Lots of business owners already Factor and do not even know it. Every time they accept a credit card or offer a discount for early payment they are Factoring. The ones who wish all their customers paid early and took a discount are the same ones who should be Factoring.
Many entrepreneurs fail because they are not fully prepared for their customers to pay in 30, 60 and sometimes even 90 days. Lots of good people have gone out of business quickly because they did not know how to deal with this challenge. Every business owner with limited resources needs to fully understand their working capital needs and consider incorporating Factoring into their business model.
Rapid growth is another common cause of business failure. Cash Flow problems can put a strain on many parts of a business and unless solved, these problems can spiral out of control. The result can be lost sleep and loss of focus resulting in rushed decisions that are more likely to be bad decisions. Factoring prevents cash flow problems and provides access to working capital at the same pace that sales grow.
Sometimes cashflow stressed business owners will withhold taxes or slow down supplier payments thinking that it is inexpensive money. It is seldom a good idea to do either. Mid-term and longer-term negative effects can end up causing serious and long-lasting damage. Every business that is behind on taxes or payables today needs to consider Factoring while it is still an option for them.
Bad things happen to good businesses (as many of us have just experienced) and this can cause their existing lenders to become more cautious. No matter how well the business did in the past credit can become tighter. For some business owners to be able to turn themselves around they should consider the kind of support that Factoring provides.
All small and mid-sized operating businesses who manufacture something, distribute things or provide services to other businesses (B2B) are candidates for Factoring. As business finance professionals, we need to be able to recognize situations where Factoring is the right solution and then provide good information about it. The last thing we want is for a business to fail because they were unaware of Factoring as an option for them.
