Why Should I Use Factoring?

By: ChrisLanchech

There are a number of benefits that you can obtain by factoring your invoices. I’ve talked about one of them already.

It’s cash flow. It doesn’t matter how successful your business has been, if cash stops coming in, then a time will come when you don’t have any.

Think of it like this. If you have a basin filled with water and you pull the plug, you have to pour in the same amount as is flowing out of the bottom. Otherwise, there will come a time, perhaps sooner than you think, when there won’t be any left.

But instead of water, it could be cash.And it’s something that can take you by surprise, especially when everything else seems to be going as well as it should.

For example, you could be filling orders and shipping them to your customers. Your customers could be delighted with your prompt service.

Or, you’re employees could be the most productive they’ve ever been.

Or your suppliers could be giving you exactly what you need just-in-time.

 

But, if there’s a delay for any reason in the payment of your invoices, you could suddenly find that there’s no cash left in the company to do any of that.

 

How would you feel if that happened to you?

 

Factoring can do more than just keep your firm going. It can also help you to maintain your creditworthiness.

The news today is replete with examples of people who have been thrust from the homes they’ve lived in for 30 years, because when they started missing mortgage payments, the banks foreclosed on them.

 

What does that teach us about how much the banks trust the firms we own to help us when we need it? If nothing else, it demonstrates that when the chips are down, they won’t.

 

Whatever they were willing to do for us in the past, matters not a jot.

 

And so that means that we have to look for other options and have them in place before we need them. Because, as much as we dislike them, banks are still the place where we have to go, in most case, to get loans for capital expenses.

We can’t live with banks, and yet we can’t live without them. If your creditworthiness has been damaged, for any reason that you care to name, your bank simply will not loan you the money that you need when you need it.

If truth be told, they may not anyway. But, your chances are greatly diminished if your credit rating is poor.

And so, rather than waiting until the last little bit of cash is about to drip out of your company, my suggestion is that you make factoring a part of your firm’s strategy.

In today’s economy, you simply don’t know when you might need some extra money, just to tie you over. And you can’t afford to leave something as important as the survival of your business until the last minute.