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Factoring

This topic has 1 reply, 2 voices, and was last updated 8 months ago by John Moffat.

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May 20, 2022 at 9:04 pm #656096
Varun.J.Thakkar
Participant
- Topics: 47
- Replies: 50
Although factor finance is generally more expensive than a bank overdraft, the
funding level is linked to the company’s volume of sales. This can help to finance
expansion and protects the company against overtrading.
Sir can u pls explain how factor finance can protect a company against overtrading?
Thank you
May 21, 2022 at 8:02 am #656112
John Moffat
Keymaster
- Topics: 56
- Replies: 51556
As explained in my lectures, overtrading is when the company is expanding quickly without the necessary increase in the short-term funding. With factoring, the short-term financing from the factor is automatically increasing with the level of sales.
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