Factoring Is Hard to Get

Bill Warner Monday, June 15, 2009

Factoring your receivables has always been an alternative to satisfy a short term cash need. Read about some of the details about how it works in Open Forum. Although factoring continues to be a financing alternative in today’s economy, it is increasingly hard to get.

Factoring hurdles

Remember that banks are really tightening their due diligence and qualification criteria for any form of business financing, including factoring. In order to qualify for this form of financing, you face a redoubling of your justification:

  • You have to have a solid history of positive financial performance
  • Your debt ratio will be analyzed closely
  • The receivables have to be from very reliable sources
  • It would be better if they know you and you have a positive financing history with them
  • You may be asked for additional backing, including personal guarantees

Other financing alternatives

Really, there are not many other alternatives except for factoring companies. They are hard to find and you really need to check them out before you engage them. A positive referral from someone you know who has had a positive experience would be the most desirable.

Nevertheless, when you are in a cash crunch, this is an alternative that you may not have a choice in passing up.

Filed Under: Financing a Company, Managing Business Financials



Bill Warner is the Managing Partner of Paladin and Associates, a business consulting firm in the Research Triangle Park area of central North Carolina, and is the Chairman of the Triangle Accredited Capital Forum, an angel investor network with over one hundred members throughout the southeast.

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