How does financial factoring help grow your business?

If you have or work for a company that sells products, you know that financing is a constant dilemma, not only in terms of production itself, but also in other essentials for the business, such as getting merchandise to customers.

Taken to the international level, this challenge can even jeopardize the market presence of any company, especially for SMEs and startups that are usually more vulnerable and go through more critical stages.

That is where the factoring opportunity stands out, as it is more accessible and effective when customers do not pay quickly or within the established period. In general, factoring provides three great benefits to your business:

Greater growth. The more you sell, the more working capital you need. In this context, factoring will help you grow by speeding up your sales, making you more competitive in an ever-changing environment.Lower risk. On the one hand, it gives you more liquidity (which relieves the pressure of meeting payments to suppliers, employees, production and, of course, getting the product to customers). In turn, it gives you the flexibility to face other risk factors of the same international trade of a financial, social or political nature.Cost efficiency. As it is a financing scheme only for a defined amount and period, you finance exactly what you are selling, so it is much more efficient.

Frequently asked questions about financial factoring

What is financial factoring?

It is a commercial transaction where an institution (factor) advances the payment of invoices that a buyer is going to pay on credit (either 30, 60 or 90 days after the shipment of the merchandise).

What are the parties to the financial factoring contract?

There are three parties to a financial factoring contract: seller, factoring company, and buyer.

How many types of financial factoring are there?

There are four types of financial factoring: notice, non-notice, recourse, and non-recourse.

What laws regulate financial factoring?

In Mexico, there is a series of laws that regulate financial factoring operations, such as the General Law of Securities and Credit Operations and the General Law of Auxiliary Credit Organizations and Activities, to which are added the activities of the National Banking Commission and Securities, which contemplates scenarios related to financial technology, including financial factoring as financing schemes.

What are the advantages of financial factoring?

It is a simple process without collateral guarantees and does not generate debts to pay and does not imply stopping other activities of the company. Convert accounts receivable into money to which you have almost immediate access, that is, you have more liquidity and improve your access to working capital.

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