If you’re a factoring provider or BDM, you already know that competition can be fierce.
Fighting and haggling for clients is one option, but, how about creating them from scratch without competition?
Time and time again, factoring BDM’s turn away clients that are perfectly fundable by an investment-based lender.
PO or production funders inject the necessary capital required to get clients factor ready, resulting in high-quality fundable receivables.
Let’s run through a few scenarios rather than using cliche terms and jargon about how you can get access to new clients:
Fundable client #1 – The pre-revenue startup (Greenfield)
The client has or is about to set up a PTY LTD due to significant sales opportunities or has created a new “special purpose” CO. to deal with the new contracts.
The client approaches the factor BDM asking for invoice factoring against an order they either have or about to receive. The BDM figures out very quickly that they need funding to pay a supplier or to manufacture goods to meet the order. REJECTED…
Fundable client #2 – The post-revenue startup
The client has been trading for 1-2 years and has a small receivables book relative to their needs. They’ve injected all the founder’s money or raised some seed capital to get them to this point.
The factors BDM is eager to bring the client onboard but soon figures out they’re seeking a substantial injection of capital to meet the production of exciting new sales growth. Furthermore, they’re running a profit loss, and any operational funds taken out of the business could cripple them overnight.
To win the client, they’d need to provide the pre-shipment funding to get suppliers paid; however, the book debts don’t cover the funding, weaker trading history and other assets are maxed out. REJECTED…
Fundable client #3 – The bank client
The factor BDM has an opportunity to win a client from the bank. The client has an import facility with the bank and will only move their cash flow facility if they receive a significant uplift in value to make a move.
The factoring company can match or better the current receivables facility; however, the amount they require to fund supplier payments is far beyond the comfort level of the factor. REJECTED…
Fundable client #4 – The turnaround
The client is either planning a turnaround or has had a controller appointed. The factors BDM is interested in funding the receivables due to the quality and spread.
The client has significant working capital tied up in inventory they need to release or still have profitable new sales orders that require fulfillment, but suppliers have shut down credit limits.
The current ledger doesn’t support the working capital required to meet new sales and significant costs involved in the turnaround, or the client requires a more substantial amount of money to manufacture goods. The profits from new sales generated will fuel the recovery of the business and generate fundable invoices. REJECTED…
. . .
Purchase order and production financiers (What’s production funding?) like Stak partner with factoring providers. It works in tandem to alleviate both financiers to focus on their specialization and risk management.
Stak works by funding pre-shipment costs right through to delivery and creation of fresh fundable receivables for factors.
Stak also oversees all aspects of inspection, logistics, and delivery of the inventory or equipment, significantly reducing the risk for factors advancing on receivables created. Once the client goes into production or delivers products, the company will be able to secure more substantial sales and provide confidence to suppliers.
The client now has a complete supply chain funding solution that alleviates cash flow roadblocks fit for purpose. The client gets a trade facility in one hand and the factoring facility in the other to replenish trade limits and access additional working capital.
Stak operates very close working and practical relationships with factors that sometimes means we’re unable to create the right value proposition for the client. Factors that are open to the idea of building working relationships benefit from the creation of our new fundable clients.
Are you looking to grow your factoring client base? Speak with us.