Factoring Insights

Tools For Members To Improve Cash Flow

Invoice finance a growing business finance trend

Merchant Factors has been a member of the Chamber of Commerce since 1985 but it strikes us that many of our fellow members are probably unaware of the valuable service we provide. We started trading with the specific objective of providing working capital solutions to businesses with a need for greater cash flow. We're a flexible alternative to the often bureaucratic, corporate banking sector.

Businesses that deal with other businesses often get caught in the stranglehold of the 60 day debtor's trap. Great elation at landing that big contract is often followed by the anxious realization that stock has to be purchased, processed and sold long before any cash actually comes back into the business. And all the while the operational costs keep stacking up.

Our solution to this problem is simple, we take over the debtor's book of the expanding business and advance 75% of the value of the invoices as soon as the deals go through. Once the actual invoices are due a couple of months later, we pay over the balance to the client less our fees. This practice is known as factoring and well, to put it bluntly, it gets the cash in the debtor's book flowing rather than slowing. Globally, factoring is a preferred method of improving the cash flow cycle. Here in South Africa, well over R25 billion in turnover is factored each year. One could also be forgiven for thinking that it's something that only works for expanding businesses. Factoring is also becoming a viable solution to businesses that may be experiencing financial difficulties. These businesses often find it very difficult to obtain finance from banks. Even companies that are under Business Rescue, can utilize Factoring to pull themselves out of the financial quagmire that so many organisations find themselves in, at some point in the business life cycle.

Ideally we'd like the opportunity to present our company to the membership but perhaps we could start by meeting with you. Please phone me directly at 021 466 5244 or e-mail me at laura@mfactors.co.za to arrange a meeting.