Factoring Articles

Survive and Thrive Successfully: Advice for Seasonal Businesses


Survive and Thrive Successfully: Advice for Seasonal Businesses Many businesses experience seasonal peaks and troughs in demand. These types of organisations face multiple challenges. Not only do they need to survive during slow seasons, but they must also find ways to thrive during periods of increased demand by capitalising on revenue opportunities without putting cash flow or long-term success at risk.

Do you own or manage a seasonal business? How do you make hay while the sun shines and batten down the hatches when the cold weather creeps in (or vice versa)?

Here are some recommendations.

1. Human capital

You don’t want to lose the skills and expertise that make your products and solutions such a success. This would mean a mad scramble to hire and train staff in time for each busy period. So, how do you make sure that you have enough people to drive peak productivity during high seasons, as well as hold onto your valued talent during low seasons?

Firstly, be transparent and keep your valued staff informed about your seasonal business cycles. Encourage them to take leave during the quieter months (rather than everyone going on holiday over the festive season, for example, if this is your busiest time of year).

Secondly, consider maintaining a core team of highly-experienced staff and then hiring seasonal employees as and when these are needed. Several recruitment agencies offer managed staffing options that build more flexibility into your workforce. Or you could hire students over the summer, or highly-skilled retirees who are happy to work more flexibly.

Whatever route you choose, take care not to hire too many people, as you don’t want your labour expenses to eat into your profits during high seasons.

2. Working capital

Smart cash flow management is critical for seasonal businesses. In an ideal world, you would be able to time your cash inflows and outflows perfectly to match your sales cycles. While you can anticipate the periods in which you will earn the most revenue (based on the nature of your products, your customers’ needs and past sales), you can’t always control when your customers will pay.

Also, while revenues fluctuate, you’ll still have your fixed expenses such as rent, electricity and more. Your cash flow therefore needs to be reliable enough to weather fluctuations in demand, and meet your daily running costs.

Having access to the right working capital finance can be extremely helpful in addressing these challenges. If you sell to your customers on credit terms of between 30 and 120 days, you should consider factoring to keep cash flowing into your business. Factoring is a finance solution that involves selling your accounts receivable to a factoring company. This firm then provides you with the working capital you need to keep your business running efficiently and successfully.

If you choose to partner with Merchant Factors , its expert team of professionals will also handle your debtor administration and credit control functions. This means that you can delegate a wide range of tasks to the Merchant Factors team, which saves you from having to hire this expertise in-house.

Services include sending monthly statements, phoning debtors for payments due, sending reminders and final demands, and handling receipting and reconciliations.

3. Capitalising on sales opportunities

Keeping the optimum level of stock in your business to meet demand yet keep costs under control is a typical challenge for seasonal businesses. Too much stock in your warehouse can put a strain on your cash flow, but you also don’t want to be caught without enough stock to capitalise on seasonal spikes in demand.

With a stock finance facility in place, you’ll have working capital available to pay your suppliers early to ensure you have your stock in time. You’ll also be in a better position to negotiate early payment discounts, which keeps more cash in your business.

Stock (or trade) finance is a funding mechanism that is specially designed to assist in the purchase of stock. This is an asset-backed facility that funds the operational cycle – from when you pay suppliers until you receive funds from customers.

A stock finance facility from Merchant Factors is carefully tailored to match your company's cash flow cycle, to prevent your organisation from overtrading. And repayment dates are based on the working capital cycle, allowing the business enough time to produce the goods, sell them, and collect the cash from the sale (or through the debtor created as a result of the sale).

This enables you to increase sales and profits during peak seasons, or develop new product lines to diversify your revenue streams. As mentioned, you’ll also be able to access purchase discounts through the early or prompt payment of suppliers, as well as purchasing advantages by being able to buy in larger quantities.

Ready to survive and thrive as a seasonal business? contact Merchant Factors today for more advice and information on agile factoring and stock finance solutions.

Finance beyond the Numbers.

Factoring: a popular form of business financing globally


Factoring: a popular form of business financing globally Factoring is a financial service leveraged by businesses around the globe to maintain healthy cash flows, fund growth cycles and save time in the back office.

Under a factoring agreement, a business sells its accounts receivable to a third party, known as a factoring company, to boost its working capital. But it doesn’t end there. Partnering with a trusted and expert factoring company is like having an entire debtor administration and credit control team working for the business, because the factoring firm handles these functions, freeing up the business owner and administrative team to focus on other areas of their roles.

According to FCI, the global representative factoring network and association with members in more than 90 countries, “Factoring is a complete financial package that combines working capital financing, credit risk protection, accounts receivable book-keeping and collection services.”

All these services combine to support stability and growth in many economic sectors, especially among small and medium enterprises (SMEs).

The state of factoring globally

Research by the FCI reveals that factoring volume reached over EUR 2.35 trillion in 2016. While this is slightly down from EUR 2.37bn in 2015, deputy secretary general at FCI Erik Timmermans explains that factoring is still growing in popularity in most regions of the world:

“Banks have been shifting SME lending from non-secured lending into receivables finance and factoring. Factoring is also moving up from SMEs to larger corporates who have discovered this as a stable form of financing.”

The FCI notes that the decline in overall factoring volumes was largely due to significantly lower demand in China and the volatility of the British pound. Many other regions saw factoring volumes continue to increase, echoing the steady growth trend that the global factoring market has seen for the past two decades – expanding 9% annually on a CAGR basis. Factoring volumes rose by 2.5% in Europe, 9.4% in the Americas and 14.1% in Australia, for example.

What about Africa?

Closer to home, Africa saw a dramatic increase in factoring volumes during 2016, reaching a total of EUR 27.6 billion factored on the continent. This represents a 47.6% year-on-year growth. South Africa is the largest factoring market in Africa, accounting for 85% of the region’s factoring volumes.

What drives demand for factoring services?

In the wake of the global financial crisis and at a time when economic conditions are seeing many banks tightening their lending, factoring provides a stable and accessible form of alternative business financing.

Add to this the fact that most factoring firms provide businesses with robust credit-risk protection services, and it’s no surprise that the demand for factoring solutions is expanding rapidly in South Africa and many other regions around the world.

Keen to find out more about factoring?

Merchant Factors is the leading independent factoring company in South Africa. Established in 1988 to offer local businesses an alternative to traditional bank loans and overdraft facilities, Merchant Factors specialises in local and cross-border finance – customising its facilities to suit the unique business needs and operational cycles of its diverse clients.

Another advantage of being an independent financial services provider, is that Merchant Factors can offer the shortest turnaround from application to pay-out in the industry.

Ready to join 2000+ businesses, who are achieving their financial goals through factoring? For fast, flexible finance – contact Merchant Factors today

Finance beyond the Numbers.

Sources:
https://fci.nl/en/news/global-factoring-volume-reaches-all-time-high-2015/3677
https://fci.nl/downloads/Annual%20Review%20%202017.pdf

5 tips for managing your accounts receivable successfully


5 tips for managing your accounts receivable successfully For a small or medium sized business, cash flow is critical. The client base may be growing. Sales may be up. But if accounts receivable are not managed in a sound and structured way, there simply won’t be enough capital to run the business effectively.

If a business sells to customers on credit terms – in other words, if invoices are not payable immediately, but rather within 30, 60, 90 or even 120 days – it’s essential to have a robust invoice collections system in place. This helps to keep close tabs on receivables, maintain a steady cash flow, and hopefully reduce the risk of late payments and bad debt.

Do these issues apply to your business? Here are five tips for ensuring effective invoice collections and protecting your cash flow.

1. Do a credit check before you extend credit

In an ideal world, all customers would pay for your products or services upon delivery. However, many customers push for credit terms, which means you wait days or even months for the cash that’s owing to your business.

Don’t forget that credit is a privilege and should only be granted to customers who are creditworthy. It’s essential to perform credit checks on all customers before agreeing on your credit sales terms.

2. Follow up with a customer satisfaction call

A few days after delivering your goods or services, follow up with a friendly phone call. Ask whether your customer is satisfied with the goods and/or level of service provided. This will not only help you to continue improving the customer experience, but also ensure that you don’t have an unhappy customer on your hands, who may be reluctant to pay your bill.

If concerns or complaints are raised, deal with these immediately. And before you end the conversation, check whether your customer has received your invoice and reinforce its due date.

3. Keep track of accounts receivable and react swiftly if they’re overdue

Put a system in place that alerts you when payments are due. This way, you’ll know immediately when a payment date has been missed, so you can swiftly send a friendly reminder. Include a duplicate invoice and a gently request whether your customer simply forgot to pay, or lost the bill.

If you have still not been paid within a working week, send another friendly reminder that the account is overdue. And follow this up with a phone call to find out if there’s a reason for the late payment. Get your client to commit to a payment date, in writing.

4. Collection letters

    If another working week passes without payment, it’s now time to send a formal collection letter that:
  • Confirms what was discussed in previous emails and phone calls
  • Demands immediate payment
  • Communicates the consequences of non-payment (for example, you could suspend the customer’s credit privileges)

Be sure to send collection letters, and any further correspondence, via registered mail so you have a record that it was received.

5. Consider professional support

Instead of working your way through these resource-consuming steps, you could rather consider partnering with an expert factoring company from the very beginning.

When you enter a factoring agreement, you sell your accounts receivable to a factoring firm, which provides you with the working capital you need to keep your business running optimally.

If you choose to partner with Merchant Factors, our professional team will also handle your debtor administration and credit control. This means that you can focus on winning new business, while our experts:

  • Carry out thorough credit checks on your customers
  • Send monthly statements
  • Phone debtors for payments due
  • Manage reminders and final demands
  • Handle receipting and reconciliations
  • Provide guidance if it becomes necessary to institute legal action

You’ll not only maintain a healthy cash position, but also avoid the headache of managing your debtors book and credit control functions internally.

Improve your cash flow now

Merchant Factors was founded in 1988 to offer businesses of all sizes an alternative to traditional bank loans and overdraft facilities. Specialising in local and cross-border finance, this fully independent financial institution offers tailor-made facilities to suit the unique business needs and operational cycles. Merchant Factors is also able to offer the shortest turnaround from application to pay-out in the industry.

Since its inception, Merchant Factors has successfully helped over 2,000 growing organisations to meet their financial goals.

Chat to us about your business goals. For fast, flexible finance – contact Merchant Factors today

Finance beyond the Numbers.

