There have been a lot of positive trends in the business finance industry over the past several years. One of them started as the great recession began to recede. Former mortgage brokers moved into creating factoring brokerages that would take receivables that companies had and then loan them money based upon the invoices or the sales volume that firms had.
Over time, factoring companies like Factoringcompanies.com got involved in creating marketplaces that showcase some of these factoring firms, presenting a geographic choice to companies that are looking for financing.
Because they are able to show specific feature comparisons of firms in ways that the firms themselves are not likely to do, it makes it easier for companies that do want a loan to find the right partner for them.
What type of company uses factoring?
If you are a firm that has been growing in sales volume but has not been able to get the best financing terms, factoring is something that you will want to look into. Even if you do not necessarily need to use a line of credit, qualifying for one will make it easier for you to follow through and borrow money when you need it.
To look at it a different way, if your firm is considering a Kickstarter campaign for a product line and is not currently in production or sales with any product or service, a factoring company may not be your first financing choice because you will want to have a stream of income that you can point to in order for them to be able to process your application.
On the other hand, if you are already building something like barbecues and you have expertise, history, and stable sales, it isn’t hard to show that to the companies that are vying for the right to be able to loan you money.
What should you look for in a factoring company?
Depending on what your financial situation is, finding a firm that can provide you with solid interest rates on receivables would be a pretty big win for for most firms. Traditionally, financing decisions are made using corporate assets and a variety of other information that may not be as applicable.
Of course if you are a company that has a track record of creating sales for your products or services, one thing that can help you to find a solid partner is to look for factoring companies that have experience in your industry.
The reason that you will want a company that has experience in your industry is that when they are looking at your receivables to determine whether they will make a loan to you or not, it certainly helps to have them understand the dynamics of your situation.
One company that was bidding on a government contract recently, asked if they could get a required invoice covered as part of their financing. The sales people at the first factoring firm did not understand how the reimbursement process would progress because the overall contract was for a year. So they were not able to fit into that factoring firm’s offer structure for that contract.
They then went to a different factoring firm and did get financed right away because they learned to present the information so that the factoring firm understood that they need to make a purchase on behalf of their client for tens of thousands of dollars. That purchase was to be reimbursed with in the first 30 days and it was guaranteed. They were financed right away.
Why would you want to get financing from a factoring company if you already had more traditional financing?
One of the most common reasons to go out and look for new lines of credit is that you want to expand you business so that you can offer contracts to government agencies at a federal, state, and local level.
It doesn’t matter what type of business you have, most activities and products that you sell will probably be used by government somewhere. Finding those people and learning to offer them services takes some time and energy. Being ready to finance any contract that they want you to bid on makes you that much more competitive as a company.