Small businesses finding factoring to be invaluable

11/03/2013

When it comes to managing paystreams, small and medium-sized enterprises (SMEs) across the globe are finding factoring to be an invaluable tool.

According to an alternative funding lender, The Interface Financial Group (IFG) - which aims its services at SMEs - factoring has become essential to helping firms cope with slow payment from clients.

Recent research from credit reporting agency Dun & Bradstreet - which provides business information for risk management, sales and marketing and global supply management decisions - suggested that payment time frames currently sit at an average of 52 days from the date the invoice was raised.

The research also showed that 62 per cent of accounts were not paid until after the date they were due, something that almost 70 per cent of SMEs surveyed reported would be a problem for their organisation over the coming months.

Whilst in the past, an organisation's working capital may have been negatively impacted by slow payment terms from their customers, factoring - which sees accounts receivable purchased by a factoring company, which then offers cost effective business funding, therefore enabling SMEs to reap the capital needed to boost business growth - means that slow payment from clients will no longer have such an impact on business cashflow.

Chief operating officer for IFG in Australia, David Hechter, said: "Small businesses should not be surprised by long payment terms - this is normal when dealing with corporate customers. However, cash flow can be a competitive advantage for SMEs - those that can demonstrate that they have the working capital facilities in place to take on work from big customers are in a better position to win that work.

"Those that feel ashamed because they need the finance in the first place will find themselves without the customers because they simply will not be able to prove they can handle the cash flow requirements of taking on a project where invoices are paid on terms. This is why factoring for small businesses is on the increase," he went on to say.