4 Receivables Factoring Myths That Simply Aren't True

Posted by Factor Funding Co. on August 6, 2014

There are several factoring facts as well as myths out there, although it seems that the myths far outweigh the actual facts. There are serious benefits to hiring a factoring company and more information can be found below on why it can be beneficial for a business that is tight on cash, looking for a way to generate more cash flow.

What are some of the top myths of factoring? Here are a few myths on receivables factoring that are debunked completely.

1) Receivables Factoring will Create a Negative Image for the Company

4 Receivables Factoring Myths That Simply Aren't TrueMany businesses tend to think that hiring on a factoring company that want to help them with their cash flow issues will also come with the association of a certain negative perception. There has been a lot of stereotyping when it comes to factoring companies. Many people believe they are similar to loan sharks. However, this is far from the truth. When a business succeeds, the factoring business also succeeds in direct relation. So, why would factors want to jeopardize that and their image?

2) Factoring, Especially Receivables Factoring, Is Just Too Expensive

Companies looking into receivables factoring might be hesitant because they have heard it can expensive and just put them into a further financial hole instead of trying to help them out of it. Compared to other solutions and the return on investment factoring has, this isn't true. A trustworthy and reputable factoring company will always ensure that the company gets back at least 80% of their receivables owed.

3) Only Companies with Serious Cash Flow Issues Need Factoring Services

This is another statement that is simply false. Businesses even in good standing with their cash flow can utilize the resources of a factoring company and see an improvement in their receivables. But the factoring company is also available for businesses that do have cash flow issues, however large or small, in order to improve their situation and get profitable once again.

4) Receivables Factoring will Only Just Drive away Customers

Businesses that are experiencing cash flow problems or want to expand their cash flow are typically already having trouble juggling that as well as customer service. A receivables factoring contract will take off the burden of seeking out owed money and let the business get back to serving its customers and making them the focus. Factoring companies understand that businesses need customers and that's why the reputable ones will ensure that those customers will still be coming back.

The benefits far outweigh any of these myths, such as the fast turnaround on payment, a flexible contract, and the contract itself with the factoring company. Businesses can succeed when there is a factoring company on their side to generate better cash flow.

*Image courtesy of freedigitalphotos.net

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