There are a lot of beliefs floating around the Internet these days about factoring and just how useful it is. But many of these beliefs are simply not very accurate. To cut through all the misinformation, here are the real facts about factoring which are backed by factoring statistics.
- Factoring is increasingly becoming more popular all over the world. According to the latest factoring statistics,the world factoring total for 2013 stood at more than $3 TRILLION dollars. The use of factoring has increased in recent years, and there seems to be no sign of reversal in the coming years. In some countries, the use of factoring has increased tremendously. It increased by 49% in Morocco, by 55% in Colombia, and by a whopping 253% in Peru.
- Factoring is more popular in some countries than in the US. Admittedly, the US does account for a lot of factoring volume, with a revenue of about $114 billion. China’s factoring volume is close to $530 billion.
Europe accounts for about 60% of all the factoring volume in the world, and several countries there do more factoring business than in the US. In the UK, factoring is a $419 billion industry. In France it’s $273 billion, in Italy it’s $242 billion, and in Germany it’s $233 billion.
- Factoring can help save companies. First of all, only about half of all companies are still open and running after 4 or 5 years. And do you know why companies fold up? There are many possible reasons, but the #1 reason is usually because the company couldn’t manage the cash flow situation properly.
What These Numbers Mean
The conclusion from all these factoring statistics is that many companies could have lasted much longer if they managed their cash flow situation properly, and factoring is meant to help them do just that. In other words, perhaps the companies that failed would still be standing today if they took advantage of factoring.
Factoring, after all, isn’t a loan. That means there’s no risk of losing even more money and losing collateral in the process. It makes use of your accounts receivable and turns them into ready cash.
It’s a rather ironic solution to your cash flow problem, because it’s these invoices that are causing problems with your cash flow in the first place.
When you have a lot of these invoices and you have them in large amounts, this means that you have money except that these aren’t in your hands yet. You’ve delivered a product or a service, and in return your payment will come later. So you don’t have your money YET but your creditors, your employees and your utility providers want their money now. This is the very definition of a cash flow problem. And factoring solves this.
A lot of businesses all over the world have figured this out. With factoring, you get an advance on all these “promissory notes” so that you then have the ready cash to get your business running smoothly. It’s that simple and that easy. And in some cases, it’s the help you need that can prevent your business from turning into a failed business.