Who are the risks when we factor an invoice with a factoring company?
June 4, 2009 by Accounts Receivable Factoring
Filed under More Factoring Answers
Can you answer overstockto’s question about Factoring?:
If depends; then what is the ups and downs if its our own risk and if its the factor’s risk?
Factoring Software
If depends; then what is the ups and downs if its our own risk and if its the factor’s risk?
Factoring Software
Factoring Feedback: If the receivable goes bad, you’re still on the hook for it. The factoring company is taking a bet that you won’t run off with their money. Since some people do, they have to charge everyone a high fee and interest (based on the duration of the receivable). Once you start factoring, it’s hard to stop. Instead of getting 100% of your revenue for your business, all of a sudden you’re down to say 95%. If your profit margins are low, then factoring fees can put you over the edge.
Ask yourself why you need a factoring company. If it’s because your profitable biz is growing so fast that expenses due now exceed liquid cash, that’s great…factoring is an option. If it’s for any other reason, you must figure out why your biz is foundering.