Factoring has been proposed as a solution for companies that are ineligible for other sources of funding such as loans.
It sounds simple enough: You sell your outstanding invoices to a financier to receive immediate payment.
However, in our experience, it may not work for all companies; in fact, small companies often find it hard to factor their invoices for various reasons.
The larger financial institutions strongly prefer to factor larger invoices. This way, they stand to earn more from interest and fees.
Applications are often declined for smaller companies with smaller invoices that are considered less attractive.
Larger financial institutions often require the entire receivables ledger of a company to be factored: i.e. all incoming invoices to be registered.
This isolates companies that want the flexibility to pick and choose which invoices to factor.
Companies that have been set up for less than 2 years will still struggle to get approval, even if they have done business with reputable companies.
Track records and years in business are very important indicators for traditional financiers.
For most factoring arrangements, personal guarantees from company directors are a non-negotiable requirement.
This is very unattractive for business owners who have set up private limited companies to keep their personal and businesses finances separate.
For smaller companies with tighter cash flow needs and those that require cash on short notice, the long approval times and unclear criteria of traditional financiers lead to much stress and uncertainty.
Multiply is a new service that could make factoring work for your company.
You decide which invoice you would like to factor! No invoice or company is too small for us.
Applications to Multiply are almost as simple as shopping online, and you will hear back from the team in less than 2 days.
Best of all, if you fit our clear and transparent criteria, we will not require personal guarantees.
Head to the Multiply website at www.multiply.com.sg or if you have any queries, drop us an email at sales@multiply.com.sg.
Lendingpot.sg operates a Business Loan Marketplace that allows an SME to connect to multiple lenders with just one application, allowing the SME to know who its prospective lenders are and the rates that they offer, in a very short time.
Jonathan Chong is an alumnus of both London School of Economics and Stanford University. He spent 5 years in EDB Singapore and co-founded an energy start-up. He is an ardent supporter and daily practitioner of Dress-Down Fridays.
