Top Reasons to View Factoring as an Opportunity Cost—Not an Expense
To factor or not to factor? When making the decision to execute a factoring transaction, some business owners get “stuck” on viewing the associated fees as a business expense, rather than an opportunity cost. A more strategic approach is to take time to evaluate how the decision to factor compares to the cost of not moving forward with activities that will generate more profits for your business. Savvy business owners consider how an immediate cash advance of 75% to 85% on unpaid customer invoices might be directed to improving business results now and over the long term.
Cash in Hand
With cash in hand from factoring, you have the financial agility to capture opportunities as they arise, or to mitigate threats from competitors or fluctuations in the marketplace. Keep in mind, that unlike banks and other financial institutions, factoring firms such as ExpoCredit place no restrictions on how funds can be utilized. The working capital accessed can be applied to any operational need. ExpoCredit factoring enables you to pay down debt, or to move forward with expansion plans. You can launch a new product line, hire more employees or initiate a new promotional campaign. You are free to choose action plans that will deliver the most impact to your bottom line, and advance your growth trajectory.
Prompt Payer Status
By paying your bills on time, there’s a strong chance you can qualify for prompt payment discounts of 2% to 3%. The additional, discounts offered for quick payment can help increase the cycles of production and sales for your business. At the same time, they reduce your administrative costs. Over the course of a year, these savings can be substantial. The cumulative extra cash can be applied to activities that will help you grow or enhance your business—and your suppliers are happy. It’s a complete win-win. As an added bonus, you will be establishing a solid reputation within the supplier community, making it easier to negotiate terms or to open new credit lines.
Improved Credit Position
Accessing cash through factoring can actually give your credit profile a positive boost. For one thing, factoring is not a loan. No debt is carried on the books. ExpoCredit factoring unlocks the cash tied up in customer invoices, with the transaction impacting the credit, rather than debit column. This can be an important benefit if you are looking to apply for a mortgage or other amortized loan to purchase a building or fleet of vehicles. Factoring with ExpoCredit works to protect your credit integrity in multiple ways. The incoming capital enables you to pay operational bills, such as rent and utilities on time, and helps you stay current with payroll and tax obligations. As importantly, major factoring transactions do not carry obligations or compromises and they can be used at your discretion only when it’s necessary for you to access cash flow or need to take advantage of the opportunity to increase immediate cash flow.
Freedom from AR Tasks
Benjamin Franklin is quoted as saying “Time is Money”, and in today’s fast paced world, freeing up time has never been more critical, especially for small business owners. Think what you might do with those extra hours if you could outsource the administrative responsibility for Accounts Receivable. When you factor with ExpoCredit, our professional teams relieve you of many of the demanding tasks associated with managing and collecting on customer invoices. We take charge of outstanding invoice balances, collecting directly from your customers, with no effort (or worries) on your part. ExpoCredit’s credit department can even help you determine the creditworthiness of your current clients and potential customers so you can establish appropriate credit limits. Over the long term, this can save you operational expenses as well as man hours. In evaluating factoring, consider what this could be worth to you compared to the expense of handling everything on your own.
Opportunity cost is about weighting the options; it’s an important economic concept expressed as the relative cost of one alternative in terms of the next-best alternative. It can come into play in a wide range of business decisions, including the choice to factor.