Dispelling common misconceptions about factoring


Dispelling common misconceptions about factoring Many growing companies in South Africa, especially SMEs, are seeking business finance that provides more flexibility than a traditional bank loan or overdraft facility. Not all organisations are able to weather the lengthy approval processes that often go hand-in-hand with bank finance. They require working capital solutions that keep pace with their operational cycles or scale with their turnover.

Factoring is a fast, flexible and strategic working capital solution that has been adopted by many businesses in South Africa – to the extent that factored turnovers across the country are now in excess of R25 billion per annum.

However, despite the growing popularity of this well-established and globally-utilized business finance strategy, some SMEs are still reluctant to explore factoring due to misconceptions that cloud their view of this innovative funding method.

What is factoring?

Factoring is a way for growing businesses of all sizes to unlock the capital that is tied up in their accounts receivable (i.e. invoices). Instead of suffering through seasonal fluctuations in demand or waiting months and months for payments due on credit sales, a factoring company can advance funds against a company’s outstanding debtor balances.

    This boosts cash flow, so the business can:
  • Cover day-to-day operational expenses
  • Invest in stock, equipment and other resources required to fulfil the next round of orders
  • Take advantage of new business opportunities
  • Continue putting growth plans into action

With factoring, the amount funded is based on turnover and not tied to bricks and mortar value. This enables the company to access business finance that is commensurate with its income.

FICTION VS. FACT

Misconception # 1: Factoring is a solution for businesses in financial trouble

Factoring is certainly a lifeline for companies with cash flow problems. But these issues are caused by credit terms that outlast cash reserves rather than poor turnover. Most companies that enter factoring agreements are experiencing an upwards business cycle. Factoring firms also tend to partner with businesses that have sound, creditworthy customer bases.

Misconception # 2: Factoring is only for large companies

In reality, factoring can suit any business that trades with another company. This includes small and medium enterprises – companies that often have smaller working capital reserves to draw on and therefore find it more challenging to wait months and months for payments due. For these SMEs, factoring provides the perfect cash flow solution.

Misconception # 3: Factoring is a loan

Factoring is the sale of an asset (accounts receivable) and therefore does not create a liability on the balance sheet. With a bank loan, a company must pay back the principal loan plus interest. Factoring, by contrast, is not a loan and the company therefore does not incur debt when factoring.

Misconception # 4: Factoring damages customer relationships

Some businesses worry about how their customers will react when a factoring company enters the picture. However, leading factoring firms handle credit control with such respect and professionalism that this reflects well on the company and adds value to the customer relationship. The company also avoids having to broach sensitive issues surrounding collections directly with customers, which ultimately creates a more positive customer experience.

Misconception # 5: Factoring is just a financial transaction

Factoring firms provide a range of debtor administration and credit control services to the businesses that partner with them. By evaluating customers’ creditworthiness, phoning debtors for payments due, sending reminders and final demands, handling receipting and reconciliations, and more – factoring companies liberate business owners from having to do this work or dedicate resources to these tasks. This represents a significant time and cost saving.

Why choose Merchant Factors?

Merchant Factors has been providing working capital solutions to SMEs and growing businesses for almost 30 years – providing these organisations with an innovative and flexible alternative to bank finance, while supporting them with expert credit control and debtor administration services.

Merchant Factors’ independence, experience and flat organisational structure means that, unlike many larger financial services institutions, Merchant Factors can customise its facilities to suit most companies’ unique needs.

This independence also enables Merchant Factors to offer the shortest turnaround time in the industry from application to pay-out.

For fast, flexible finance – contact Merchant Factors today

Finance beyond the Numbers.

The value of having credit-worthy customers


The value of having credit-worthy customers Many business owners lose sleep agonising over their credit scores – which can be a major obstacle when applying for finance. A blip in your company’s credit record, even based on an issue that was resolved years ago, may affect your ability to access a bank loan or overdraft facility.

Fortunately, traditional bank finance is not the only lifeline available to businesses in need of working capital. Factoring, a funding strategy used by enterprises of all sizes in South Africa and abroad, focuses on your customers’ creditworthiness rather than your own.

This means that you can move beyond worrying about your own credit score. It also means that you need to have a sound due diligence process in place, for both new and existing customers, to ensure that you only sell on credit terms to those customers who are willing and able to pay on time, and in full.

How factoring works

Most businesses that trade with other businesses sell their products or services on credit. If you’re such a company, you may experience months where there’s very little cash flowing into your business. Waiting months and months for your customers to pay can leave you with insufficient funds to cover your day-to-day expenses. This is a risky position to be in; and one that is not conducive to growth at all.

Factoring gives you the ability to draw cash back into your business before your customers pay, by unlocking the working capital that is tied up in your outstanding debtor balances. This is such a fast and flexible way to enhance your cash flow and continue growing your business, without having to sacrifice equity or control.

You also avoid having to jump through endless hoops to secure finance from the banks, which often takes so long that it doesn’t match the needs of your unique operational cycle at all.

Are your customers credit-worthy?

The more credit-worthy your customers are, the more value you will derive from a factoring agreement. But you don’t need to handle all the due diligence on your own.

Merchant Factors provides a comprehensive debtors’ book administration and collection service as part of a factoring agreement. Trained professionals on the Merchant Factors team also manage credit control, conducting detailed credit checks and assessing credit limits with access to a range of leading databases, including Merchant Factors’ own. This helps companies to identify high risk debtors early, and prevent losses and bad debts from crippling the business.

    This expert service includes:
  • Opening new debtors’ accounts
  • Checking the completion of credit application forms
  • Performing the necessary credit checks and assessing credit limits
  • Sending reminder letters and final demands where necessary and as guided by clients
  • Verifying deliveries as an after-sales service
  • Assisting in the settling of disputed accounts and liaising with attorneys when accounts are handed over (in consultation with clients)

Merchant Factors always keeps companies well-informed of all assessments and transactions by means of clear, comprehensive sales and related management information. This is shared by email, in hard copy or via an online portal that is available around the clock.

Finance that grows with your business

With Merchant Factors, your finance agreement is based on your turnover rather than the value of bricks and mortar. This means that your business model or expansion plans are not limited by an inflexible overdraft cap or loan amount. Rather, your access to working capital grows as your revenue increases.

The danger of not choosing a scalable funding approach is that your business could outgrow your loan amount, once again plunging you into a cash flow crisis. With factoring, your finance matches your operational cycle and your unique business needs.

Why Merchant Factors?

Merchant Factors was founded in 1988 to offer growing businesses an alternative to traditional bank loans. The firm is a leader in local and cross-border finance; and is able to tailor its facilities to suit most emerging small and medium size businesses. Since its inception, Merchant Factors has supported over 2000 growing companies.

As the only truly independent debtor finance institution in South Africa, Merchant Factors can offer the shortest turnaround time in the industry from application to pay-out, in addition to comprehensive debtor administration services.

For fast, flexible finance – contact Merchant Factors today

Finance beyond the Numbers.

Does factoring affect customer relationships?


Working capital and credit control services to take your business forward SMEs in South Africa and abroad use factoring to improve their liquidity ratios and keep their business finances healthy. Factoring is a form of debtor finance that involves a company selling its invoices to a third party (a factoring company) to improve cash flow and ensure ready access to the working capital required for growth.

When a business makes a credit sale, payment is normally due within a pre-determined period, typically 30, 60, 90 or even 120 days. With a factoring contract in place, the organisation does not have to wait for months to receive cash against the sale. Rather, it can access funds immediately – to fund daily operations, pay salaries, cover rent and fuel growth.

However, converting sales into cash is just the beginning. When handled by an expert factoring company, this approach to business finance also enables companies to cut complexity in the back office.

Factoring saves time and resources

Many companies choose factoring over bank finance due to the extensive support that reputable factoring companies provide in the areas of credit control and debtor administration.

When a business enters a factoring agreement with Merchant Factors – a financial institution that has been providing working capital solutions to growing businesses for almost 30 years – Merchant Factors acts as the company’s accounts and credit control department.

    The services provided by Merchant Factors include:
  • Opening of new debtors' accounts
  • Performing debtor credit checks and assessing credit limits using intelligence gained from Experian, ITC and the Merchant Factors database
  • Sending reminder letters and final demands where necessary
  • Verifying deliveries as an after sales service
  • Banking receipts and allocating payments made according to remittance advices received from debtors
  • Assisting in settling of disputed accounts

How this benefits business

Many smaller businesses do not have the capacity, skills or budget to handle these processes effectively and successfully in-house. With Merchant Factors handling credit control and debtor administration, the business does not need to acquire or retain these sought-after (and therefore costly) skills.

Beyond saving time and money, the business owner also avoids having to deal with overdue invoices or disputed accounts personally, which is a huge relief. These types of interactions can be stressful and place strain on the good relationships that the business has built with its customers. Merchant Factors acts as a buffer between the business and its clients in this regard.

Does factoring impact customer relationships?

Some businesses are concerned about how their clients will react when Merchant Factors begins dealing with them.

Merchant Factors understands that healthy customer relationships form the bedrock of any business strategy. In today’s competitive commercial landscape, the customer experience can be the difference between maintaining and losing a business relationship.

To this end, Merchant Factors handles credit control with the utmost respect and professionalism. A team of highly-skilled and experienced credit control professionals will quickly develop relationships with the company’s customers, ensuring efficient collection of monies owed – in a way that reflects well on the company.

Merchant Factors also helps to explain its involvement and correct any misconceptions that a company’s customers may have. Factoring is a well-established business finance strategy that is used by many companies in South Africa and internationally. Over R25 billion in turnover is factored by South African businesses each year – helping to fund growth and keep businesses healthy during seasonal fluctuations in demand.

It’s also important to note that factoring does not require an SME to relinquish control of any important customer or business decisions. Should it be necessary for Merchant Factors to issue a final demand, for example, it will only do so in conjunction with the company. Existing clients often use Merchant Factor’s disciplines as an “excuse” thus avoiding any negative impact on their relationship with the debtor!

Why Merchant Factors?

Merchant Factors was established in 1988 to offer growing businesses with an alternative to traditional bank finance. Since its inception, Merchant Factors has provided financial and professional support to over 2,000 organisations, enabling them to keep their business strategies on track.

Also, as the only truly independent debtor finance institution in South Africa, Merchant Factors offers businesses the shortest turnaround time in the industry from application to pay-out.

For fast, flexible finance – contact Merchant Factors

Finance beyond the Numbers.

Invoice factoring and invoice discounting: what’s the difference?


Working capital and credit control services to take your business forward As a small or medium enterprise, you may be looking for an alternative source of business finance – a funding mechanism that does not carry the same limitations as a traditional bank loan. You may need faster access to finance than the banks are able to give you; or you may be looking for a working capital solution that grows with your turnover.

