Commercial Factoring Gains Traction in Challenging Times

As volatility grips markets globally, many companies are exercising caution in plotting their approach to spending and investments in the years ahead. The recent earnings results delivered by Westpac Banking Group highlighted this sentiment which showed a general decline in operation lending of ~$2 billion. The major cause of this situation is driven by the large companies who either prefer equity with regards to capital raising or maybe just want to avoid borrowing funds.

For smaller businesses, however, there is still strong demand for credit but the accessibility of affordable credit has turned into a major challenge. Many small business owners have used the equity in their homes to fund their businesses, but the overall decline in property markets has reduced their ability to use this strategy in the current market environment.

This is the reason many small business owners are turning to commercial factoring as a way of raising capital for their cash strapped businesses. Because large companies are very important to the small enterprises, they usually control the terms of payments leaving small enterprises waiting. As a result, a small business must have the cash flow way of meet their liabilities to live and grow.

The customer invoices are assets in a small business which are often ignored yet this is considered as the source of collateral for a line of credit in commercial factoring. These facilities allow open and unpaid invoices being converted into cash through an “advance” based on the overall scale of invoices being financed. The small business receives the money from the finance company supplying the facility and then incurs a fee once the invoice(s) are paid. The other advantage of commercial factoring is that there is an inherent discipline on the product because the ‘mini loan’ pays back by the customer’s normal repayment behaviour. In case your business is in dire need of funds in this challenging times, a commercial factoring facility could be your solution where payment time frames will continue to extend to sixty days.

To learn more about commercial factoring, call The Interface Financial Group (IFG) at 1300 957 900.

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