 What are costs of NOT Factoring?
First of all you should consider the time value of money and the benefits of improved cash flow to your business. There are also many questions you have to pay your attention to by having cash for your invoices within 24 hours. Be ready answer them. Because it is very important whether you are able to pay your suppliers faster and receive better discounts; whether you are able to perform your next order to XYZ Company and make payroll without tapping your line of credit at the bank. You should offer longer terms to larger customers and attract more business. But can you do this? Consider whether improved cash flow can help your business grow or survive without incurring more debt at the bank. Also try to answer whether the financial profits of improved cash flow to your business can compensate the fees of Factoring, and then some. They are situations and in many cases factoring is a smart business decision.
When Factoring is NOT a good fit for a business
There are may be two reasons for this:
1. LOW MARGINS. Think whether your business is running on low margins, which are less than 10%. But if this is so then factoring may not be right for you.
2. PLENTY OF CASH ON HAND. Even if you have cash rich business free of cash flow concerns, it doesn't mean factoring can help your business.
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