cash cow

Factoring is a form of specialist finance aimed at supporting those that operate in the business to business environment. Funding is secured off the strength of the business’s clients. It’s really a means of unlocking the cash that would ordinarily be tied up for 60 to 90 days as accounts receivable. In simple terms the invoice is sold to a factoring company who will advance funds to the business and then administer and collect the outstanding amounts directly from the debtors as they become due.

The benefits of factoring vary depending on the business’s needs. An organization that is experiencing high growth may find they are walking a financial tightrope between meeting customers’ needs and ordering greater volumes of inventory from suppliers. Another example is a business that is experiencing a slow-down may need funding to keep the business on course until things pick up again. Factoring provides a working capital solution in both cases.

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