Factoring Insights

Factoring As A Lifeline In The Business Rescue Process

Invoice finance a growing business finance trend

Merchant Factors is a financial institution with a specific focus on improving cash flow across a range of industry sectors in South Africa. Our working capital solutions have been utilized extensively over the past 25 years, not only by businesses experiencing rapid growth, but also by those requiring a much needed cash flow injection to get things back on track.

s a Business Rescue Practitioner you have the often-daunting tasks of monitoring and directing the recovery process of a distressed business. Section 128(1)(b) of the new Companies Act does indicate, amongst other things, the development and implementation of a business rescue plan. Our experience has shown that Factoring can and does provide a financially viable means to steer a company back on course. Factoring as an alternative means of improving cash flow is becoming more popular with South African businesses. In fact it is estimated that currently over R25 billion a year, in turnover, is factored locally. Factoring is a form of specialist finance aimed at supporting those that operate in the business to business environment.

Funding is secured off the strength of the debtors' book. It's really a means of unlocking the cash that would ordinarily be tied up for 60 to 90 days as accounts receivable. In simple terms the debtor's book is basically sold to a financial institution such as Merchant Factors, who advance funding to the business and then administer and collect the outstanding amounts directly from the debtors as they become due. Our factoring solution can be tailored precisely for entities who are already in the Business Rescue process as per Chapter 6 of the Companies Act.