When factoring?

Factoring as an alternative when normal bank financing isn't sufficient in the following situations:

Fast growth

Businesses that are launching new products, tapping into new markets or (re-)starting often grow fast… but are not always ready to cope with this growth: they tend to lack sufficient cash resources and the required balance sheet ratios. And at this early stage their bank is (still) unwilling to extend its commitment.

Seasonal sales fluctuations

Businesses with seasonal sales fluctuations usually need to invest first to reap the benefits later in the year. Consequence: highly variable financing needs which often cannot be arranged (in full) through a bank.

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High receivables balance

Invoices are usually payable within thirty to sixty days. Slow payers tend to delay payment even longer. All that time the business is deprived access to its outstanding cash. And their bank is also often unwilling to tide them over with extra finance.

Accelerated expansion in foreign markets

New export markets unlock new opportunities. Sometimes businesses are unable to benefit due to a lack of financial resources or because unfamiliarity with the foreign debtors and local commercial practices makes the financial risks unacceptably high.

Purchasing

Suppliers want payment security; customers want reassurances that the correct goods will be delivered in good condition and on time. Substantial purchasing obligations for placed orders can unnecessarily tie up cash resources. Also in the bank's eyes.

Too little time for debtor management

Businesses focus mainly on their core activities. They often lack the capacity, knowledge and information for proper and professional debtor management. As a consequence, capital remains tied up at debtors and unnecessary debtor risks are run.

Business takeovers; management buy-in/buy-out

Takeovers and acquisition-driven growth often cause major balance sheet changes. In such cases banks can be reluctant to provide (extra) credit. Consequence: little or no access to bank credit facilities and reduced potential for further business development. Debtor-based financing solutions can provide the answer.

Unencumbered stock

Businesses with large unencumbered stock of finished product are financially less agile. Unencumbered stock unnecessarily tie up financial resources and impede further business development.