Factoring is a financing strategy adopted by businesses around the world to unlock the cash that is tied up in their accounts receivable (i.e. invoices). Instead of waiting months and months for the payments due to you on your credit sales, a factoring company can advance working capital against your outstanding debtor balances.

This is a smart way to stay cash flow positive, so you can continue paying your operational expenses while also funding your business growth plans. The amount of money you receive is based on your invoice amounts and not tied to bricks and mortar value, so you can access an amount that is commensurate with your income.

Invoice factoring or invoice discounting?

Invoice factoring is often confused with – or compared to – invoice discounting. While these two financial services have some similarities, they are not one and the same.

With both invoice factoring and invoice discounting, a third party provides the working capital against the accounts receivable of a business. With factoring (or sometimes referred to as “invoice factoring”), the third party (a factoring company or Factor) buys the credit sale invoices from you. With invoice discounting, the third party generally uses the accounts receivable as collateral for the funding.

There is no loss of equity or control of the business with either option.

Sales ledger management

    When you enter into a factoring agreement, the factor acts as your accounts and credit control department, taking over the following functions:
  • Opening accounts for new customers;
  • Managing credit checks and assessing credit limits;
  • Handling collections and payments;
  • Sending reminder letters and final demands where necessary;
  • Assisting in settling of disputed accounts; etc.

With invoice discounting, on the other hand, all these roles remain your responsibility. You continue to administer your own sales ledger, chase payments and manage credit control processes.

Due to the amount of back office support provided, which frees up time and other resources, factoring will most likely appeal if you do not have the budget, staff, time or patience to manage these functions in-house. Essentially, factoring gives you an expert and highly professional credit control team at your side.

Acknowledging that there’s a third party involved

When you opt for the factoring route, your customers will be made aware that you have handed your debtors’ book over to a factoring company.

With invoice discounting, however, you continue to collect payments from your customers directly, and they are usually unaware that there’s a third party involved.

While confidentiality may be very important to you, it’s essential to note that factoring is a well-established and well-respected financing method worldwide – for many different reasons.

Many companies choose to factor their invoices to ensure that they have enough cash available for growth, whether they’re planning to buy more stock, upgrade equipment, increase their talent pool or expand their footprint. An expert and professional factoring company can explain their involvement to your customers in these terms, dispelling any concerns they may have around dealing with a third party.

Which option is best for your business?

Every company has own unique business goals, financial needs and customer relationships. All these issues will influence the decision between factoring and invoice discounting.

If factoring sounds like the right option for your business, be sure to select a factoring company that has the experience, reputation and independence to provide your business – and your valued customers – with the exceptional level of service deserved.

Why choose Merchant Factors?

Merchant Factors has been providing working capital solutions to SMEs and growing businesses for almost 30 years. The company was founded to offer organizations in South Africa with a sound alternative to traditional bank loans and overdrafts – and today, Merchant Factors is the leading independent factoring specialist.

Bringing a team of expert credit-control professionals with it, Merchant Factors liberates businesses from having to evaluate their customers’ creditworthiness, phone debtors for payments due, send reminders and final demands, or handle receipting and reconciliations. This enables small business owners to focus on business issues instead of wasting hours and hours chasing payments and juggling other sales ledger duties.

Merchant Factors’ independence, experience and flat organisational structure means that, unlike many larger financial services institutions, it can customise its facilities to suit most small and medium size emerging businesses, no matter whether their turnover is R100,000 or R15 million per month.

This independence also enables Merchant Factors to offer the shortest turnaround time in the industry from application to pay-out.

For fast, flexible invoice financing – contact Merchant Factors today.

Finance beyond the Numbers.

Working capital and credit control services to take your business forward


Working capital and credit control services to take your business forward Factoring is a type of business finance that provides an alternative to traditional bank loans and overdrafts. Despite local businesses factoring over R25 billion in turnover each year, some South African companies are still unfamiliar with this funding strategy, designed to provide growing businesses with fast access to working capital.

Many companies offer their customers products or services on credit. This means that these businesses must wait for 30, 60, 90 or even 120 days before receiving the funds that are payable on invoices due. This can have a significant impact on cash flow and almost always restricts business growth.

How factoring keeps companies in business

Factoring is a solution provided by various financial services providers, including banks and independent factoring companies, that enables an organisation to draw cash back into the business before the customer pays.

When partnering with Merchant Factors, a totally independent finance house founded in 1988, up to 75% of the value of an invoice can be paid on presentation of the POD, with the balance being paid as soon as the customer settles the account in full.

Back office support: the added advantage of factoring

Unlike many other financial institutions whose service extends to the provision of finance only, Merchant Factors provides much-needed support in another challenging area: the administration of the debtor’s book.

Collecting and managing payments requires a significant amount of effort and also uses valuable time that could rather be spent running the business. Add to this the headache-inducing instances where customers are difficult to reach or payments are overdue, and this process becomes an arduous one that wastes many precious working hours.

As part of its comprehensive factoring solution, Merchant Factors handles sales ledger administration on behalf of the business. This is similar to providing the company with an entire accounts and credit control department – a service that saves hours and hours of valuable business time.

    Merchant Factors’ team of trained credit control professionals handle the following processes:
  • Opening of new debtors' accounts
  • Checking the completion of the credit application form
  • Performing the necessary credit checks
  • Assessing credit limits
  • Sending reminder letters and final demands where necessary and as guided by clients
  • Verifying deliveries as an after sales service
  • Banking receipts and allocating payments made according to remittance advices received from debtors
  • Assisting in settling of disputed accounts and liaising with attorneys when accounts are handed over

All of these services are carried out in consultation with the business. At no point does the business lose control of its debtor’s book, customer relationships or company reputation.

A completely professional service

Most companies are relieved to save the hours they would otherwise have dedicated to chasing payments/managing collections. However, some businesses may be concerned that their customers could react negatively to the prospect of dealing directly with Merchant Factors.

Merchant Factors understands that collections are an important step in the customer journey and that good customer relationships are a valuable asset. This is reflected in the professional way that Merchant Factors introduces its team and handles credit control. Their expert service not only reflects well on the business but also provides a welcome shield between the business and the delicate issue of ‘difficult’ collections.

Merchant Factors’ team of highly experienced administrative and credit control professionals quickly develop solid relationships with the business’s customers to ensure both positive customer experience and efficient collection of monies owed.

Complete transparency

Another benefit of teaming up with Merchant Factors is their 24/7 online system that provides clear, comprehensive sales and related management information. The business can monitor all aspects of its factored debtors’ details every step of the way.

About Merchant Factors

Merchant Factors was established almost 30 years ago to offer an alternative to the lengthy processes and limitations applicable to the funding that banks generally make available to their clients, including growing small and medium sized businesses. The financial solutions that Merchant Factors offer are innovative, flexible and fully focused on fostering business growth.

Since its inception, Merchant Factors has provided financial and professional support to over 2,000 organisations, enabling them to keep their businesses running smoothly and successfully.

Significantly, as the only truly independent debtor finance institution in South Africa, Merchant Factors offers businesses the shortest turnaround time in the industry from application to pay-out.

Unlock working capital and professional administrative support today. For fast, flexible finance – contact Merchant Factors.

Finance beyond the Numbers.

How factoring helps to reduce your risk of bad debt and losses


How factoring helps to reduce your risk of bad debt and losses Regrettably, many businesses in South Africa have experienced a painful loss of income due to unpaid accounts receivable. Bad debt expenses occur when a business is unable to collect the funds that it is owed, because the debtor is facing bankruptcy or other financial problems, and all reasonable efforts to collect these outstanding payments have been exhausted.

Of course, their loss is not just limited to the amount owing on the invoice. It also includes the time and raw materials that were committed to fulfilling the order or providing the service, as well as the future anticipated earnings from that client who suddenly ‘went under’.

It’s not surprising that the risk of doing business with a high credit risk customer can keep even the most experienced business owners awake at night. While they may have gone to every effort to assess customers’ creditworthiness and ask for trade references, the amount of due diligence required to really “know your customer” can be incredibly time consuming and costly. The expense of accurate credit checks and the like may be unaffordable for some smaller businesses.

However, bad debt losses can be a serious challenge for business owners who need constant cash flow to keep their companies operating efficiently. Often, a bad debt can mean there’s no working capital available to the company to pay salaries, operate equipment, cover rent and electricity, and meet other critical day-to-day business expenses.

Even when a company does have some cash to cover everyday expenses, unpaid invoices – with no hope of collecting these payments – could also send a business right back to square one: a place where there’s absolutely no working capital available for growth.

Fortunately, there’s a solution.

Factoring companies are credit control experts

‘Remember that the six most expensive words in business are: “We’ve always done it that way” – Catherine De Vrye.

Sometimes, the best risk control strategy is to outsource the risk mitigation and control function to an expert partner. Teaming up with a well-established, trusted and experienced factoring company helps organisations to minimize bad debt losses and ensure they sell on credit only to creditworthy customers.

Factoring is a business finance solution that is used by organisations around the world; and an industry that is growing rapidly. It involves a company selling its accounts receivable to a factoring company. This unleashes working capital and helps to protect the business against the risks of running out of cash while they’re waiting out credit terms on their accounts receivable (sometimes up to four months).

Yet this is only part of the value that factoring companies can provide to their clients. Factoring specialists also offer expert debtor administration services on behalf of the businesses with which they partner. This saves many valuable business hours that could be spent pitching for new business or landing a new contract.

At Merchant Factors, a dedicated team of debtor administration and credit control professionals analyse delinquent debtors to help clients prevent losses and bad debts. This also facilitates the early identification of high risk debtors.

Merchant Factors makes the debtor administration and credit control process as painless as possible. This includes handling the opening of new debtors' accounts, checking the completion of the credit application form, performing the necessary credit checks and assessing credit limits using intelligence gained from Experian, ITC and Merchant Factors’ own comprehensive database.

With Merchant Factors making informed, expert credit decisions on behalf of businesses, the risk of bad debt losses is significantly reduced.

    More reasons to partner with Merchant Factors:
  • Complete transparency:
    Merchant Factors provides clients with a 24/7 online system that provides clear, comprehensive sales and related debtor management information
  • A strong track record:
    Merchant Factors was established in 1988 to offer growing businesses an innovative, fast and flexible funding alternative to bank finance. Over the years, Merchant Factors has provided financial and credit control support to over 2,000 organisations, enabling them to meet their business goals.
  • No lengthy waiting periods:
    As the only truly independent debtor finance institution in South Africa, Merchant Factors can offer businesses the shortest turnaround time in the industry from finance application to pay-out.

