Benefits, facts and myths
Advantages of factoring
Factoring brings many benefits to the entrepreneur. It offers access to funds for the day-to-day operations, takes over the business risks and is easy to get. Its most important advantages include:
Advantages of factoring
Factoring brings many benefits to the entrepreneur. It offers access to funds for the day-to-day operations, takes over the business risks and is easy to get. Its most important advantages include:
Flexibility in attempts towards payment terms
Thanks to factoring the seller can considerably prolong the due date in which the contractors are to pay. As the result, the value of orders increases.
Improvement of liquidity
Thanks to the smoothly obtained funds, the seller is able to adjust own obligations/liabilities on an ongoing basis.
Disciplining the debtors
Entrepreneurs’ business partners are notified that they are using factoring. The analysis evidence that they are becoming much more disciplined in their approach to pay the invoices.
Unlimited cash
With the company growth, the increase in sales and the number and value of invoices issued, the seller can use the growing pool of funds.
Immediate access to cash
The seller does not have to wait for funds, just gets it even on the day the invoice was issued.
Flexibility in attempts towards payment terms
Thanks to factoring the seller can considerably prolong the due date in which the contractors are to pay. As the result, the value of orders increases.
Improvement of liquidity
Thanks to the smoothly obtained funds, the seller is able to adjust own obligations/liabilities on an ongoing basis.
Disciplining the debtors
Entrepreneurs’ business partners are notified that they are using factoring. The analysis evidence that they are becoming much more disciplined in their approach to pay the invoices.
Unlimited cash
With the company growth, the increase in sales and the number and value of invoices issued, the seller can use the growing pool of funds.
Immediate access to cash
The seller does not have to wait for funds, just gets it even on the day the invoice was issued.
Factoring, myths and facts
Factoring, myths and facts
Myth: Factoring is expensive
Fact: Price of factoring is comparable to the credit costs
It happens, that entrepreneurs choose to snap up the short term credits in situations where factoring would be a much more cost effective solution. This is due to the erroneous belief that this service is just much. Nothing more wrong.
The cost of financing within factoring facility is comparable to the price of credit. However, factoring includes a number of services that streamline the due payments. This facility is much easier to get because it does not require provision. The funds are on the seller’s account much faster, which saves a lot of time.
Myth: Factoring is expensive
Fact: Price of factoring is comparable to the credit costs
It happens, that entrepreneurs choose to snap up the short term credits in situations where factoring would be a much more cost effective solution. This is due to the erroneous belief that this service is just much. Nothing more wrong.
The cost of financing within factoring facility is comparable to the price of credit. However, factoring includes a number of services that streamline the due payments. This facility is much easier to get because it does not require provision. The funds are on the seller’s account much faster, which saves a lot of time.
Myth: Factoring eqals debt recovery
Fact: Faktoring is financing combined with receivable administration
It happens, the entrepreneur decides to take a closer look at factoring services, as a result of negative experience with late payment. However, factoring is not a form of debt collection.
The fact that a factor takes over a nonpayment risk does not mean that it is an automatic debt recovery. Factor helps the seller to get immediate financing and also takes over the receivables’ administration.
Myth: Factoring eqals debt recovery
Fact: Faktoring is financing combined with receivable administration
It happens, the entrepreneur decides to take a closer look at factoring services, as a result of negative experience with late payment. However, factoring is not a form of debt collection.
The fact that a factor takes over a nonpayment risk does not mean that it is an automatic debt recovery. Factor helps the seller to get immediate financing and also takes over the receivables’ administration.
Myth: factoring fits only large businesses
Fact: Factoring is an answer to the needs of all type companies
Another myth among businessmen that quite commonly exists is the conviction that the factoring services can afford only large entities. Meanwhile, the scale of the activity is not relevant in this case.
The service is available primarily for companies that carry out integrated accounts, have a permanent business relationship with their contractors and receivables evidenced in the documents.
Factoring is a way to free up the resources for the business. When a seller is to wait for the issued invoices to be paid, it cannot use the relevant funds yet. However, if the seller transfers the receivables onto a factoring company, it will pay the large part of the debt immediately. The rest of the face value of the invoice shall be paid to the seller upon receipt of payment in full from the contactor.
Such a formula may seem complicated, so it is confused with other solutions. Wrongly attributed to its features of credit, debt collection and even insuring the receivable.
Myth: factoring fits only large businesses
Fact: Factoring is an answer to the needs of all type companies
Innym mitem, który wśród przedsiębiorców jest dość powszechny, jest przeświadczenie, że faktoring jest ofertą wyłącznie dla dużych przedsiębiorstw. Tymczasem skala prowadzonej działalności nie ma w tym przypadku znaczenia.
Usługa jest dostępna przede wszystkim dla firm, które prowadzą pełną księgowość, mają trwałe relacje biznesowe ze swoimi kontrahentami i udokumentowane należności.
