Selling accounts receivable via a factoring firm, sometimes referred to as “debtor factoring“, is one of many business funding solutions used by businesses both as a strategy to grow but also used by many savvy business owners as a way to capitalize their business without borrowing and without giving up equity in their company!
The term “debtor factoring” refers to your selling accounts receivable of companies that bought your product and in so doing are obligated to pay you … and in no short terms: They are now a debtor to your company. This is not a negative and face it we all want to make the sun shine and call them a customer but the reality is that if you sold them goods or services on open terms and you are waiting to get paid then they are a debtor too. If you disagree then please tell me what you are going to do if they don’t pay you and if you are going to tell me that you are not going to send them to collection and/or sue them please let me know your name, your company, and what you sell because I know some people that will buy as much of your product as they can get their hands on!
Along that line an often over looked value added service the factoring company brings to the table is credit protection and credit insurance … as well as in some cases a broad depth of business advisory experience. After all: Who else know more about growing a business without borrowing than a factor?
The real beauty here is that with the factor providing the credit work a business owner can sell on an unlimited basis and still run their business on nearly a COD basis. How? As fast as the owner sells the factor, if the credit of the customers is solid, will convert invoices to cash in days if not hours.
Does this cost? Compared to a bank loan yes but I want to ask: What happens when your sales grow past the capacity of your bank line? Most likely the sales stop and now you are losing profits as in “leaving them in the street” … So I ask: How much does that cost?
Smart owners compare the two and if they’re in business to maximize their profits vs. borrow cheap money guess what they do? They make the appropriate decision!
Explore selling your accounts receivable:
- It doesn’t require you to have good credit because this function is based on the credit of who you sell to and not your company nor your personal credit
- Selling Accounts Receivable grows as you sell … how powerful is that when you don’t have to wait foryour money and can access when you want it vs. when your customer “feels” like paying you?
- Using this process does not require you to borrow nor does it require you to give away equity in your company
Think on the above: The process of “debtor factoring” was used by the Egyptians and it still works for the Fortune 500’s of today … so why not you or someone you know?