For fast, flexible finance and a robust credit risk control strategy – contact Merchant Factors today.

Finance beyond the Numbers.

Cash flow squeeze? Invoice factoring may be able to assist you!


Cash flow squeeze? Invoice factoring may be able to assist you! “Never take your eyes off the cash flow because it is the lifeblood of business.” – Richard Branson. Many small- and medium-sized businesses invoice healthy amounts for products delivered and services rendered, yet experience a cash flow crunch because their customers require market related credit terms.

In South Africa, it is not uncommon for businesses to sell on terms extending to 30, 60, 90 or even 120 days after date of statement. While their reasons for doing so vary, these companies often need to allow such terms to prevent their customers from going elsewhere.

Unfortunately, not all organisations can afford to wait so long to receive the cash that is owing to them. Doing so could put their cash flow as well as the health of their businesses at risk. Not having working capital means not being able to meet payroll, purchase raw materials, maintain stock levels, process the next round of orders, pay suppliers or cover other business-critical expenses.

Uncertainty over cash flow may also mean putting business growth plans on hold. The risk of spending on increased stock, upgrading equipment or exploring a new business avenue could be too great if it is unclear when clients are going to pay their invoices.

Invoice factoring could be the answer

One way to inject much needed cash into a business – now rather than later – is to opt for a well-established financing method called invoice factoring. Used by companies around the world to finance operational cycles and meet expansion plans, invoice factoring involves a business selling its invoices (i.e. accounts receivable) to a finance partner like Merchant Factors, who will then collect payment of the invoices directly from the customers of the business.

Factoring gives companies both big and small the opportunity to draw working capital back into the business when it is needed, without having to apply for a bank loan, or give up equity or control. In fact, some businesses make invoice factoring part of their business models so that they can offer their customers favourable credit terms without having to worry about cash flow, chasing customers for money, or spending hours administering the debtors book – an expert factoring company takes care of this on behalf of its clients.

How to qualify for invoice factoring

    If your business meets the following criteria, you could qualify for a fast and flexible invoice factoring solution from Merchant Factors:
  • You have an annual turnover of between R1 million to R20 million
  • You sell on credit terms not exceeding 120 days
  • You deal business-to-business only (i.e. no consumer debt lending)
  • You sell on an outright basis, not on consignment or "sale or return"
  • You have no sales involving contractual obligations that need to be performed at a future date, such as retentions, progress payments, interim claims or draws (construction businesses are excluded)

If this sounds like your business – invoice factoring is an ideal way to ensure the steady cash flow you need to keep your business operating optimally and your relationships with your suppliers healthy.

For the record – a note about credit scores

It’s important to understand that unlike traditional bank finance or overdraft facilities, your chances of qualifying for a factoring agreement are reliant on the quality of your customer’s credit rather than your company’s own credit score.

This means that any issues with your own credit record will not necessarily affect your chances of factoring your invoices.

We care about the future of your business

Merchant Factors is the only truly independent factoring house in South Africa with over a 30 year track record. This affords us the flexibility to offer our clients the fastest turnaround time in the industry from application to pay-out.

    In addition to accessing the working capital you need as fast as possible, another reason to partner with Merchant Factors is the fact that our debtor administration services save your valuable time.
  • Evaluating your clients' creditworthiness
  • Distributing monthly statements
  • Calling debtors to chase payments due
  • Sending reminders and final demands as and when necessary
  • Handling receipting and reconciliations
  • Liaising with attorneys if it becomes necessary to institute legal action and collection processes

To find out whether you qualify for our fast, flexible financing solutions – contact Merchant Factors today.

Finance beyond the Numbers.

A solution to the small business finance gap


Cash flow squeeze? Invoice factoring may be able to assist you! Small and medium enterprises (SMEs) are the driving force behind job creation in South Africa, where they provide employment to a significant portion of the population. According to the Business Partners SME Index for the fourth quarter of 2016, almost half – 47% – of local SMEs had hired new staff members in the past 12 months.1

Small businesses are also heavyweight contributors to the nation’s economic development. A study on the small, medium and micro enterprise (SMME) sector of South Africa commissioned by the Small Enterprise Development Agency (SEDA) found that SMMEs can act as “key drivers of economic growth, innovation and job creation.”

The study gauged the extent to which this sector contributes towards GVA (GDP before taxes and subsidies) and found that SMMEs were responsible for 18% of GVA in the fourth quarter of 2010. Notably, this contribution increased over the years to reach 22% by the second quarter of 2015.2

How can we ensure that this upward trend continues?

For small businesses to continue stimulating economic growth and creating jobs in the current lukewarm economic climate, there are several factors which will need to be addressed. One significant challenge that many local SMEs face is limited access to business finance.

When the 2016 National Small Business Survey was conducted, interviewing more than 17,950 organisations across the country, the findings indicate that a lack of funding and/or insufficient cash flow is the biggest obstacle in the path to growth for this important sector.3

How can SMEs bridge this funding gap?

As economic expansion slows, some banks are becoming more risk-averse and it can be difficult for smaller businesses to access traditional loans and overdraft finance from these organisations. Equity financing is another option, but this can mean losing ownership or control of the business – a situation that many business owners want to avoid after the effort of building an enterprise from the ground up.

An alternative – and innovative – funding mechanism available to SMEs is asset-backed finance. This involves funding that can be backed by a range of corporate assets, including invoices. For companies that sell on an outright basis, accept credit terms not exceeding 120 days and deal business-to-business only, invoice factoring is an ideal way to access the working capital that is needed to fund the operational cycle, cover other everyday business expenses and keep growth plans on track.

When a business factors its invoices, it sells these to a financial services provider, ideally a specialised factoring company. This company then provides the business with funding that is secured against debtor balances outstanding; and takes over the responsibility of managing the sales ledger.

How invoice factoring benefits SMEs

Provided the small business chooses a reputable and experienced factoring company, invoice finance can unlock a range of advantages.

    These include:
  • A much-needed cash injection to meet payroll, rent, tax payments and other operational expenses
  • Working capital for business growth
  • Access to finance without compromising equity or control
  • A financial agreement that scales with the business, due to it being based on accounts receivable rather than bricks and mortar
  • The freedom to focus on profit-generating tasks while the factoring company chases invoice payments
  • The ability to pay suppliers promptly and capitalise on purchase discounts
  • A chance to build better relationships with suppliers and other stakeholders

All these benefits contribute to the long-term financial well-being of the business, which is good news for the SME sector and ultimately, the broader economy.

Choosing the right financier

Merchant Factors is an industry leader in servicing growing businesses in South Africa and beyond with innovative and flexible financing tools.

Since 1988, the company has been providing asset-based finance to growing businesses as an alternative (or supplementary facility) to traditional bank loans and overdrafts. Today, Merchant Factors is a well-established debtor finance institution that has successfully assisted over 2,000 businesses in achieving their unique financial goals.

One major advantage that Merchant Factors offers its clients is the fastest turnaround time in the industry from application to pay-out. This is made possible by its position as the only truly independent debtor finance institution in South Africa.

For fast, flexible invoice financing – contact Merchant Factors.

Finance beyond the Numbers.

How to unlock your working capital


Invoice finance a growing business finance trend Every business needs funds to pay for the operational cycle - the time it takes to invest in the inventory required to produce goods or services, sell these and receive cash in return. To ensure they can continue operating efficiently through each cycle, as well as remain on a growth trajectory, companies need a certain amount of cash in the business – known as 'working capital'.

Working capital is calculated as an organisation's current assets minus its current liabilities. Typically, current assets include cash, accounts receivable, inventory and other resources that can be turned into cash; while current liabilities tend to be expenses that are due in less than 12 months.

Measuring financial health

A working capital ratio or net working capital formula is a common metric used to gauge the short-term financial wellbeing of a business. This is calculated by dividing current assets by current liabilities. A ratio less than 1 indicates negative working capital, which means that the company will struggle to pay its short-term liabilities, such as its debtor invoices or taxes payable, among other expenses. Any ratio over 1, on the other hand, indicates positive working capital.

In general, a higher ratio (over 2 and climbing over time) could raise a flag that the company is not leveraging its assets efficiently. Perhaps the company is paying its bills on time, but not collecting the cash that’s owing to the business fast enough, due to debtors insisting on lengthy invoice payment terms. If the company does not address this, it could soon risk running into cash flow problems.

How your unpaid invoices can lead to cash flow problems

With your working capital tied up in unpaid invoices, there is a risk that you could run out of cash to pay your expenses halfway through the operational cycle. You may also find yourself in a serious cash flow crisis if something unexpected should happen, such as an accident or natural disaster that has an impact on your premises, stock or supply chain.

Alternatively, you could witness a sudden peak in demand for your products or solutions, and then struggle to meet this due to a lack of cash in the business as you wait out your invoice payment terms. A 30-, 60- or 90-day wait for payment on your accounts receivable could create a gap for your competitors to step in and capitalise on new opportunities before you can.

One way to unlock much-needed cash in a fast and scalable way is to use invoice factoring as a method of working capital finance. Factoring is a finance solution that involves selling your accounts receivable to a factoring company. This company then provides you with the cash injection you need to keep your business running efficiently and successfully.

    If you choose to partner with Merchant Factors, we will also handle your debtor administration. This means that you can delegate the following tasks to our team:
  • Sending monthly statements
  • Phoning debtors for payments due
  • Sending reminders and final demands
  • Handling receipting and reconciliations
  • Liaising with attorneys if it becomes necessary to institute legal action

This is one of the chief advantages of choosing to factor with Merchant Factors. You do not only get the cash that’s owing to your company when your business really needs it, but you also free up your time to focus on projects that add value. You’ll be amazed at how much time you save (and stress you avoid) when you don’t need to deal with the headache-inducing task of chasing invoice payments.

Improve your working capital now

Merchant Factors was founded in 1988 to offer businesses of all sizes an alternative to traditional bank loans and overdraft facilities. We specialise in local and cross-border finance; and we’re able to tailor our facilities to suit the unique needs of our clients and their operational cycles.

Since our inception, we've successfully supported over 2,000 organisations, enabling them to keep their businesses running smoothly and successfully.

We are also proud, as the only truly independent debtor finance institution in South Africa, to be able to offer you the fastest turnaround time in the industry from application to pay-out.

Unlock your working capital today. For fast, flexible invoice financing – contact Merchant Factors.

Finance beyond the Numbers.

