Having stayed out of the factoring business, banks still prefer tangible assets to collateralize their lines of credit. Nevertheless, receivable finance requires high overhead, professional credit analysis, technology updates and considerable maintenance. And banks realize that.
Very often bankers refer out clients who wish to use or require a "Bank Factoring" program. But government regulation pressures on the banking industry have tightened lending parameters. And banking clients with rapid growth will unavoidably cause the borrowing leverage for growing to levels which are intolerable to most banking institutions.
A good banker knows the bank's limitations and will work to preserve at least part of the relationship. By keeping a long term relationship with their clients, many factoring solutions profit the bank. And the customer's business can profit by accessing receivable finance that their bank can no longer provide or expand.
There are solutions for bankers. And many of them are great outsource for bankers that want to help their clients establish a receivable finance program while still keeping up a close relationship. This process is simple. With a more basic credit analysis it is concentrating on the quality of the account debtors, which are your customers. Depending on the industry, most funding transactions may take only 3 to 5 working days vs. months by another lending institution.
 Such organizations specialize in providing domestic and export receivable finance, purchase order financing, letters of credit, credit analysis, credit protection, collections and accounts receivable management.
Banks typically need a history of benefits and audited financials. And factoring companies provide factoring facilities with much more flexibility with regard to documentation, credit, and record keeping issues. Often companies, qualifying for a bank credit line, may find themselves with insufficient funds for growth in the near future.
But factoring company can accommodate businesses that have outgrown their bank line by buying out the bank credit line using the receivables to leverage out the buyout. The other reason is that the bank will subordinate the accounts receivable to us in order to provide a factoring arrangement with the potential client.
By evaluating your customer's ability to pay, not yours, factoring companies establish credit limits. With them your factoring credit facility will be virtually unlimited for future growth and will be based on accounts receivable owed by credible clients.
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