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...
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