Can Factoring Make You Money

Can Factoring Make you​ Money?
Simply put,​ factoring helps businesses meet their cash flow needs by providing immediate cash by using accounts receivable.
Many people view factoring as​ a​ short-term stopgap to​ plug the​ working capital hole that inevitably presents itself in​ almost every growing business .​
Although factoring can many times help a​ business refresh its working capital in​ the​ midst of​ a​ ‘cash crunch’,​ it​ can actually be a​ highly profitable long-term strategy .​
With adequate cash flow,​ a​ business has the​ ability to​ not only avoid stoppages in​ business,​ but to​ increase customers and sales .​
Cash flow is​ the​ lifeblood of​ any business and with out it,​ regardless of​ profitability,​ a​ business can cease to​ exist.
Also consider the​ fact that by factoring,​ debt is​ not shown on​ your financial statements .​
This reflects strong numbers and if​ you​ have the​ opportunity to​ sell your company,​ this can be attractive.
Factoring is​ one of​ the​ few forms of​ financing that can support rapid growth in​ a​ business .​
As the​ receivables increase,​ so in​ turn does the​ funding,​ as​ long as​ your customers are credit worthy .​
Therefore,​ it​ stands to​ reason that by reducing working capital requirements,​ a​ company can more rapidly reach their long-term growth plans .​
The net effect is​ increased sales,​ increased production,​ and decreased stress.
Factoring is​ typically more expensive than traditional financing,​ however,​ the​ cost of​ factoring is​ usually significantly less than the​ loss of​ net profits that would have otherwise been generated by the​ substantial growth that it​ supports.
Ways to​ offset the​ cost of​ factoring if​ it​ applies to​ your industry is​ to​ use the​ positive cash flow and take early pay discounts from your vendors and also buy in​ bulk using volume discounts .​
These savings can be deducted from your factoring cost if​ not eliminate them completely.
If you​ are turning down business due to​ the​ lack of​ capital,​ you​ need to​ explore the​ benefits that factoring can provide .​
It is​ a​ form of​ commercial finance that is​ very powerful and must not be over looked.

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