What is Factoring?

Factoring is a unique means for small and medium sized businesses to access liquidity that may be currently tied up in accounts receivable. Liquid Capital Principals (franchisees) purchase credit-worthy insured receivables and advances from their clients at up to 85% of their value. Liquid Capital then collects the funds from the debtor and transfers the remaining balance to the client, less applicable fees.

Factoring is an alternative form of financing ideally suited to growing enterprises that do not have a long and established financial relationship with a bank, or suitable assets available for use as collateral. In financial circles, there is a popular saying that banks will “only lend you money when you don’t need it”. That’s because banks operate on a covenant-based financing model that focuses predominantly on a company’s financial history and existing balance sheet. In doing so, they favour companies with strong fundamentals that may not need the funding in the first place.

Think of a growing business as you would driving a car. Major banks tend to look in the rearview mirror, to see where the company has been – its historical performance. By comparison, factoring is all about looking forward through the windshield, to see where the business is going, and all the opportunities available on the road ahead. At Liquid Capital, we look at where the business is going and offer the liquidity needed to help get the business there faster.

Like an inheritance from a long-lost relative, factoring is the financial option that many businesses didn’t know they had. Factoring helps clients access cash immediately to ease their short-term financing needs, rather than waiting the 30-45 days to collect their receivables. Liquid Capital also provides credit assessment, collection, and 24-7 access to all reports.