Factoring enables businesses to acquire the capital indicated in their invoices before payment from their customers is due. It helps businesses to develop growth opportunities and enhance their financial status through the process of selling the invoices to a third-party company (a factor). Export finance marketplaces, like Fineon Exchange, deliver customized financing solutions for a company’s cash flow needs, utilising factoring and reverse factoring tools.
In this type of agreement the factor first assesses the creditworthiness of your customers, if they meet their criteria, the factor will purchase an exporter’s invoices. The factor will gather debts from the importer at a later stage. It helps exporters with a steady flow of working capital, receiving cash instantly instead of waiting to collect the debt from the importer.
Among the various other benefits of factoring, faster access to finance helps exporters most in accelerating opportunities for organisational growth but some other advantages include:
- Minimising administrative overheads – by selling invoices to a factoring company an exporter can invest resources in other areas of your company. It results in the reduction of payroll expenses on accounts receivable staff for example.
- Factoring offers the same benefits for start-ups and large companies, with adaptable agreements for the needs of any organisation.
- It enhances overall business efficiency by transferring the collection of invoices to a factoring company.
- It will minimise debts and enhances your outlook to external investors, reducing your need for loans.
The growth factor for any business, whether it is a local start-up or a multi-national, is based on its ability to access capital quickly. And factoring mobilises businesses to fulfil their capital needs quickly, with a cost-saving benefit based on a reduction in accounts receivable overheads. Exporting businesses can sustain equity through collaboration with an export finance company, which eliminates the need for seeking capital investors, delivers fast funding through factoring, and improves financial control over the company.
