Factoring has grown rapidly in popularity over the past 10 years. There are many reasons for this. On the one hand, the major banks are increasingly cautious in providing working capital financing due to stricter regulatory rules. On the other hand, this popularity also has to do with improving the product. More and more innovative parties have entered the market, making the factoring product more customer-friendly and certainly cheaper. As a result, the cost of factoring is often comparable to that of a normal business loan.
The number of Dutch companies using factoring has more than doubled in five years (FAAN figures, March 2022). Also, after the corona dip in 2020, the so-called funds in use, the total credit utilisation, again exceeded the 2019 peak in 2021. Factoring is not only suitable for SMEs, but also for many large companies.
Up-to-date insight with associated funding
With factoring, almost everyone thinks of (pre-)financing accounts receivable. The company pledges or sells its receivables to the factoring company and, in return, receives almost instant payment of an amount equivalent to 85% to 90% of the receivables. What many people do not know is that this asset-based-finance method is also excellent for financing inventory. The method is similar to factoring debtors and also always goes hand in hand with debtor portfolio financing. This can even be applied to sailing stocks, which effectively also takes care of purchase financing. The lender often establishes a link between its system and the company's inventory records, giving an up-to-date insight into the inventory position and associated financing at any time of the day.
Conditions
The requirements for asset-based stock financing are somewhat higher than debtor financing, though, and not all factoring companies offer stock financing. The main requirements are:
- Minimum company turnover €5 million, sometimes even €10 million
- Only possible in combination with debtor financing
- Minimum amount of stock financing €500,000
- Only finished goods that are paid and current and stored in the Netherlands.
- Company must have properly computerised inventory records.
Grow up!
Stock financing is an excellent tool to free up extra cash, which can be used to pay suppliers faster. But it is also an excellent tool for further business growth. Although it is a somewhat more complicated matter, Xolv Finance's advisers know the pitfalls like no other and can ensure that financing is placed with the best party.
Would you like to know more? Then contact one of our advisers without any obligation.
