What is bank factoring?
The name, bank factoring, might suggest that it is the bank that provides factoring services, but this is a simplification. It is not the banks, but actually companies specifically delegated by them to use bank capital, that offer factoring. This comes with some conveniences, but it also brings with it more limitations. The main issue that draws the attention of companies looking to finance their invoices is the price, and this is the one that banks offer the lowest. The reason is obvious – almost unlimited access to funds.
As everywhere, here too there is the other side of the coin, mainly related to the availability of factoring and the cost of additional services. Although not usually communicated explicitly, banks are reluctant to serve SME companies with factoring -. tend to focus on larger companies with a proven credit history. Few companies with temporary financial difficulties or short tenure can count on bank factoring, as the risk assessment is similar to that used for taking out standard loans.
Taking all of the above into account, it may be necessary to find another solution – such as non-bank factoring.
How does non-bank factoring work?
Non-bank factoring is handled by independent factoring companies , such as PragmaGO. This is a service aimed at all types of businesses. Although the cost of non-bank factoring is slightly higher, they compensate with much greater accessibility, less stringent risk assessment and a range of additional services. Besides, non-bank factoring can be used by customers from any industry – it doesn’t matter what your company does.
Also, if you’re looking for a quick and simplified handling of your case, you don’t need to look any further – independent factoring companies don’t need entire stacks of documents with the company’s credit history. The invoices covered by the contract are sufficient collateral.
Additional services
- Factoring without leaving home – one of the most important features of non-bank factoring is the possibility of online fact oring – just fill out an application online, add a list of regular invoice recipients and you’re done!
- Accounts receivable processing – do you want to focus on your work, offering superior products or services and growing your business? Have the factoring company contact debtors, make sure payment terms are met, and do other administrative work. Although opting for such a service will increase the cost of factoring, it will certainly prove more beneficial than setting up an administration department in a small company.
- Buyout of single invo ices – do you need ad hoc assistance because you have issued an invoice for a large amount, but its due date is several months away? Some companies, engaged in non-bank factoring such as PragmaGO, offer financing for single invoices, so you will regain liquidity immediately.
Which factoring to choose?
When deciding whether to use the offer of a bank or a non-bank institution, it is worth taking into account first of all the current needs of the company. Companies that care about fast financing of invoices are more likely to choose non-bank factoring. The main reasons behind this decision are the speed of the decision and much greater transparency compared to banking services, which are fraught with additional fees.
Nevertheless, it is worth remembering to check all the options available on the market to make the best decision.