Business finance solutions: 10 reasons to choose factoring


Invoice finance a growing business finance trend When your business needs access to working capital, what are your options? Many small and medium enterprises find it difficult to obtain traditional bank finance in this economy; and even when they do, the approval and processing period can last weeks, sometimes even months.


    Invoice factoring is a relatively simple step you can take to free up cash within your business. Here are ten reasons why it makes good business sense to choose a factoring solution from Merchant Factors.
  1. No need to wait months for payment

    If your cashflow is compromised by having to wait 30, 60 or 90 days until your clients pay your invoices, invoice factoring is a solution. This financing method involves your business selling your invoices (i.e. accounts receivable) to a finance partner like Merchant Factors, who will then collect payment of your invoices directly from your clients. Factoring gives you an opportunity to draw working capital back into your business so that you can pay salaries, increase your stock levels, process a new round of orders or capitalise on a business opportunity.

  2. No need to put your business plans on hold

    Many companies use invoice factoring to fund business growth without having to give up equity or control. Factoring also provides ready cash to buy more raw materials, upgrade equipment, hire new employees, explore new revenue streams or put other plans into action without having to wait months before your invoices are paid.

  3. No debt is incurred

    Unlike traditional bank finance or overdraft facilities, factoring is not a loan. This means that you do not incur debt when you factor. When you partner with Merchant Factors, we charge an administration fee plus a discount rate which is agreed with your business upfront. This rate ranges from between 2.0% and 3.0% above the prime lending rate on funds that have been advanced until the invoice is settled by your customers. The administrative fee ranges from 0.5% to 2.5%.

  4. It's not about your credit history

    Factoring agreements are reliant on the quality of your customer’s credit rating unlike high street banks as less reliance is placed on your balance sheet such as minimum equity requirements and gearing ratios.

  5. Your working capital matches your business needs

    Typically, bank loans are capped according to the value of bricks and mortar. When you choose factoring, however, your access to capital increases as your turnover grows, because this capital is directly linked to the growth of your accounts receivable. This means that factoring is a financing solution that scales with your business.

  6. Fast access to finance

    Many small and medium enterprises struggle with the lengthy periods between applying for a loan and receiving the cash. With factoring, you have swifter access to the cashflow you need to keep your business running. Furthermore, Merchant Factors is the only truly independent factoring house in South Africa, which means we have the flexibility to offer the fastest turnaround time in the industry from application to pay-out.

  7. Back-office support

    One of the chief advantages of partnering with Merchant Factors is the valuable debtor administration services that our team will provide. We act as professional credit controllers, administering your sales ledger for you, which means you can focus your time and resources on other business-critical tasks and processes.

      Our services include:
    • Evaluating your customers' creditworthiness
    • Sending monthly statements
    • Phoning debtors for payments due
    • Sending reminders and final demands
    • Handling receipting and reconciliations
    • Liaising with attorneys if it becomes necessary to institute legal action

  8. You benefit from our expertise

    Merchant Factors has been providing a wide range of businesses with working capital solutions for 29 years. Founded in 1988, we have successfully enabled over 2,000 clients to meet their business goals.

  9. We’re independent

    Our independence, experience and flat organisational structure means that, unlike the banks, we are innovative, flexible and committed. We are also able to tailor our facilities to suit most emerging small and medium size businesses, no matter whether your turnover is R100,000 or R15 million per month.

  10. We have many satisfied customers

    Over the decades, we have built strong and lasting partnerships with numerous clients – taking a real interest in the success of their businesses.

"In the current economic climate, it’s encouraging to deal with decision-makers who are accommodating towards your working capital requirements, but they more importantly, businessmen that believe in the potential of your business. Not only do Merchant Factors believe in your ability, but they show a real interest." – Paul Issa, Buccaneer Shoes

Unlock your working capital today. For fast, flexible invoice financing – contact Merchant Factors.

Finance beyond the Numbers.

Invoice finance: a growing business finance trend


Invoice finance a growing business finance trend Asset-based finance, a term used to describe funding against a range of balance sheet assets including invoices, is a well-established and fast-growing financing strategy that is used by businesses on a global scale.

In the UK, for example, organisations are increasingly opting for asset-based finance to fund new business initiatives and growth opportunities. Many companies use this financing strategy to supplement more traditional types of finance such as overdrafts and loans.

According to research conducted by the Asset Based Finance Association (ABFA), the amount of asset-based finance provided to companies in the UK reached a record high of £22.2 billion in 2016. This represents a healthy 13% year-on-year increase.1

The Association reports that last year, 80% of asset-based finance was derived from invoice finance, which involves businesses securing funding against their unpaid invoices. During 2016, the capital unlocked through invoice finance accounted for £17.9 billion of overall funding provided to businesses in the UK.

Commenting on the findings, Chief Executive of the ABFA Jeff Longhurst noted that invoice finance and other methods of asset based finance is ideal for both SMEs and larger businesses.

“All sizes of UK businesses need to be aware of the possibilities and opportunities that asset based finance can provide them beyond what traditional sources can often offer them,” Mr Longhurst commented.

Invoice finance in South Africa

Factoring, a form of invoice finance that provides working capital against debtor balances outstanding, is a financial strategy used by a wide range of businesses in South Africa, including both SMEs and larger corporations.

Also known as “accounts receivable financing”, factoring involves a business selling its invoices to a third-party finance provider, known as a “factor”. This gives the business access to much-needed working capital – funds that are already owing to the business – in order to meet daily expenses as well as continue with growth initiatives that may have been put on hold while waiting out lengthy invoice payment terms.

The factor then takes over the responsibility of collecting payment of the invoices directly from the business’s clients, acting as a credit controller and administering the sales ledger on the business’s behalf.

The advantages of factoring
    When you choose the right finance partner, invoice factoring unlocks many benefits:
  • There’s no need to wait out lengthy invoice payment terms of 30, 60, 90 or even 120 days.
  • You can grow your business and generate profits instead of wasting time chasing invoice payments.
  • You’re able to minimise your risk of bad debt and thus build better relationships with suppliers and other stakeholders
  • Without compromising equity or control, you have the freedom to expand your business.
  • Due to having the ready cash to buy in larger quantities, you can capitalise on purchase advantages.
  • You can also pay suppliers promptly and be eligible for purchase discounts.

There is little doubt that these advantages are attractive. However, it’s important to choose the right business finance provider, who can offer you a comprehensive invoice factoring service that is backed by in-depth industry expertise.

Why choose Merchant Factors?

Merchant Factors was founded in 1988 to offer asset-based finance to growing businesses as an alternative to (or supplementary to) traditional bank loans and overdrafts. Today, we’re a well-established yet fully independent debtor finance institution that specialises in local and cross-border trade finance.

Two important characteristics of our business model are innovation and flexibility; and we can tailor our facilities to suit the requirements of most enterprises. Since our inception, we’ve successfully assisted over 2,000 businesses in achieving their unique financial goals.

    In addition to unlocking working capital, Merchant Factors offers comprehensive debtor administration services that include:
  • Performing the necessary credit checks on new and existing debtors;
  • Sending reminder letters and final demands where necessary;
  • Verifying deliveries as an after-sales service;
  • and liaising with attorneys should disputed accounts need to be handed over.

All these services are handled in line with our clients’ requirements – and no action is taken independently of your guidance.

Most importantly, we pride ourselves on the fact that Merchant Factors can offer you the fastest turnaround time in the industry from application to pay-out. This is made possible by our position as the only truly independent debtor finance institution in South Africa.

With more enterprises around the world accessing invoice finance, now is the time to explore this innovative and rewarding business finance option. Contact Merchant Factors today.

Finance beyond the Numbers.

Can you afford to wait? The solution to lengthy invoice payment terms


Can you afford to wait? The solution to lengthy invoice payment terms Late invoice payments are a major headwind for many business owners. This is an issue of particular concern for companies in the small and medium enterprise (SME) sector, because SMEs generally have fewer resources and their cash flows are more at risk when their debtors take months to pay.

As a business owner, a weak cash flow can impact your ability to meet your day-to-day operational costs. It can also have a broader impact, affecting your employees’ job security and career goals, as well as the relationships you have with various stakeholders in your supply chain – not to mention your own business development plans.

    A recent survey in the U.S. 1 explored the impact that unpaid invoices and late payments have had on SMEs across the country. The research results indicate that:
  • 23% of small business owners are unable to hire new employees;
  • 23% can’t invest in new equipment;
  • 20% have put their marketing efforts on hold;
  • 18% are unable to offer pay increases or bonuses to their employees;
  • 18% are unable to offer pay increases or bonuses to their employees;
Local SMEs are also affected

Late invoice payments are also a stumbling block for companies in South Africa. Xero, a local research firm, recently surveyed 517 small businesses across South Africa and this research indicates that almost one third of respondents (32%) have experienced cash flow issues due to late invoice payments.2

Commenting on the study, Marnus Broodryk, CEO of The Beancounter and Shark Tank SA, said:

"Late payments are a big problem for many small businesses. The resulting issues with cash flow can stifle growth and even put entrepreneurs out of business.”

How do late invoice payments affect your business?

As this research shows, chasing accounts receivable can place pressure on many areas of a business. When your company fails to receive timely payments on your invoices – or is forced to wait out extended payment terms of 60, 90 or even 120 days – it puts a stranglehold on your cash flow, affects the health of your business and forces you to place your growth plans on hold.

Without access to working capital, you’re unable to buy the equipment or stock required to increase production and sales, finance marketing efforts to attract new opportunities, or invest in the human capital that you need to take your business forward.

You may also struggle to reward your valued staff, which could affect motivation levels and threaten your ability to retain business-critical skills and talent. Ultimately, this impacts your profitability and your reputation in the market.

At the same time, many small businesses waste significant resources chasing their late payments, which means that invoice backlogs are not only affecting cash flow but also taking up time that would be far better devoted to more strategic pursuits.

How to unlock capital

When your clients take months to pay you, what are your options? Qualifying for a bank loan can be a time-consuming process, involving an often frustrating review of your company’s financials, assets and liabilities, and credit history.

Fortunately, there is a faster way to access much-needed working capital. Invoice factoring is a financial strategy used by businesses around the world. Sometimes referred to as “accounts receivable financing”, factoring involves a business selling its invoices (i.e. accounts receivable) to a third-party organisation, known as a “factor”. The factor then collects payment of the invoices directly from the business’s clients. Essentially, factoring gives you the ability to access the cash that is owed to you without having to wait out your clients’ lengthy invoice payment terms.

Unlike a bank loan, a factoring agreement unlocks working capital fast, without debt being incurred.

Why Merchant Factors?

