Debtor finance : Fact Vs. myth
Myth #1:
Financing
accounts receivable is a financial strategy only used by Fortune 500 companies, corporations or businesses that are in extremely “bad” financial condition. In speaking with entrepreneurs, we often come across some misconceptions about the debtor finance industry.
Fact: Debtor finance can be, and is used by businesses of all sizes; not only in the Australia, but internationally.
While it is true that debtor finance used to be exclusively by large businesses, today more small businesses than big businesses are invoice
financing
today. Almost any business, including a start up enterprise can receive funding through debtor finance. Debtor finance is also not just for companies experiencing cash shortages. Most astute business managers use it in long-term planning and in conjunction with other revenue generation methods.
Myth #2: If you finance your invoices, your customer will get “nervous” about your financial condition. As a result, you may lose their business.
Fact: The fact that your business [whether it is a start up, growing exponentially, or a “mature” firm] has been approved for outside funding can be used to cement the relationship you have with your clients. With funding in place, you can, perhaps for the first time begin to assertively market your products or services to your existing clients. You can also feel confident in your ability to grow, based on the fact that you will have access to capital to meet the needs of your clients, even with very short notice.
The end result of establishing a professional factoring relationship will be that your customer will be more likely, not less likely to continue to work with you. They will not seek another vendor to start a new relationship with, and it has been our experience that your average sale/transaction will increase once funding has begun with your long term customers. Our ability to preapprove clients and prospects allows you to significantly increase the size of your sale to any one client.
Myth #3 : Debtor finance companies offend and alienate customers with collection calls.
Fact : A debtor finance company's goal is to enable you to do increasing and continuing business. Therefore, it is in a finance companiesinterest to help you succeed. It's folly to think that factors would intentionally offend and harass your customers with collection calls. The other facts are that without direct pressure factors more often improve and enhance the collection process to the amazement of clients. This is so because most businesses realize that their ability to secure more accounts can be directly related to their credit reports and references. The report factors may provide to Commercial Credit Bureaus may impact the ability of your customers to do business. Therefore, in order to have and maintain good credit rating, they will pay on time.
Yes, I would not deny the fact that sometimes they do call customers, but only as a reminder, rather than to harass a customer. Factors are more likely to successfully resolve payment issues in ways that would satisfy the client than the client would on their own.
Complete our online form for a quick quotation, click here
If you have an immediate cash flow funding requirement please feel free to call our office on 1300 652 158, enquire online or email ARCF@ARCFfinance.com.au. We are here to help you.
