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Why Factor? A Company May be
Un-Bankable: |
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| A Young Company
May be Growing Fast: Factoring is custom-made for companies that are growing by leaps and bounds. Often, a new company grows so fast that it quickly outgrows a traditional line of credit. This makes it difficult for the company to seize market opportunities that will help it stay on its growth track. Using factoring, it is almost impossible to outgrow a credit line. With factoring, the line is based upon the amount of qualified receivables, and limited only by the factor’s lending limit. A Good Way to Ensure Equity Retention: Factoring allows a company to finance without diluting equity. This, of course is a critical issue to current shareholders. A Form of Credit Protection: Factoring enables you to pass off the credit risk. This is referred to as limited-recourse factoring. A Bridge to Wall Street: Factoring can be a bridge to an equity event or traditional credit facility. It can, in fact, help you to delay an equity event as a method of retaining more equity. Taking Advantage of Supplier Discounts: A company can factor an invoice to take advantage of a vendor discount. Over time, this could amount to significant savings. Cashing in on International Receivables: Many traditional banks refuse to acknowledge that foreign receivables have value. This is tremendously old-fashioned, considering the fact that most viable companies now do at least some business offshore. In many factoring programs, foreign receivables can be factored, though often at a reduced advance rate. Eliminating the Need for Personal Guarantees: Using factoring, you can often structure a program that doesn’t require personal guarantees. |
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