Factoring: Boost your business cash flow with Merchant Factors

Swift access to finance is part and parcel of running a business, and many companies explore the traditional routes first.

But conventional sources of capital are not easy to come by and involves an excessive amount of red tape.

Commercial banks will typically review a company’s assets, liabilities, credit history, period in business, its overall financial health, profitability and positive cash flow, among other criteria.

If any one of these fail to meet the lender’s criteria, a funding application may not get rubber-stamped.

There is another way.

Factoring is a finance solution that focuses on the quality of customers credit, rather than your company’s own credit score.

This means if your company has accounts receivable to leverage, you can still access working capital – and much more.

What is factoring? It’s a financing strategy that boosts your cash flow. It is also known as ‘accounts receivable financing’.

How does it work? It involves you selling your unpaid invoices to a third-party organisation, known as a ‘factor’.

The factor collects payment of the invoices in line with your invoice terms. This enables you to draw cash back into your company when it is needed, rather than having to wait out the credit sales terms.

Why factor? Get faster payment on your invoices and boost cash flow.

This in turn means that your company can:

• Meet expenses on time.
• Take advantage of settlement discounts from suppliers.
• Lessen the risk of potential bad debt.
• Expand and diversify operations.
• Redirect monies to other activities that grow the business.
• Gain a competitive advantage.

With factoring in place, you can accept deals with clients who can only accept extended credit sales terms without compromising your cash flow.

Why is factoring better than a bank loan?

• It is easier to access: Banks are under immense pressure from regulators and a volatile economic environment. This means many companies – especially SMEs – are struggling to qualify for bank loans.

• Shorter turnaround times: Banks can take up to 12 weeks to process your application. Even once the loan is approved, you may still have to wait months before the cash is made available. Factoring, however, boosts your cash flow almost immediately.

• Scalable funding: A bank overdraft limit is defined by the value of bricks and mortar. This means your access to capital does not increase as your turnover grows. It’s capped. So, your business could potentially outgrow your funding line, translating into a cash flow crisis, but because factoring is based on your accounts receivable, the amount of money you can finance increases as turnover rises.

Need working capital, now?

Founded in 1988, Merchant Factors offers growing businesses an alternative to traditional bank loans and overdrafts.

The firm specialises in factoring, invoice discounting and trade finance products. Since inception, Merchant Factors has empowered more than 3 000 businesses to reach their financial goals.

For fast, flexible invoice financing, contact Merchant Factors today at www.mfactors.co.za. Finance beyond the numbers!

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