At Merchant Factors, we believe that prolonged invoice payment terms pose a serious risk to the SME sector. We founded our business in 1988 to provide a solution to this challenge. Since our inception, we’ve successfully assisted over 2,000 businesses in reaching their financial dreams.

Today, Merchant Factors remains a fully independent finance house, which means that we are agile enough to provide you with working capital solutions as you need them. We understand that you can’t afford to put your business goals on hold – and we therefore offer you the fastest turnaround time in the industry from application to pay-out.

For fast, flexible financing – contact Merchant Factors today.

Finance beyond the Numbers.

How healthy is your business?


How healthy is your business? A healthy business is a resilient, resourceful and forward-thinking business that can continue operating and meeting client expectations despite the ups and downs that are created by macro- and microeconomic factors.

While many factors are out of your control, such as a natural disaster or political volatility; you can plan for unexpected events by building resilience into your business strategy. You can also put processes in place for better managing the factors that have a direct impact on your business.

    These include:
  • Your target market
    Your customers and clients have an incredible amount of influence over your business. If they did not choose to buy your products or services, then you wouldn’t be in business at all. Your customers may not always be right, but listening to them and understanding their needs (and pain points) will enable you to create a solution that meets their expectations. Understanding your target market is integral to winning and retaining their business.
  • Your people
    By investing in the best skills and talent to produce or sell your products, or provide your services, you can give your company the edge in a competitive marketplace. Whether you choose to offer decent salaries, generous benefits packages, great working conditions or attractive career progression opportunities – make sure you are doing your utmost to attract, retain and motivate the experts your business needs to thrive.
  • Your supply chain
    To operate profitably, you need to work hard to negotiate the best deals you can on your raw materials and goods from your suppliers so that you can offer a competitive price to your customers. You also need to be sure that you can rely on every individual and entity along your supply chain, so that you don’t let others down further down the line or end up doing business with someone unsavoury who could damage your reputation by association.
  • Your business image
    The way that your target market and community perceive your company has a significant impact on its well-being. If you operate with social and environmental responsibility, give back to the community, treat your employees fairly and conduct business in an ethical manner, you will build a strong and healthy reputation in the market that will not only increase customer or client loyalty, but also help you to attract the most sought-after talent and gain a competitive advantage.
  • Access to finance
    Cash is king when it comes to keeping your business healthy. It means you have the working capital you need to keep your daily processes running optimally, as well as to build and grow.

    If your business often grapples with low cashflow while you’re waiting for your clients to pay their invoices – often sitting out invoice payment terms of 30, 60 or 90 days – you should consider factoring as a financing option.

    Factoring is a financing strategy adopted by businesses around the globe to unlock working capital. Sometimes referred to as “accounts receivable financing”, factoring involves a business selling its invoices (i.e. accounts receivable) to a third-party organisation, known as a “factor”. The factor then collects payment of the invoices directly from the business’s clients.

    Essentially, factoring gives you the ability to draw cash back into your business when it is needed to boost cashflow and enable you to meet expenses, mitigate the risk of potential bad debt, and meet your growth goals.
Improve your cashflow now

Merchant Factors was founded in 1988 to offer growing businesses an alternative to traditional bank loans. We specialise in local and cross-border trade finance; and we’re able to tailor our facilities to suit most emerging small and medium size businesses. Since our inception, we’ve successfully assisted over 2000 businesses in reaching their financial dreams.

As the only truly independent debtor finance institution in South Africa, Merchant Factors can offer you the fastest turnaround time in the industry from application to pay-out.

For fast, flexible financing – contact Merchant Factors today.

Finance beyond the Numbers.

Survive or thrive? How to maintain profitability in all business climates


How to maintain profitability in all business climates When you have been running a business for any length of time, you know that there will always be ups and downs – no matter whether you’re navigating broader economic challenges or operating in a market that is characterised by seasonal demand.

However, some companies seem to be able to handle the quiet seasons better than others. If your business strategy is only suited to smooth sailing and not resilient enough to handle the rocky patches, you may be setting yourself up for failure – or at the very least risking your reputation due to disruptions in service delivery, missed production deadlines, quality breaches, late payments and so forth. Reputational damage could negatively impact your ability to bounce back when the going gets good as you may no longer be able to attract the top talent, win new contracts or maintain your overall competitive position in the market.

Here are some recommendations for how you can keep your business healthy in every business climate.

Be agile not frugal

Optimising your day-to-day operational costs is critical when you’re dealing with fluctuating demand. Everything from your staff complement to your stock levels need to be carefully planned to ensure you are not tying up much-needed cash when demand flattens.

However, it’s important not to rein in your expenses to the point where you stall your own growth. Ideally, look for ways to introduce more agility and scalability into your resource planning. For example, you may consider a managed staffing or seasonal labour solution, renting equipment rather than buying it, or pay-as-you-go IT resources (such as software and business process applications on the cloud, which can scale to suit your budget and business needs).

Be pro-active not re-active

In some industries, it is easy to plan for times of feast and famine. For example, a company that offers seaside accommodation would be well-prepared for lower revenues during the colder winter months.

However, not all ups and downs are that easy to predict; and this is where you can really put your business in danger – should a sudden drop in earnings catch you unawares. In this case, you could analyse your data to see if you can identify demand patterns, as well as keep up to date on developments in the local and global markets that could spell trouble for your business. Forewarned is forearmed.

Keep nurturing your relationships

No matter whether you’re selling business-to-business or business-to-customer, keep your relationships with your clients, suppliers, distributors and other stakeholders current and healthy, even during the slow months. The last thing you want is to waste time re-connecting when a busy season rolls around. Stay in touch and you’ll remain top of mind.

Maintain a healthy cashflow

Without a steady cashflow, your business can’t meet daily running costs, let alone capitalise on new business opportunities that come your way. Ensuring that you have access to working capital when you need it is therefore not only a strategy for surviving the tough times, but also a tactic for taking full advantage of spikes in demand when they do occur. With cash at hand, you have more flexibility to step up production when the market recovers.

That said, it can be a challenge to access cash when you need it, especially when the entire economy is putting on the brakes. Qualifying for a bank loan can be a long and frustrating process, during which the bank will review your company’s financials, assets and liabilities, and credit history.

Fortunately, there is a faster way to access the working capital you need. Factoring is a financial strategy used by a wide range of businesses around the globe. Sometimes referred to as “accounts receivable financing”, factoring involves a business selling its invoices (i.e. accounts receivable) to a third-party organisation, known as a “factor”. The factor then collects payment of the invoices directly from the business’s clients. Essentially, factoring gives companies the ability to draw cash back into the business when it is needed, rather than wait out invoice payment terms – which can run into months.

Unlike a bank loan, a factoring agreement unlocks working capital quickly and you do not incur debt when you factor. Also, you’re qualified for the funding based on the quality of your customer’s credit rather than the strength of your own balance sheet.

Do you have what it takes to succeed in every season?

At Merchant Factors, we understand that you have unique needs during each business season. Founded in 1988, we are a well-established yet totally independent finance house, which means that we are agile enough to provide businesses with innovative and relevant working capital solutions when they are needed – ranging from factoring to stock and bridging finance.

We also understand that you can’t afford to put your business goals on hold. This is why Merchant Factors offers you the fastest turnaround time in the industry from application to pay-out.

For fast, flexible financing – contact Merchant Factors today.

Finance beyond the Numbers.

Bridging the gap: interim finance solutions to suit your business


Bridging the gap: interim finance solutions to suit your business Increased regulatory scrutiny in the wake of the 2007-2008 financial crisis has put pressure on banks to adopt a more risk-averse culture and prohibitive customer onboarding processes. In this environment, like many organisations around the globe, you may find it challenging to access the finance you need to weather business storms and put your growth plans into action.

Fortunately, there are other funding mechanisms available that offer a lifeline to businesses in need of short-term working capital. These include bridging finance and trade (or stock) finance.

The benefits of bridging finance

In recent years, more customers and businesses have become aware of the benefits of bridging finance, and soaring demand has fuelled phenomenal growth in the sector. In the UK, for instance, the regulated bridging finance sector is valued at GPB 4 billion.1

Bridging finance is an asset-backed loan used to maintain liquidity while waiting for a cash inflow due in the near future. For instance, some firms choose to use a bridging loan to cover business funding gaps while they are in the process of arranging longer-term finance.

While loan amounts and terms vary, bridging finance is typically provided as a short-term loan – generally between three and nine months. By its nature, bridging finance can be accessed easily and quickly, especially when it is facilitated by reputable private institutions that specialise in alternative funding services.

If your company is established in the market and you have efficient sales ledger administration and collection routines, this is a finance opportunity that may be ideal for your organisation.

    Why apply for bridging finance?
  • Access funds fast:
    Bridging finance boosts your cashflow. With a well-selected finance partner, you can expect to receive the funds quickly.
  • Don’t put growth plans on hold:
    Bridging finance empowers you to take advantage of opportunities in the market before your competitors do – with ready cash to invest in the raw materials, stock, equipment or technology you may require.
  • Expand and hold onto equity:
    This interim funding option allows your company to expand without having to sell equity to fund this growth.
  • Mitigate the risk of reputational damage:
    By keeping cashflow healthy, bridging finance helps your business to stay liquid, meet expenses, keep your relationships with suppliers healthy and maintain your good standing in the market.
The freedom to finance more stock

Trade or Stock finance is an asset-backed facility that enables growing businesses to increase their stock levels. Essentially, it provides the working capital you may require to fund the operational cycle (i.e. from the time payment is made to a supplier until funds are received from customers).

This allows you to respond to increased demand; and boost your sales and profits without tying up the internal funds you need for your other operational expenses.

This form of finance is typically layered over and above conventional banking finance, with the purpose of increasing your flexibility to increase stock levels as and when required.

    Why apply for trade or stock finance?
  • Generate more profit:
    This financing option allows you to augment sales of existing product lines, as well as develop new ones.
  • Gain purchasing advantages:
    By being able to buy in larger quantities, you may benefit from economies of scale or receive purchase discounts through prompt payment of suppliers.
  • Respond quickly to demand fluctuations:
    Trade or stock finance makes funds available for special opportunities, emergencies and seasonal peaks.

Ultimately, these benefits translate into greater profitability and a more competitive position in the market for your business.

Looking for the ultimate interim finance solution?

Merchant Factors was founded in 1988 to offer growing businesses an alternative to traditional bank loans and overdraft facilities that are more headache-inducing than helpful.

We understand that you have unique needs at various points in the lifecycle of your business. As a totally independent finance house, we have the agility to provide businesses with innovative and relevant working capital solutions when they are needed – ranging from factoring to stock and bridging finance.

