Article provided by Merchant Factors
As a business owner, you may have reached the point where you’re ready to grow your sales. Perhaps you want to seize an exciting new opportunity in the market or expand into new locations. Maybe you’re ready to introduce a new product line or you want to hire new skills. While there’s no limit to your growth plans – you may well be limited by your cash flow.
So, where do you go to get the growth finance you need?
You may have already approached a bank and battled to access the full amount of capital you require. Alternatively, you may be looking to diversify your business finance portfolio. Either way, factoring offers you an attractive solution.
What is factoring?
Factoring is a specialised form of asset-backed finance that provides businesses with fast access to working capital. When you enter a factoring agreement, the factoring company buys your accounts receivable (i.e. your invoices). You receive around 75% of the invoice amount upfront. The factoring company then takes care of the invoice payment collections on your behalf, paying you the balance that is owing on the invoices, minus an agreed admin fee, when your customers have settled these accounts in full.
Beyond helping you access your capital faster, a strategic factoring agreement can offer you many other benefits. These include:
More time to grow your business
With factoring, you have access to expert back-office support. This is because the factoring firm acts as your in-house debtor administration and credit control team, conducting credit checks on your customers, handling collections professionally and providing you with 24/7 visibility on the status of your accounts payable. These services come at no extra cost. In fact, they add value to your bottom line, because you have more time and energy to focus on putting your working capital to good use – growing your business.
Support
Many other types of lenders do not really get to know your business beyond doing due diligence to check if you’re eligible for a loan. A factoring company, on the other hand, spends time with you and gets to know your business goals, your operational cycle and your customers. They use this intelligence to tailor your factoring facility to suit your unique requirements and ensure your business grows from strength to strength.
Your factoring facility expands with your company
Unlike a conventional bank loan which is based on the value of bricks and mortar, there is no limit to the amount of working capital that your business can access through factoring. This is because your factoring facility is based on your accounts receivable. As your receivables grow, you’re able to access more working capital to fund further growth.
“Skin in the game”
When you partner with a factoring company that lends its own money, this company has a vested interest in your success. In other words, it has “skin in the game”, because the more you earn, the more the factoring firm stands to earn. Your success is their success. As an added benefit, the factoring company also has a vested interest in treating your customers professionally, because when invoice payment collections go smoothly and according to plan, everyone wins.
In today’s competitive business environment, ensuring a steady and reliable cash flow is essential for seizing growth opportunities. Factoring offers an agile and flexible financing solution that not only improves liquidity but also supports operational efficiency. By converting outstanding invoices into immediate working capital, businesses can focus on scaling, innovating, and meeting market demands with confidence.
Merchant Factors is a proud Partner of the NSBC