Copying and distributing are prohibited without permission of the publisher
Feelgood factors
01 June 2007
Oliver O'Connell looks at factoring's progression from what has been described as a 'last resort' financing technique in its early days, to its move into the emerging markets and the enormous potential for growth among SMEs in manufacturing-based economies.
The advantages of invoice financing or factoring are well known – factoring can help when buyers are not prepared to pay in advance or put up a letter of credit. In that situation you have to forego the sale or offer open account terms. These terms are very attractive to buyers but place a lot of risk and cash flow burdens on the seller. Factoring helps mitigate the risks and supply the working capital. It also works well with other products to enable the seller to trade on open account safely.
John Beaney, head of international, HSBC Invoice Finance explains: "Buyers can generally purchase more with open account terms than with a letter of credit. The burdens on their bank facilities are lower, so offering open account can lead to increased total sales. There may also be better prices. Customers must also recognise that a letter of credit imposes many disciplines...
You must be logged in to view this page. If you are already a registered user please log in. Alternatively, you can request a free trial or subscribe.
Already have an account?
Subscribe
Subscribers have unlimited access to all current and archive content. Start your
subscription today - click on the button below.
Free trial
Taking a free trial will give you access to the latest news and analysis for two days
(excluding some surveys and articles). Start your free trial today.