We also understand that you can’t afford to put your business goals on hold. This is why Merchant Factors offers you the fastest turnaround time in the industry from application to pay-out.

For fast, flexible financing – contact Merchant Factors today.

Finance beyond the Numbers.

Factoring stands the test of time


Factoring stands the test of time Like all financing strategies, factoring has evolved over the centuries to keep pace with developments in the commercial world and the legal sphere, as well as the emergence of technology such as air travel, telecommunications and IT.

However, through the ages, factoring has always remained true to its central objective – which is to provide companies with the working capital that they need to operate optimally, take advantage of new business opportunities and meet their expansion goals.

Today, factoring is a financial transaction that involves a business selling its invoices (i.e. accounts receivable) to a third-party organisation, called a “factor”. The factor provides the business with the cash that’s owing to them and collects payment of the invoices directly from the business’s clients. This gives the business an opportunity to access working capital when it is needed, rather than experience cashflow problems while waiting out invoice payment terms of 30, 60, 90 or even 120 days.

The idea of boosting cashflow through factoring is not new. In fact, factoring is a well-established form of lending that dates back as far as the days of the ancient Babylonians.

A brief history of factoring
    Let’s look at how factoring has evolved through the years:
  • Origins of factoring:
    Historians believe that factoring was first established to finance business and trade in ancient Mesopotamia, with evidence of factoring preserved in the Babylonian Code of Hammurabi, which dates to about 1754 B.C.1
  • 1300s:
    Factoring became a well-established form of business lending in 14th century England, particularly in the clothing trade.
  • 1600s:
    Factoring crossed the Atlantic in around 1620 when the Pilgrims colonised America. Traders in this community needed cash to pay for raw materials like timber and tobacco, which were shipped back to England.
  • 1800s:
    During the Industrial Revolution, factoring became a common form of business finance for companies throughout Europe and the United States.
  • 1900 – 1950s:
    The popularity of factoring rose rapidly in the United States, especially within the clothing and textile industries. Some banks began introducing factoring services.
  • 1960 – 1980s:
    The factoring industry was booming due to rising interest rates and the fact that more stringent banking regulations were impacting the availability of loans.
  • 1990s:
    The major players in the financial services industry, including GE Capital and GMAC (General Motors Acceptance Corp) auto loans, launched their own factoring service offerings. Some smaller firms created niche factoring solutions for specific industries.
  • 2000s:
    The digital revolution has given birth to technology that makes factoring management processes more efficient. This translates into faster access to finance for businesses that want to boost their cashflows through factoring.
Our track record

First established in 1988, Merchant Factors has spent the past three decades providing innovative and flexible working capital solutions to a wide range of clients spread across a variety of industries. Almost 30 years on, we are a well-established leader in the local and cross-border factoring and trade finance industry.

Historically, factoring has been a relationship-focused business. While we do leverage modern technology to increase efficiencies and create a better customer experience, Merchant Factors still adheres to the age-hold approach when dealing with clients – building open and personal business relationships through regular, face-to-face meetings. This enables us to gain an in-depth understanding of each client’s business, as well as their current priorities and future plans.

As the only truly independent debtor finance institution in South Africa, Merchant Factors can offer clients the fastest turnaround time in the industry from application to pay-out, in addition to comprehensive debtor administration services.

Each application is assessed according to the quality of the debtors' book and future prospects of the applicant, instead of the often prohibitive methods used by certain other finance houses. As a result, over the years, our services have contributed to the growth and success of over 2000 businesses to date.

For a business financing strategy that has stood the test of time, contact Merchant Factors today.

Finance beyond the Numbers.

Cash in on success: why cashflow is business-critical


Why do companies need ready cash The availability of cash resources is important to both the short- and long-term health of your company. You may be invoicing impressive sums of money, but until that cash is paid over to you, it can’t keep your business ticking over, fuel its growth, or protect you from the risk of unpaid bills and bad debt.

No matter the size of your organisation, sufficient working capital is the life force of your business.

Why do companies need ready cash?
  • Cash keeps your business operating:
    Without a positive cashflow, how can you invest in the raw materials, stock, transport, electricity and other assets that keep your business ticking over? You may even struggle to pay salaries and rent on your business premises come month-end.
  • Cash is an expansion tool:
    A company can easily stagnate when there’s never enough cash available to fuel growth. You may have the most innovative ideas and ground-breaking expansion strategies, but these are just dreams until you have cash at the ready to put them into action. Developing your business, no matter how conservatively, requires extra capital. Depending on your industry, you’ll need cash to invest in the equipment, employees, technology, infrastructure, retail space or other resources that make growth possible.
  • Cash is critical in a crisis:
    No company is immune from unexpected costs. Will you be sufficiently prepared if a plumbing problem needs an immediate solution, critical equipment breaks down or an unforeseen event damages your stock? These types of emergencies, accidents and failures can eat into your available cash, fast – leaving you with precious little to cover your usual running costs. Maintaining a healthy cashflow is the best way to protect your business against the consequences of meeting expenses that you didn’t initially plan for.
  • Cash keeps you agile:
    Every now and then, a business opportunity comes your way that you weren’t expecting, but you must act on quickly, before your competitors do. Without access to cash, you may not be able to meet your potential new client’s demands fast enough or diversify into a new area of the market when there is a clear gap that you have the expertise to fill. A healthy cashflow gives you more flexibility to grab once-in-a-lifetime chances that come your way or go the extra mile to win that new account.
Cash may well be king, but how can you keep it flowing in?

Your clients are in the same position as you, working hard to keep cash in their business. This means that they’re likely to push for extended invoice payment terms; and these days, many companies wait 30, 60 and sometimes even 90 days to receive the cash that’s owing to them.

While you may trust that you will receive the cash (eventually), every day without working capital can put your firm at risk. For example, manufacturers need cashflow to keep their production lines up and running. A lack of cash could mean missed delivery deadlines, late shipments and unhappy clients – all at a great cost to the bottom line.

Waiting for invoices to be paid may seem like a short-term problem. However, as discussed, this can impact your cashflow and lead to longer-term issues. For many businesses, both locally and abroad, the ideal solution to this challenge is factoring.

Many firms have heard about factoring, but they’re not 100% sure how it works. Essentially, factoring involves selling your accounts receivable to a third-party organisation, known as a “factor”. The factor then provides you with the working capital you need to keep your business operating and growing.

It’s important to note that factoring is not the same as negotiating an early settlement – as the factor collects the payment in accordance with the invoice terms. If you choose not to factor, but rather to ask your client directly for an early payment, this could be viewed as a sign of weakness. They may wonder whether you have the resources to keep your product quality consistent and maintain a healthy business relationship going forward. Furthermore, the cost of early settlement exceeds the cost of factoring.

Why factor?

Factoring is a financial strategy used by a wide range of businesses around the globe – from SMEs to large corporations. Unlike a bank loan, a factoring agreement unlocks working capital quickly, allowing you to mitigate all the risks associated with poor cashflow. Also, as there is no debt, you’re qualified for the funding based on your client’s credit health and not your own.

The factoring team takes over the responsibility of collecting payment of the invoices directly from your clients – acting as a credit controller and administering your sales ledger on your behalf. In addition to providing you with the ready cash you need to grow your business, a factoring agreement also frees up your time, allowing you to spend more time putting your expansion strategies into action.

Improve your cashflow now

Merchant Factors was founded in 1988 to offer growing businesses an alternative to traditional bank loans. We specialise in local and cross-border trade finance; and we’re able to tailor our facilities to suit most emerging small and medium size businesses. Since our inception, we’ve successfully assisted over 2000 businesses in reaching their financial dreams.

As the only truly independent debtor finance institution in South Africa, Merchant Factors can offer you the fastest turnaround time in the industry from application to pay-out.

Access the cashflow you need to meet your business goals – contact Merchant Factors today.

Finance beyond the Numbers.

The X Factor: what sets factoring apart from traditional bank loans?


The difference between factoring and loans Factoring is a financing strategy adopted by businesses around the globe to unlock working capital. Many companies can’t afford to wait for 30, 60 or 90 days until their clients pay their invoices. They need the cash that’s owing to them to pay salaries, process the next round of orders, or capitalise on new opportunities before their competitors do.

Sometimes referred to as “accounts receivable financing”, factoring involves a business selling its invoices (i.e. accounts receivable) to a third-party organisation, known as a “factor”. The factor then collects payment of the invoices directly from the business’s clients. Essentially, factoring gives companies the ability to draw cash back into the business when it is needed, rather than wait out the invoice payment terms.

Why factor?

Many companies choose to factor because they prefer faster payment on their invoices. This boosts cashflow and empowers these organisations to meet expenses and mitigate the risk of potential bad debt. It also gives them the freedom to upgrade equipment, acquire new employees and embark on other activities that grow the business.

Factoring can also put companies at a competitive advantage. Before, cashflow concerns may have forced them to walk away from deals with clients who could only offer payment terms of 30, 60 or 90 days. With factoring in place, however, these companies can accept these deals without compromising cashflow.

While factoring clearly offers numerous advantages, this is not the only way to finance your business. Many companies explore the traditional bank loan route first – sometimes because they simply do not know that factoring is an option.

Are you looking to boost your cashflow? Here’s how factoring differs from traditional bank lending.

Factoring vs. borrowing from the bank
  • Ease of access: In South Africa and the rest of the world, banks have been more risk averse since the financial crisis and subsequent global economic meltdown. In this challenging environment, many companies – especially SMEs – are struggling to access bank loans. Qualifying for a bank loan is an arduous process. The bank will review your company’s financials, assets and liabilities, and credit history. A bad credit record, even based on an issue that was resolved years ago, may put your business out of the running for a bank loan. Factoring, on the other hand, focuses on the quality of your customer’s credit, rather than your own credit score.
  • Turnaround time: Seda, an agency under the Department of Trade and Industry that focuses on small enterprise development, describes applying for business finance in South “is a slow, frustrating and disappointing process”. Banks can take a long time to process your application, sometimes up to eight weeks; and then you may still have to wait months before the cash is made available to you1. With factoring, however, you boost your cashflow almost immediately.
  • The amount you’re allowed to finance: When you borrow money from a bank, the amount is capped. Because this limit is based on the value of bricks and mortar, your access to capital does not increase as your turnover grows. With no flexibility to accommodate expansion, a business could grow too fast for the loan amount, which again results in a cashflow crisis. On the other side of the coin, factoring is scalable. The amount of money you can finance increases as turnover rises – because it’s based on your accounts receivable. In other words, your working capital matches your business needs.
  • The debt issue: When you borrow from the bank, you must pay back the principal loan as well as interest on top of this amount. By contrast, factoring is not a loan. This means that you do not incur debt when you factor.
  • Back-office support: While traditional bank loans do not come with the added advantage of debtor administration services, many leading factoring specialists offer valuable back-office support. Factoring firms can act as professional credit controllers, administering your sales ledger for you. They can evaluate your clients' creditworthiness, phone debtors for payments due, send reminders and final demands, handle receipting and reconciliations, and even help you to liaise with attorneys if it becomes necessary to institute legal action. All of this frees up your time and resources, allowing you to focus on more strategic issues, such as increasing your sales and expanding your business.
Does your company require working capital, now?

