Factoring Blog - For Small Businesses

I have been keenly observing a trend in today’s society toward alternative forms of financing called ”cash flow” financing.

Consumers and business owners alike now have a wide variety of ways to turn a future payment into cash – today.  

People and businesses can “sell” or “assign” rights to a payment we expect to receive in the future, to get money NOW.  In effect we are getting accelerated cash flow. 

Many of these methods have been around in one form or another for decades, even centuries.  What’s different today is how these methods are going mainstream.  

Ads for structured settlement payments are plastered all over television.  Payday loan companies seem to have storefronts tucked away in every shopping plaza. 

As I’ve said before, I’m not encouraging the consumer cash flow financing vehicles.  I think there’s potential for misuse among some consumers — especially those who live paycheck to paycheck and who can least afford it.  If a friend or relative asked me whether they should get a payday advance or sell their lawsuit settlement or life insurance annuity, I’d be hard pressed to recommend it, except as a last resort.

Business factoring, however, is in a totally different category.  Smart companies use it for strategic competitive advantage.  Instead of being a short-term fix, some companies use it as a strategic self-funding mechanism (since it is based on leveraging customer receipts the company has already generated, not debt that they will have to find the revenues to pay back).  

But I’ve wanted to comment on this trend toward our ”get your money now” society because it is becoming so prevalent.  It’s quite the social change underway. 

Ultimately I think this trend is good for the factoring industry.  It means your decision to factor your receivables will be considered standard operating procedure by clients.  As the idea of accelerating cash flow becomes mainstream – and is done by Joe down the street or your uncle — factoring receivables will be considered as routine as pulling out a credit card (which at one time was considered an unusual thing).  

This entry was posted on Thursday, January 10th, 2008 at 3:11 pm and is filed under Factoring. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.