How factoring benefits SMEs and entrepreneurs
Historically, entrepreneurs and SMEs have been denied financing by the banking sector and in the current context, where interest rates and market flow are in “crisis”, traditional financial institutions have increased the requirements and closed even more the possibility of granting loans to these sectors.
In this sense, factoring services offered by fintechs such as Xepelin have become the most convenient option to obtain liquidity and perhaps the only one to boost the Mexican business sector.
Factoring is convenient for entrepreneurs and SMEs for several reasons, the most important of which are the ease of application and approval, since the list of requirements for this type of financing is very short compared to that of a traditional credit.
Also, factoring has one of the lowest interest rates in the market which, on average, is up to 70% lower than other financial products such as traditional bank loans and working capital.
What is Factoring?
Factoring is the sale of a company’s accounts receivable at a discount, similar to a bank loan, but without the long paper work, or credit checks.
The factoring company purchases the receivables, and pays the company immediately upon collection of the receivable from the customer.
The factor charges a fee for this service, which is added to the cost of the invoice.
Factoring can be a useful way for a business to get cash quickly as it is an advance payment of invoices.
It is also a good way for a business to reduce its reliance on banks and other financial institutions.