Merchant Factors was founded in 1988 to offer growing businesses an alternative to traditional bank loans. We specialise in local and cross-border trade finance; and we’re able to tailor our facilities to suit most emerging small and medium size businesses. Since our inception, we have empowered over 2000 businesses to reach their financial goals.

As the only truly independent debtor finance institution in South Africa, Merchant Factors can offer you the fastest turnaround time in the industry from application to pay-out, in addition to comprehensive debtor administration services.

For fast, flexible invoice financing – contact Merchant Factors today.

Finance beyond the Numbers.

Face up to the Factor – Factoring myths busted!


Factoring Myths Busted One of the most underutilised working capital tools in the South African SME environment is factoring or invoice discounting. We bust 3 Myths surrounding Factoring to showcase this very adaptable, and viable, finance option for growing businesses. Read our infographic to find out more.

Have You Factored in Rapid Growth?


case study have you factored in rapid growth Trek Plastics have been navigating the South African business landscape for over half a century, first as a tool & die manufacturer then expanding into the plastics industry in 1978. In 2015, landing a lucrative contract appeared to be a dream come true for the Port Elizabeth-based company but cash flow restrictions threatened to derail the golden opportunity.

Managing Director and owner, David Truter, was quick to realise that the new contract to supply Ford Engine Plant packaging for their export components was a mixed blessing.

He told us: "Ford's required payment terms were in excess of our normal 30 day period which meant that we needed to effect payment to suppliers prior to the receipt of the money from our debtors. Our book increased by nearly 50% and our cash was effectively locked up in paper!"

At the time, Trek Plastics opted to make use of an invoice discounting facility with one of the commercial banks but a number of limitations led them to seek assistance from independent finance house, Merchant Factors.

He continued: "Dealing with our bank for an increase in our overdraft/invoice discounting facility was lengthy and tedious but, since having been referred to and taking up a facility from Merchant Factors, all I need do now is make a call and submit updated sales and cash flow projections. Provided that the projected value of our debtor's book can support the required increase, I am able to secure access to cash in the form of an agreed percentage of the additional invoicing."

After the taking up facilities offered by Merchant Factors in May 2015, Trek Plastics have seen their business grow significantly.

"Since the move, my turnover has doubled and has increased from just over breakeven to a healthy profit, largely due to the confidence that we have in our ability to take on the big contracts, with new customers properly credit checked by Merchant Factors before manufacture and delivery, and having more time to 'do business'.

The personal contact with decision makers enables me to concentrate on running my business without always having to worry about cash flow."

Find out more about how Merchant Factors can help your company during times of growth and expansion.

Keep Moving, Stay Liquid


Keep Moving Stay Liquid Whether you’re waiting for a phone call, an important email, or the kettle to boil, waiting can be frustrating. Waiting for cash inflow for your business can be just as frustrating as the anticipation builds, and you feel suspended, unable to progress, unable to grow.

It is said that waiting is a game of patience. But perhaps it is rather a game of motion. When you’re actively doing something else, the wait doesn’t seem to mount such an offensive. When you have momentum that wait becomes secondary, as the result no longer holds your attention, or your progress, hostage. When you can move forward your business moves forward. And what facilitates this movement? Well, a bridge.

"Bridging Finance is an asset-backed form of financing used to maintain liquidity while waiting for an anticipated and reasonably expected cash inflow."

Often short term in nature (three to nine months) Bridging Finance allows access to much-needed funds and the terms around the agreement can be tailored to each unique business’ needs when facilitated by private institutions like Merchant Factors.

"Bridging Finance by its very nature presupposes that it needs to be available almost immediately and unlike commercial banks and other financial institutions, Merchant Factors boast the quickest turnaround time in the industry from application to pay out; making us an extremely viable option in respect of working capital solutions."
Johnny Philippou, Managing Director

For SMEs, Bridging Finance can be a lifeline to help overcome financial hurdles that so many small and medium enterprise companies face in South Africa. Beyond this short-term funding, other creative solutions like Factoring and Trade Finance or working capital finance can assist with growth and expansion opportunities for Business-to-Business entrepreneurs. Find out more by chatting with us here.

3 Cash Flow Tips for Business to Business Entrepreneurs


3 Cash Flow Tips for Business to Business Entrepreneurs Access to finance for SME's continues to be the make or break point for company growth and expansion. According to the World Economic Forum Competitiveness Rankings, South Africa, ranked 49 overall, "hosts the continent's most efficient financial market" placing the country at the 12th position in comparison to her global counterparts. - Source

Being Cash Flow Clever can take your B2B to the next level. Let's look at 3 Cash Flow Tips for Business to Business Entrepreneurs.

  1. Thrive with Long Sales Cycles

    Lengthy sales cycles and terms can make businesses feel the end of the month crunch when accounts need to be settled, but there are still monies outstanding from debtors.

    "For a rapidly expanding or SME organisation, those terms can be crippling and cash flow becomes an increasingly elusive commodity."

    Getting Cash Flow Clever takes the headache and stress out of the waiting game. Factoring, for example, allows businesses to put money back into their own operations while they wait for the customer payments – and with up to 75% of invoice value upon presentation and the balance of 25% less cost flowing back into the business upon settlement by your customer, your business can thrive instead of just survive until month end.

  2. Take advantage of upfront payments/early settlement discounts

    Improve your standing with suppliers by paying for your goods on time, every time. Access to much-needed Cash Flow allows fledgling and established businesses room to negotiate with suppliers on price and deliverables – a positive result for anyone's bottom line.

    "Bulk settlement discounts reduce the overall cost of goods to the business,margins improve and the savings may even cover the costs of the factoring."

  3. Value your equity

    For some entrepreneurs, Cash Flow comes at the (often high) cost of losing shareholder equity, or other levels of control in their own business. Being Cash Flow Clever helps you protect not only your bottom line but your company stake too without diluting ownership. Partnering with institutions that value what you've built is paramount to a successful partnership.

    "For some entrepreneurs, Cash Flow comes at the (often high) cost of losing shareholder equity, or other levels of control in their own business. Being Cash Flow Clever helps you protect not only your bottom line but your company stake too without diluting ownership. Partnering with institutions that value what you've built is paramount to a successful partnership."

    Access to Cash Flow for growth, expansion, and for building good relations with suppliers can help put your business ahead of the competition. Chat to Merchant Factors to find out how you can get Cash Flow Clever.

WTF - Why The Factor


Why The Factor - Working Capital from Factoring to Expand Your Dreams In the current economic climate, SMEs need to look to service providers offering out of the box financial solutions to generate the working capital necessary for growth and expansion. With 28 years experience navigating the South African finance world, Merchant Factors offer just the maverick thinking business owners need. Outlined in the infographic is an introduction to one of our core financial alternatives – Factoring.

Merchant Factors celebrates 28 Years of Success


Since 1988, Merchant Factors have grown from strength to strength and today pride themselves on providing innovative and flexible working capital solutions to a vast array of clients spread across numerous industries. Now in 2016, on their 28th anniversary the Merchant Factors family can revel in the success of the company and its elite status within the finance fraternity.

The founder and visionary of the company, Johnny Philippou, has cultivated a corporate culture of trust, integrity and confidentiality throughout the years, as well as encouraged entrepreneurial and flexible thinking. By hand-picking the Merchant Factors team, he has maintained a commendable level of energy and enthusiasm which ensures their clients achieve consistent and excellent levels of service.

With combined experience exceeding 150 years, it is not unexpected that they are leaders in the Factoring and Trade Finance industry. As a founding member of The Banking Association of South Africa’s Debtor Finance Committee, it is evident that they are truly dedicated to the businesses and organisations utilising this type of financing.

Merchant Factors, being the only truly independent institution of its kind, fall in a league of their own and set themselves apart from competitors by ensuring the fastest turn-around time, from application to pay-out, in the industry.

Their success has not been without its challenges but it is their company dynamics and efficient service culture which have assisted them on the climb to the top. Each application is assessed according to the quality of the debtors' book and future prospects of the applicant, instead of the often rigid methods used by certain other finance houses and this has allowed Merchant Factors to acquaint themselves thoroughly with each current client, ensuring an open and personal business relationship.

Merchant Factors' services have contributed to the growth and success of countless companies and their current client list is both impressive and constantly expanding. The growing company is continually being moulded by Johnny and his team and all eyes are on Merchant Factors to see what the next 28 years will bring!

SA Economy Grew in 3rd Quarter


South Africa's economy grew marginally by 0.7% in the third quarter of 2015, Statistics SA announced on Tuesday.

Source

Internet Fraud Awareness


Increase number of attempts to obtain funds under false pretences. Criminals are targeting the debtors books of companies. Attached "Internet Fraud-Awareness Bulletin" kindly provided by Paul O’Sullivan & Associates.

Document

What SA Businesses can learn from Starbucks


When it comes to doing business in the digital landscape, there’s a lot local companies can learn about adding value to the customer experience and sustaining brand loyalty. Local businesses have not yet optimised the potential of mobile technology in loyalty programmes and have used it in limited ways. The digital loyalty programme of American coffeehouse, Starbucks, is seen as a global success story with 10.4m active members, says Nolan Daniel, director of Paradigm Group

Source

Tapping into craft beer boom


Wine makers plunge into the new craze of "craft beer". This Diversification is a result of wine makers catering to the ever widening variety of wine tourists visiting their estates. Craft beer is produced throughout the year unlike wine makers who traditionally operate seasonally. This has allowed estates to effectively utilize their facilities and manufacture beer throughout the year.

Read More

2015 National Small Business Survey reveals SME optimism despite challenges


Results from the 2015 National Small Business Survey, released by the National Small Business Chamber (NSBC), show the continued resilience of South African SMEs in the face of economic challenges. The annual survey canvassed 18 500 small businesses throughout the country, providing valuable insight into current trends and sentiments in the sector.

Source