As you can see from our Success Stories page, we’ve had the privilege of helping hundreds of companies around the world find the lending solutions they need to get their small businesses off the ground, and turn their small businesses into rapidly growing companies. We’re proud of the fact that we offer an alternative for companies that have been turned away by traditional financial institutions. Unlike the banks, we don’t believe in one size fits all cash flow solutions. We believe in learning about the needs and goals of your company so that we can decide whether factoring, asset-based financing, or receivables financing is right for you.
Unfortunately, many companies self-select out of factoring services because they believe one of the many myths that exist about this unique and practical form of financing. Like most myths, these falsehoods were born out of rumors and a lack of education about how factoring companies work and what benefits can be gained from this form of financing.
In this post, we’ll strive to clear up some of those misunderstandings so that you can make a more informed decision about the cash flow solutions that are best for your company.
Myth #1: Only Startups Need Factoring
Truth: Companies In All Stages Of Growth Can Benefit From Factoring
We like to think of factoring as a way to high fast-forward on your working capital. If you’re growing and want to grow faster, cashing in on your unpaid invoices is a great way to do it. If you’re struggling through cash flow issues during a slow season and want to get past this roadblock faster, factoring is a way to get access to your money faster. These benefits apply whether your company is one year old or 10 years old.
Myth #2: All Factoring Companies Are The Same
Truth: Factors Vary Widely In Their Services & Expertise
No matter what industry you consider, there are going to be companies that lead the pack and those that are barely treading water. When profit is the only goal, some factoring companies will cut corners on customer service and technology, and hedge their own bets by creating inflexible contracts that lock their clients into undesirable deals. This is why it’s so important to read customer reviews about your potential factoring company and thoroughly vet any contracts they provide.
Myth #3: Factoring Is Prohibitively Expensive
Truth: In Many Cases, Factoring Rates Are Similar To Loans
This is an especially damaging myth for small companies who might have very tight budgetary margins. Worried that they can’t afford the cost of factoring, they automatically look to other financing options or simply allow their cash flow problems to continue. What they don’t know is that factoring rates vary depending on which company you choose. In many cases, factors will make every effort to keep their services competitive with bank loans.
Stay tuned for Part Two of Factoring Myths, in which we’ll clear up some additional misunderstandings about this type of commercial financing. For now, take some time to learn more about our custom lending solutions and how we’ve helped companies just like yours not only survive, but thrive.
Please contact The Commercial Finance Group in Atlanta with any questions you may have.
