Debt and Factoring

1005 Words5 Pages
Nowadays, every business needs finance. But at the same time, bad debt has become a stinging problem for the creditors. Many companies are faced with the high credit risk, so obtaining it can be one of the most difficult parts of running your business. So what is the solution for this problem? You can see, there are so many types of business finance, including: bank loans, credit cards, leasing, even outsides investors, family and friend loans… But in my opinion, one of the quickest forms of low cost business finance is factoring, where you can get up to 85% of the value of your invoice immediately, and the remainder (minus the factoring company’s fee) after the money is collected. kFactoring is one of the best ways to get quick…show more content…
Suitable for Businesses of All Sizes- One big advantage of factoring is that it is potentially suitable for businesses of all sizes; especially now there are invoice finance firms that are targeted at small businesses and their needs. The above listed advantage do not mean that the factoring operation are totally free from any limitation. Some of main limitations of such transaction are listed below: Reputation – Some less reputable invoice finance companies can damage your customer relations by being too aggressive in collecting factored invoices. However, you can avoid this problem by choosing a well known and reputable firm. Control – Factoring reduces the control you have over your debts, as the invoice finance company collects them for you. However, this also means less work on your part. factoring can have a negative impact on the way a business operates. * The factor usually takes over the maintenance of the sales ledger. Customers may prefer to deal with the company it is trading with rather than a factor. However, if the factor 's techniques are clearly agreed beforehand, there will usually be no problem. * Factoring may impose constraints on the way to do business. For non-recourse factoring, most factors will want to pre-approve customers, which may cause delays. The factor will apply credit limits to individual customers (though these should be no lower than prudent credit control would suggest). * The
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