Improved Balance Sheet
Factoring in Non-Recourse type, makes your Company have a impoved Balance Sheet. This way, your Company gets better credit ratings and is more sought after.
In the previous Upside“Does not increase debt” we mentioned Non-Recourse Factoring due to the major upside of not increasing the debt of your Company.
Additionally, Non-Recourse Factoring will too improve your Balance Sheet.
Having a healthy balance sheet has huge repercussions on a company’s financial life. Firstly, the lenders, when analyzing your company, will give it a higher rating. In addition, commercial rating companies and Credit Insurers will also consider that your company has lower risk. Better credit rating gives you access to better financing conditions as well as better purchasing conditions from your suppliers. As your suppliers will now have a higher risk coverage ceiling for your company.
Non-Recourse Factoring improves the balance sheet. Because, in accounting terms, it is as if your Buyers were paying your company in cash. Due to this consideration the balance of accounts receivable will decrease. This will have a direct impact on decreasing your Average Collection Period (ACP) while also increasing your Financial Autonomy (FA).
The Financial Autonomy Ratio is one of the main ratios in a company’s financial analysis. Therefore, Non-Recourse Factoring is the cheapest way to increase Financial Autonomy.
To these numerous positive impacts you can add yet another: if you wish to sell your company, with the improvement of financial ratios, it will be worth more.
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If Factoring is set to Recourse Factoring, this means there is a Recourse onto the Supplier. Therefore, in the event of non-payment by the Buyer, the Supplier must return to the Financier the amounts that have been advanced.
Since the funding you receive is linked to the invoices you have issued, the more you sell the more funding you will receive. Most banks set a funding ceiling for your Company. While factoring increases your sales, the financing you receive also increases.
Find out more about the Upsides of Factoring
Does not increase Debt
Complements Credit Risk Coverage
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