Factoring has grown by leaps and bounds all over the world, but in the US it’s still surprising to find so many small business owners who don’t really know much about it. In fact, some of these people think that they know a lot about the factoring industry, but what they supposedly “know” turns out to be untrue.
Industry experts recently compiled factoring statistics that shed light on the topic. These stats definitely disprove several commonly-held beliefs and myths among American small business owners.
Myth #1.Factoring offers an insignificant amount of money on a global scale.
Now this depends a lot on what you mean by “insignificant”. In the US, the factoring volume has reached more than $113.36 billion. Worldwide, the factoring volume exceeds $3 trillion, and that’s hardly what you’d classify as insignificant.
Myth #2.Factoring is a purely (or mostly) American practice.
Some hard-core “patriots” seem to believe that if something is a good thing, then it’s an American thing—like democracy, freedom, and football. But factoring is a worldwide practice, and it’s offered in every continent.
Perhaps the most striking example here is China, which many Americans regard as a backward communist country. Factoring in this country has grown to more than 378 billion euros (or almost $512 billion) according to one estimate. In fact, China is the largest factoring market in the whole world.
Myth #3.It’s only in Third World countries where factoring offers a definitive advantage.
While the assumption that China is a “Third World” country is open to debate, that’s not exactly the case with many European countries. The largest regional factoring market is Europe with about 60% of the total global factoring volume. And according to the factoring statistics, numerous developed countries engage in factoring that completely dwarfs the US factoring volume. These countries include the UK, France, Germany, Spain, and Italy. Factoring is also going strong in Taiwan, Japan, and Australia.
Myth #4.The use of factoring in business is declining due to the increasing number of funding methods.
This isn’t true at all, as the global factoring volume has increased just recently. In the US, factoring growth is at 8%. In some countries, the growth of factoring has been phenomenal:
- Peru. 253% growth rate
- Colombia. 55%
- Korea. 54%
- Morocco. 49%
- India. 44%
- Croatia. 39%
- Austria. 29%
- Poland. 29%
- Australia. 26%
- UAE. 21%
- Russia. 19%
- Singapore. 15%
- China. 10%
So what do all these factoring statistics mean? Essentially, it means that more and more companies globally are discovering the many advantages of using this kind of funding for operational expenses and for business growth. Despite government initiatives and “lenient” bank requirements. Many small businesses to day still can’t get adequate funding in a timely manner. The chances of getting the money you need are much better with factoring, and you get your money much more quickly.
In addition, you can also negotiate and transfer the responsibility of collecting to the factor who buys your accounts receivable. This saves you a lot of worry, and now the matter of late-paying and nonpaying customers won’t be your problem anymore too.