There are numerous debt factoring case studies which you can find online, and if you take the time to study them at length, you will find that debt factoring can even be more advantages than you previously thought. Debt factoring is an industry which involves many different arrangements, but with the right factoring partner you may be able to get the financing you need.
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In addition, you can get additional benefits which can foster greater growth for your company.
- You can get credit protection against customer insolvency default. The problem with many industries today is that if you wish to grow you may have to extend your operations overseas, and that can be very problematic. For one, if an overseas customer defaults on an invoice then you may have a very difficult time in getting the money owed to you for the goods you’ve delivered.
This is why some factoring companies offer total credit protection against such a contingency. You can then expand your business and get new customers abroad without having to insist on cash on delivery or a letter of credit.
- You can outsource receivables ledger bookkeeping. When you have numerous customers abroad, keeping track of all those receivables can be a huge task. You’ll probably need to setup a department to do this. Yet by outsourcing this task to an international factoring company (which is already set up to do this for you), you can then keep your overhead costs down. This may enable you to keep your pricing competitive to attract more customers.
- You can let the factoring company take over the collection process. If you think that keeping track of all these invoices is complicated, then you’ll despair at how convoluted and arduous the process will be when you need to collect your money. It’s one thing to have overseas customers, but it’s a more expensive proposition to have to set up local offices just to do your collecting.
But factoring companies have standing relationships with local collection services, which can then handle this job for you. Some companies don’t like using factoring services to handle collections because they’re not sure about how professional they’ll be, but that’s not a problem here. Since these are overseas customers, the local collection agencies used by the factoring companies would be better suited for task of collecting than anyone in your company. These people know the culture as they’re part of it after all.
- You can be protected from currency fluctuations. Another risk in international deals is that you there’s a possibility that the exchange rate can go against you. You’re essentially dabbling in Forex trading. But many debt factoring case studiesclearly show that you can also be protected from this type of risk. If you’re based in the US, everything in the contract with your factoring service will be in fixed US dollars regardless of the changes in the exchange rate.