March 10, 2020
Improving a company’s cash flow is crucial for a company and Factoring financing is an excellent method help. Factoring helps a company without taking on new debt and n having to wait months for customers to pay their invoices. Instead, they sell their invoices to generate immediate funding. The existence of Factoring financing has been available for a while. However, due to the shrinking availability of financing options than in the past, more companies are fighting for the services now.
The approval rate for small business loan applications urges to reach 28% (Forbes, 2019). Meaning one out of every four companies only get approval from big banks. Leaving the other three companies to shut down and having to find other ways to get financial aid. For many years, debt was the preferred method of generating capital for new and established businesses. However sources that provided such funds has virtually run dry. Hence, companies have innovated methods to do business and that is ‘invoice factoring’.
As mentioned in ‘Why Companies Factor?’, factoring helps remedy a company’s cash flow problem by providing them with the financial aid they require. This allows a business to generate cash as little as in 1 day. On top of that, Factoring can be done even by newly established companies and those with bad credit.
Seafood supplier who buy raw materials from overseas to supply hotel and restaurants in Singapore needs extra fund to purchase more seafood for CNY holiday. They have 10 invoices with restaurants who will only pay in 30 days. They can sell all 10 invoices and receive 90% of the amount right today.
This way, they have extra cash at hand to purchase more seafood, without having to take a loan (debt on their book), and only at a small flat, all-in fee with Multiply.
The above example is how Multiply’s Invoice Factoring works. It allows the business to leverage on their Account Receivables (Invoice) for instant cash. A company would rather get paid in a few days instead of waiting the average 30 to 90 days which is the average time an invoice is repaid. Factoring allows a company who requires cash immediately to afford to run their day to day operations.