiencing cash flow problems. For over 35 years they have helped businesses large and small find solutions to their financing needs.