Factoring is a Flexible Way to Grow Your Business

 

Factoring is a Flexible Way to Grow Your Business

Every day, rapidly growing companies face a common cash-flow conundrum: a limited line of credit. Once a bank establishes a line of credit on a company’s past performance it’s difficult to increase that line. A young, emergent company expecting a spike in business that requires quick cash is often constrained by the bank’s regulations and inability to act outside a traditional loan standard.

Here’s an Example:

Company X is doing $1 million in annual sales and had a $100,000 line of credit from the bank. However, a massive new order will increase sales to almost $3 million. The bank line is clearly not an option to increase operational capacity. Using factoring as a way to increase case flow allows the business to grow sales in a flexible way and now has a monthly borrowing need of almost $500,000—five times larger than what the bank could provide.