One of the paradoxes in these times of economic tension is the incredible abundancy of liquidity. What is at stake right now for companies is the diversification and the sustainability of their short-term financing sources rather than the access to cash itself. Considering this, factoring is an interesting substitute. Trade receivables is an asset often overlooked by companies, even though it can structure their working capital. More importantly, the negative image that factoring was associated with companies having economic concerns is no more. Furthermore, since a few years, we have been witnessing an upward movement in the size of user companies.
Factoring: for tailored solutions
Trade receivables’ quality and control must be considered to fully optimize the cash leverage. When it comes to available products, factoring is truly multidimensional. The offers are expanding, allowing finance for domestic as well as export sales; the integration in a same programme of multiple European subsidiaries of a group or even the optimisation of the presentation of the balance sheet from a deconsolidation approach. Moreover, the rise of the FinTechs, on their way to become new players of financing and trade receivables, should keep boosting the market.
Make sure that take the characteristics of the company are into account
Picking a factor is no easy task. What makes the operation a success or not is above all the understanding by the factor of the company’s line of business and its methods. For example, the invoicing process, the wish to outsource certain functions or the amount of the non-performing receivables could all reduce the funding available and therefore make the factoring programme counterproductive. Making a proper study about the implementation of the factoring contract, seeking advice from several factors and comparing offers on a wider scope than just the price is all part of the best practices!