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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?
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.