Wiki

Factoring for growth financing:
The cost-benefit comparison

When is factoring worthwhile for your company? If you only look at the cost of selling receivables, you might quickly think: “That’s expensive!” But the true value only becomes apparent in comparison. In this analysis, we highlight the key functions of factoring and compare them with possible financing alternatives – so that you can make an informed decision.

Factoring compared to possible alternatives

Why are more and more SMEs in Germany turning to factoring to finance their growth?
Quite simply:

Immediate liquidity, without additional borrowing
Protection against payment defaults
Relief for accounting and administration

Factoring is particularly attractive: it adapts flexibly to your turnover and does not affect your credit rating – unlike traditional bank loans, leasing models or equity capital. This gives you financial flexibility and secures competitive advantages.</p

Your plus with A.B.S.

The three main functions of factoring

Factoring is one of the most efficient forms of financing for SMEs – especially when all three functions of the sale of receivables are considered together. Full service factoring combines three key functions:

Financing function

Fast liquidity: You receive up to 90 % of your invoice amounts within 24 hours – ideal for companies that want to actively grow, start-ups, exporters or companies undergoing restructuring – i.e. commercial enterprises that can no longer easily obtain a loan commitment in times of Basel II and III or are not yet considered creditworthy in the early stages of their business activities.

Hedging function

Hardly any other financing instrument can offer you full bad debt protection for domestic and international transactions as easily and favourably as full service factoring. This also reduces the risk of getting into financial difficulties yourself as a result of a possible bad debt loss.

Service function

If you make use of full-service factoring, this also means that you transfer your accounts receivable accounting to your factoring provider with all the potential savings and opportunities of professionalised receivables management. Starting with credit checks and dunning through to the implementation of debt collection procedures and representation in court.