By Lou Wallace
There seems to be a lot of confusion in the financial arena about factoring. While factoring is the oldest form of financing for a business most people including some financial experts have formed the wrong opinion of factoring.
I have had recent discussion with financial advisors and accountants who feel referring their clients to a factor or asset based lender will reflect poorly on them as professionals. While they know their clients need assistance they believe that factors or asset based lenders are not as reputable as Banks. They also feel that factors and asset based lenders are the lenders of last resort or only for companies that are on the verge of failing. I am not sure who started this ridiculous theory but I have to believe it was probably some Banker who wanted business owners to believe that if they couldn’t borrow from a Bank then there was something seriously wrong with a persons company. This theory even was promoted further by companies being told if their customers knew they were factoring their receivables they would quit doing business with them because they would believe they weren’t financially sound.
What the Bankers and other financial advisors failed to grasp is “what can a businesses do for working capital?” when the banks won’t lend. In the current market financial market many banks are just not lending. I recently spoke with a business owner who was looking for financing and he said he spoke to five banks all which told him they weren’t taking on any knew borrowers at this time. He also said his business consultant and accountant told him that he should just tough it out rather than go to an asset based lender or factor as they told him this might reflect poorly on his business. Even though he had a chance to grow his business and pick up new clients he was being advised to just wait until the banks started lending again. How ridiculous was this advice?
In over thirty years of banking and asset based lending I have never known a business to suffer a loss of business because they factored their receivables or used an asset based lender. This is a total misconception. Factoring is well known in many industries and is accepted in some industries as the only way to finance working capital. The clothing industry is a prime example. Factoring works well with manufacturers, staffing agents, and the transporation industry.
Performance Funding Group, LLC is a locally owned and privately funded asset based lender who has been providing several different loan products since 1997. Lou Wallace has been working in commercial loans since 1971. Lou Wallace can be reached at 602-912-0200.