There are several reasons why Scottish businesses turn to factoring companies. It pays for business owners to look into the experiences of their peers to see why it is such a popular route to go down. With this in mind, here are some of the benefits.
An accessible way of borrowing
The main problem Scottish businesses face when they are trying to borrow money is finding a financial institution that is willing to lend. Since the recession began in 2008, firms across the world have found it increasingly difficult to borrow money. Many traditional financial institutions have become risk adverse to the point where they hardly lend at all.
This has not been the case with factoring companies. Rather than lend less, they have begun to lend more. Invoice factoring is a form of asset based lending. Since 2008, the number of organisations in this sector which have lent to Scottish and UK companies has grown every year. The fact that Scottish firms know that their chances of securing a loan are far higher if they use a factoring firm is one of the key reasons they are giving up on seeking loans from traditional lenders.
Avoiding the red tape
Of course, it is still possible for some companies to get a loan through a bank or other kind of traditional financial institution. However, the process of securing these loans is far longer and more complicated than it once was.
A firm that wants an overdraft or a loan usually has to fill out a number of complicated forms. In many cases, they will also be asked to produce a business plan. This is something which takes a lot of time to produce, and if the loan is refused, it is time that will have been wasted.
For those taking the factoring route, things are much easier. There less red tape and loans can be arranged with just a few details, and there is no need to provide a business plan to secure a loan.
Factoring is faster
The other problem with seeking loans from traditional sources is that it takes too long to get a decision. Firms can find themselves waiting weeks, or in some cases months, for a response to their loan or overdraft applications. With factoring, decisions are normally made in as little as a few hours or, at most, a few days.
In modern business, being able to make decisions quickly and implement changes fast is crucial. A company that needs to take advantage of discounted raw materials cannot afford to wait a week or two while the bank decides whether it will give them an overdraft or not. Using a factoring company, the firm can secure the money it needs quickly, and buy the discounted raw materials before they sell out.
Factoring works well for all kinds of Scottish companies. Now that more firms understand how it works and the advantages of borrowing in this way, they are spreading the word. As a result, even more Scottish companies are using factoring to borrow the cash they need to help their businesses to prosper.