Can you imagine a factoring company setting up a contract with your company knowing full well that your customers are not going to pay you in time and too that this is going to put you and your company in financial duress?
If you know of this having happened please share it with other here on this blog?
An invoice factoring relationship needs to look at the whole picture otherwise an account that will result in misery for everyone and sadly the only one that will benefit is the factor which is not what a proper factoring relationship is about.
What should be done when a factor, or any other lender for that matter, sees a problem? Ethically shouldn’t the factoring company at least make the problem known? In our case we typically stay with the applicant in an advisory capacity to help them resolve and/or correct their situation so that they will be able to position their business successfully. Isn’t this what serving a client is all about?
NOTE: In the above situation there were two other factoring companies involved yet we were the only factoring source to point out to the client that they were heading for possible ruin. In addition we worked with the client to analyze their cash flow and profit margins and based on the amount of time that these customers would delay in paying this new staffing company had the applicant moved forward she would have been supporting those contracts at a loss to her company. Keep in mind: Even when this happens a factor is still going to get paid!
As hard as it was for her to accept that turning these contracts down was the best thing she could do: We also showed her ways to support some of these ‘slow pay’ customers by utilizing her fast paying clients … something that no one else did for her.
Often times the factoring industry as a whole gets a ‘bad wrap’ because other factors don’t go the extra mile in providing service. We lose, or I prefer to call it invest, a lot of time helping applicants by going the extra mile with information that allows them to better position their companies to grow without hitting more road blocks.
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