No business owner wants to give their customers and suppliers the impression that they are struggling financially – particularly if this isn’t the case.
This has long been a common misconception and can be an obstacle for companies considering factoring their invoices, where a business raises working capital by assigning its unpaid invoices to a finance provider, who can also take on the responsibility of collecting what is owed.
Who is it working for?
Some company owners still fear that their clients will think the worst if they receive invoices assigned from a factoring company, but nowadays thousands of firms in a variety of industry sectors, including many publically listed companies across Australia, are thriving having embraced this alternative finance solution.
Firms across a wide range of industries are benefitting from factoring - from services and manufacturing to distribution and transport. Their clients increasingly understand that factoring is a mechanism that enhances cash flow and operational efficiency, rather than a signal that the business is in any kind of financial difficulty.
Factoring is particularly beneficial for small businesses.
Factoring remains a particularly positive option for smaller companies lacking the resource to handle credit collection and fund growth. These businesses get the greatest benefit from factoring: not only does it release the cash tied up in their unpaid invoices, but it also enables them to outsource the credit control functions to dedicated professionals. A specialist provider is even likely to be able to get the invoices paid more quickly.
What are your options?
Factoring in its various forms has been around for thousands of years, the ancient Romans used an informal version of invoice finance to fund the growth of commerce. Today’s banking and commercial environment has been transformed since the GFC by alternative funding providers to the banks, where factoring is increasingly viewed as a mainstream option rather than a last resort.
Australian business have been rapidly switching to factoring and debtor finance over recent years as an alternative funding option and the industry continues to grow at double digit rates compared to mainstream bank lending which is relatively flat.In fact, annual factoring turnover by Australian businesses has increased 31% to $5bn over the past 4 years to June 2015 according to the Debtor & Invoice Finance Assoc.
FactorONE has always been a key proponent of alternative funding for SMEs. Our team has a wealth of experience and are prepared to discuss tailoring solutions to suit a range of different businesses. If you'd like to know more about how factoring could benefit an SME, don't hesitate to contact us on 1300 322 867.
