We were pleasantly surprised to see the current issue of Costco Connection feature an article on how small businesses can survive the cash flow crunch. It offered up factoring as a viable option for cash-starved small businesses that are looking to grow again.

The article confirms that the conventional wisdom that small businesses would lead us out of this Recession hasn’t proved to be as true as we’d like.  Banks continue to hold purse straps tight, despite government pressure, and many big businesses are putting the squeeze on smaller companies by paying their bills more slowly – as a matter of policy.

Once primarily used as alternative financing for the garment district in the United States, factoring has broadened its appeal across sectors. According to the Wall Street Journal’s How to Guide for Small Business Funding, “now billions of dollars in accounts receivable flow through factors each year, many of whom specialize in particular industries such as trucking, construction or health care. Some companies use it as a stop-gap measure to temporary meet cash-flow needs. Others prefer factoring to banks, which often require more paperwork, or other outside investors, who may want a piece of the business.”

One advantage that both Costco and the WSJ touch upon is the ability for a company to get help with collections – a time-consuming task that keeps key personnel away from selling their merchandise and growing their businesses. Costco also advises – as we do – that factors, experienced with overseas suppliers and purchasers, can also be a great help when navigating through the paperwork of international business.

To read more:   Costco Connection, June issue www.costcoconnection.com
Wall St. Journal’s How to Guides for Small Business: www.guides.wsj.com/small-business/…/how-to-use-factoring-for-cash-flow

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