Often when business owners hear about alternative financing options such as factoring services, they think it’s a new type of business funding. As with most things that are new, there may be reservations or questions about its legitimacy. Factoring has existed in one form or another for hundreds of years and has helped businesses grow and thrive.
The word “factor” comes from Latin and means “he who gets things done.” Throughout history and through today that is exactly what factoring does. It helps business owners get things done, allowing them to keep their business moving forward. Factoring services have been used by businesses throughout history to expand and improve.
Factoring can be traced all the way back to the earliest civilizations and is particularly evident in the Roman Empire. Rome is considered to be one of the first global empires and its merchants often did business in faraway lands. Factors made it possible for merchants to conduct business during slower seasons – as much of ancient business was based on agriculture. Factors also financed expeditions that helped business owners expand their customer base and increase their operations.
Factoring services continued to be used throughout the centuries across the globe. In England, The Hudson Bay Trading Company and The East India Company financed the growth of their global enterprises using factoring. The Massachusetts Bay Company had a team of factors operating in the American colonies for colonists in need of advanced payment on raw materials shipped across the Atlantic Ocean to England. The surge in the American textile business in the late 1800s and early 1900s helped establish factoring as a popular method of domestic business funding.
The 1970s and 80s saw interest rates rise and bank regulations become more restrictive. This increased the use of factoring, especially with small businesses. More factoring companies were established in the 1990s and the financial crisis of 2008 created a gap in small business funding that pushed factoring services and other forms of alternative finance closer to the forefront of the industry.
Today’s factoring services are rooted in history and continue to help businesses thrive by providing them with additional cash flow when they need it most. Combined with technology such as cloud-based platforms and Fintech, factoring can be applied for and a determination made faster than ever. Yet, factoring is still often viewed with skepticism, which is a bit ironic.
Over 70% of US households have at least one credit card with 1.27 billion active cards. Credit card use is a common form of factoring which American retail depends on in order to thrive. In the credit card scenario, the issuing financial institution is the factor. When a purchase is made with a credit card, the seller receives payment immediately from the factor (financial institution), minus a percentage for using the service.
With credit card use so widely accepted, it raises the question “Why does factoring often get a bad rap?” as it is basically the same type of service. It only takes a few unscrupulous business people, in this case, factors, to damage the reputation of an entire industry. Throughout history, there were those who would require unreasonable percentages for their factoring services, causing distrust among consumers.
With the number of companies providing factoring services growing, they have to offer fair percentage rates in order to remain competitive. Also, factoring providers and other alternative finance companies are governed by state and federal lending regulations and are required to comply with contract and commercial law. Factoring can be a great solution for a business in need of short-term working capital.
Capflow Funding Group will work with you to find the best funding solution to provide your business with immediate capital and keep your business moving forward. In addition to factoring, we also connect our clients to Purchase Order Financing, Inventory Funding, and Merchant Cash Advances. CapFlow services many different industries with a variety of different funding needs. Contact us today and find out how invoice factoring can help grow your small business.
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The peak season differs from business to business. For some, it’s months leading up to all the gift-giving holidays at the end of the year. For others, it’s the warm weather resort season which can vary depending on geographic location. No matter what type of business you own or what time of year your busy season is, the key to success is being prepared. There are steps you can take to make the most of your peak season.
When looking ahead to the next busy season, look at how your business performed during previous years. If peak season business has steadily increased year after year, it’s a good indication that you should prepare for a similar increase during the current year. If the performance of previous seasons reads more like a rollercoaster ride, with varying highs and lows, find out why.
Was there a strong downturn in the economy? Did your inventory run low too early in the season? Maybe you didn’t hire enough seasonal staff or allow ample time to train them properly? Weather can even impact performance if your business caters to the clientele of a seasonal resort. While some factors may be out of your control, looking back can provide valuable insights to help you more accurately anticipate future business and better prepare for the upcoming season.
Preparing for the peak season starts well before it arrives. Begin with your inventory. If it is produced in-house, you may be able to wait until the season is closer to scale production based on the amount of business you anticipate. If you need to order your inventory from a manufacturer, you will have to order early to ensure both the availability and on-time delivery of your inventory.
It’s important to get an early start on hiring and training your seasonal staff. Post openings on job websites at least a couple of months before the peak season arrives. This will give you plenty of time to screen applicants and choose the best candidates. If possible, bring at least a few candidates on part-time before the season begins. This will provide time for thorough training and help you build a strong core staff to get the rest of the team up to speed before the season arrives.
Having ample staff that is well-trained will be beneficial in building strong customer relationships and minimizing customer strain. A properly trained staff should work like a well-oiled machine and be able to keep up with increased business while still consistently providing quality customer service. Consumers are more likely to do repeat business with a company that meets their needs on time, every time. They may also become a brand advocate. Word of mouth, personal referrals, and online reviews are a great way to gain new customers.
If your equipment has been limping along since last year’s peak season, it‘s probably time for an equipment upgrade. Outfitting your business with up-to-date equipment will not only improve customer service but it will also help you attract more qualified candidates. The prospect of working twice as hard with old, antiquated equipment can result in the perfect candidate turning down the opportunity to work with your company.
In today’s digital marketplace, keeping your website up-to-date and working properly is important. Some business owners, especially those who aren’t running an eCommerce business will let maintaining their website fall to the bottom of the to-do list when gearing up for their busy season.
Even if your company isn’t an eCommerce business, it’s crucial that all the information on your site, from business hours and contact information to the products and services you provide, needs to be current. Your customers, especially those who are traveling from out of town, need to be well acquainted with your business before the season arrives. Remember, whether it’s the Christmas holiday or a summer vacation, your customers are planning ahead too!
Preparing for your peak season can put a drain on working capital. There are ways to keep your business on track year round which can make preparation much easier. However, if you find you cash flow dwindling due to peak season prep, Capflow Funding Group may be able to help. We work with a variety of different industries and specialize in invoice factoring and merchant cash advances. Contact us today and prepare for the best peak season yet!
