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This video offers an honest explanation about factoring, how it works, and its associated benefits and drawbacks.

Most Repossessors have the same problem; slow payment. The finance companies that employ recovery agents know better than anyone what delaying payment does to their finances. However, their cash flows are improved at the recovery agent’s expense. In response to this situation, recovery agents have employed a few different strategies.

First, and most obvious, is to sit on a solid cash reserve. This ensures that there are no cash flow deficiencies, and provides the ability to wait for payment. Sounds simple enough but in reality this is a luxurious position to be in. Not all businesses can build up that cash cushion and even the ones that can have to work hard to maintain it.

Another common strategy

I read a financing expert’s Blog post about his experience helping a client get funding. It provided a much needed reality check as to how financing availability is not static; rather it’s constantly changing and even financially strong, profitable businesses may find that funds are not as easy to get as they once were.

“I recently worked with a client seeking financing from their business where the business is well established, has an excellent balance sheet, and is very profitable. The Owners were experienced, established, and had a solid track record of performance.

So why were they looking for financing?

Their primary and only institutional lender could no longer underwrite the type of business they were in.

A recent survey of business owners by the NFIB has gotten a lot of attention. It showed that small business owners are pessimistic about the current state of the economy. Other data suggests that small business lending is down (This article is exceptional, please read) due to the expiration of stimulus measures that offered 90 percent guarantees on SBA loans. Although there may be new legislation to return guarantees to 90 percent, it may take some time before it becomes effective. There are also talks of a double dip recession that could undo the recovery process and send us into another recession.

With the current uncertainty, managing business risk is of utmost importance.