How is Factoring different from a Cash Credit Limit?
Banks typically analyse their customer’s last audited financial statements to assess the Working Capital finance requirements for cash credit. This approach fails when a business is experiencing rapid growth and limits assessed on a historical basis may not be sufficient to fuel business growth. Factoring analyses the funding needs of the business based on the current and projected sales volume and is therefore more in tune with the needs of the business. Additionally, a Cash Credit facility requires you to provide collateral security that is not necessary in case of a Factoring facility. Factoring solutions offer funding upto 90% of invoice value whereas the working capital bank provides between 60 – 75% funding.
