Several major events have triggered this need: for some companies, the PGEs (state-guaranteed loans) that were taken out at the height of the health crisis are due for repayment, and not all of them have recovered the cash flow required to do so.
For others, it is the rise in raw material prices that has a strong impact on cash flow, since it is necessary to buy before selling, or to buy more to store and benefit from better prices.
For others, it is the recovery that needs to be financed, since the WCR is inevitably higher.
For all these reasons, factoring, which had been less used by companies over the last 2 years, is picking up strongly: + 12% growth since the beginning of the year!
This short-term financing solution is still the main source of cash flow for companies, ahead of bank credit.
1 - What is factoring?
Factoring is a business financing solution that makes it possible to mobilize an important company asset: trade receivables.These invoices, which are awaiting payment, can be transferred to a factoring company, which in exchange provides the corresponding cash flow, in return for a management fee.
It is an extremely simple and flexible solution with many advantages:
- In addition to the cash flow, the factoring company manages the invoices in most types of contracts: it reminds the customers, collects the payments if necessary, and letters the accounts. This allows you to delegate some of the administrative tasks to specialists and save time!
- Factoring is flexible according to your cash flow needs: indeed, you can transfer only the invoices corresponding to the cash flow you need, not necessarily all the customer invoices. Similarly, although the sums corresponding to the amounts of the invoices are made available, there is no obligation to draw everything. You can indeed draw only the cash you need, and therefore pay financial charges only on that part.
- Factoring has no ceiling on the amount: unlike a bank overdraft for which you have to negotiate regularly with your banker, especially to increase the line, the available cash grows at the same time as the invoices transferred: the more you transfer, the more cash you have available!
- Factoring is suitable for all types of companies, whatever their size or sector of activity: from very small companies with a turnover of €100,000 to multinationals, from flat-rate contracts to tailor-made contracts, there are many solutions to meet all needs.
- Start-up companies: with little history or balance sheet, banks are reluctant to lend large sums. In the case of factoring, the situation of the assignor (the supplier) is relatively unimportant, what counts is the number and quality of the customer invoices assigned.
- Growing companies, or companies with operating cycles requiring a high level of working capital: here too, cash flow needs can be significant and factoring can meet them, unlike banks which can limit overdrafts and loans.
- Companies experiencing cash flow difficulties, whether temporary or not: in these situations, banks can limit or even eliminate cash injections, and solutions must sometimes be found urgently. Factoring, which can be set up in a few days, is often the best alternative.
2 - The current financing needs of companies
More and more companies are currently looking for additional financing.
The banks played their role during the health crisis, with the help of the State, but these famous PGE are well registered in the debts of the company, it is not a subsidy!
They must therefore be repaid. More than half of them have already been repaid, but there are still a large number of companies that must do so, and some have used up all the loan without having the means to repay it.
Among the possible solutions, factoring allows you to recover cash without increasing your debt, which is not negligible.
Financing the purchase of raw materials is a real headache for many companies. It means to buy more expensive, before reselling at best more expensive (which is not always the case, in a certain number of situations the prices and contracts having been signed it is difficult to pass the increases).
In the best case, it will still be necessary to finance these purchases for a few months, before they are paid by the customers.
This is where factoring comes in, since it allows you to mobilize your receivables to pay your suppliers without waiting for the customer to pay. No more need to wait for the due date of the invoice to get the cash.
In a certain number of sectors, the recovery has been very strong after the months of calm. This is always a good thing, but often a problem for cash flow: working capital requirements are stretched because, here too, you have to buy more before being paid more.
These months of cash flow tension can block the development of the company, or even lead to unpaid bank bills if the cash flow is too tense.
Factoring is also the best solution to finance the development. The sums are immediately available.
3 - How to subscribe to a factoring contract?
There are many factoring companies. In general, each bank has a dedicated subsidiary, plus a number of independent factors. In most cases, companies are helped by a broker specialized in this field, to define their needs, to obtain the best offers and above all to compare them, with all the information needed to make the right choice.bPayd is one of the leading brokers in the sector with an approach that is both online and human: by entering the few necessary details on the platform you can quickly receive a comparison of offers from several factoring companies.
A bPayd advisor will contact you and follow up with you to answer your questions and help you make your choice.
It should be noted that to obtain an offer with good conditions, the quality of the assigned receivables is important. Indeed, the customers must be able to honour their payment at the due date of the invoice.