Business finance solutions: 10 reasons to choose factoring
When your business needs access to working capital, what are your options? Many small and medium enterprises find it difficult to obtain traditional bank finance in this economy; and even when they do, the approval and processing period can last weeks, sometimes even months.
- Invoice factoring is a relatively simple step you can take to free up cash within your business. Here are ten reasons why it makes good business sense to choose a factoring solution from Merchant Factors.
No need to wait months for payment
If your cashflow is compromised by having to wait 30, 60 or 90 days until your clients pay your invoices, invoice factoring is a solution. This financing method involves your business selling your invoices (i.e. accounts receivable) to a finance partner like Merchant Factors, who will then collect payment of your invoices directly from your clients. Factoring gives you an opportunity to draw working capital back into your business so that you can pay salaries, increase your stock levels, process a new round of orders or capitalise on a business opportunity.
No need to put your business plans on hold
Many companies use invoice factoring to fund business growth without having to give up equity or control. Factoring also provides ready cash to buy more raw materials, upgrade equipment, hire new employees, explore new revenue streams or put other plans into action without having to wait months before your invoices are paid.
No debt is incurred
Unlike traditional bank finance or overdraft facilities, factoring is not a loan. This means that you do not incur debt when you factor. When you partner with Merchant Factors, we charge an administration fee plus a discount rate which is agreed with your business upfront. This rate ranges from between 2.0% and 3.0% above the prime lending rate on funds that have been advanced until the invoice is settled by your customers. The administrative fee ranges from 0.5% to 2.5%.
It's not about your credit history
Factoring agreements are reliant on the quality of your customer’s credit rating unlike high street banks as less reliance is placed on your balance sheet such as minimum equity requirements and gearing ratios.
Your working capital matches your business needs
Typically, bank loans are capped according to the value of bricks and mortar. When you choose factoring, however, your access to capital increases as your turnover grows, because this capital is directly linked to the growth of your accounts receivable. This means that factoring is a financing solution that scales with your business.
Fast access to finance
Many small and medium enterprises struggle with the lengthy periods between applying for a loan and receiving the cash. With factoring, you have swifter access to the cashflow you need to keep your business running. Furthermore, Merchant Factors is the only truly independent factoring house in South Africa, which means we have the flexibility to offer the fastest turnaround time in the industry from application to pay-out.
One of the chief advantages of partnering with Merchant Factors is the valuable debtor administration services that our team will provide. We act as professional credit controllers, administering your sales ledger for you, which means you can focus your time and resources on other business-critical tasks and processes.
Our services include:
- Evaluating your customers' creditworthiness
- Sending monthly statements
- Phoning debtors for payments due
- Sending reminders and final demands
- Handling receipting and reconciliations
- Liaising with attorneys if it becomes necessary to institute legal action
You benefit from our expertise
Merchant Factors has been providing a wide range of businesses with working capital solutions for 29 years. Founded in 1988, we have successfully enabled over 2,000 clients to meet their business goals.
Our independence, experience and flat organisational structure means that, unlike the banks, we are innovative, flexible and committed. We are also able to tailor our facilities to suit most emerging small and medium size businesses, no matter whether your turnover is R100,000 or R15 million per month.
We have many satisfied customers
Over the decades, we have built strong and lasting partnerships with numerous clients – taking a real interest in the success of their businesses.
"In the current economic climate, it’s encouraging to deal with decision-makers who are accommodating towards your working capital requirements, but they more importantly, businessmen that believe in the potential of your business. Not only do Merchant Factors believe in your ability, but they show a real interest." – Paul Issa, Buccaneer Shoes
Unlock your working capital today. For fast, flexible invoice financing – contact Merchant Factors.
Finance beyond the Numbers.