Most people that come to us looking for factoring do so because they have cash flow problems and need funds to cover operations. However, factoring can also be used as a tool for growth. And as a tool for growth, factoring offers a number of benefits. Let's look at an example.Let's say a business services company is using factoring to handle it's operational costs. A new prospect appears and offers them a contract for consulting services. It's a large and lucrative contract - but invoices will be paid in 60 days. Unfortunately, the company does not have enough of its own funds to cover this contract. This is a common situation.
If structured correctly, the company can take on the contract, invoice for the work before payroll is due and then factor the invoice to cover payroll expenses. This enables the company to take on new business leveraging the factoring company's capital. However - and this is important - the transaction would need to be structured correctly to ensure payroll is met. The company would need to have factorable invoices before payroll is due.
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