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Is Factoring Too Expensive?

August 12th, 2009 · 2 Comments

Invoice factoring is usually a good fit for companies that:

  • Have been turned down by a bank for a working capital loan
  • Are not able to grow their business with the existing bank line of credit
  • Have a profit margin of at least 15%
  • Generate at least $20,000 per month in business to business accounts receivable
  • Sell their products or services to creditworthy customers who pay in a timely manner

Accounts receivable factoring has been around since the colonial times in one form or another and generates billions of dollars in volume per year.   Nevertheless,  many bankers and consultants try to talk their clients out of utilizing this form of financing because it is “too expensive”.

The key questions you should ask those that don’t want you to work with a factoring company are:

  1. “Do you have a less expensive alternative for me?”
  2. Assume the answer to the above question is no.   “If I had an adequate amount of working capital to produce more orders and fulfill new contracts that would generate incremental profits, wouldn’t it be too expensive not to factor invoices?”

Invoice factoring is not cheap financing, but it does have the advantage of providing the amount of working capital that is limited only by your pool of receivables.  You should at least do an analysis to project the results of factoring on your bottom line.

Could you use an infusion of instant working capital?  Go to our online application to get started today!

Tags: accounts receivable factoring · cash flow · factoring accounts receivable · factoring invoices · factoring receivables · receivables factoring · receivables financing · working capital

2 responses so far ↓

  • 1 Is Factoring Too Expensive? | Loans References // Aug 13, 2009 at 10:46 pm

    [...] See original here:  Is Factoring Too Expensive? [...]

  • 2 Factoring: Too expensive? // Jul 7, 2010 at 11:14 am

    [...] the alternatives that a business can actually qualify for should be considered. The point being, labeling factoring as “too expensive” in all situations is too simplistic. Factoring is a financial tool, and as with all tools, they [...]

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