How factoring benefits SMEs and entrepreneurs

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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.

How factoring benefits SMEs and entrepreneurs

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.

Business woman in the cafe

Advantages of Factoring for SMEs and Entrepreneurs

Factoring is a business financing option that can be very beneficial to entrepreneurs.

Factoring is a way for businesses to borrow money from a factor and pay them interest on the loan.

This can be a great way for businesses to get started, as it allows them to borrow money without having to sell their equity.

Additionally, factoring can be a great way to bridge the gap between when a business has revenues and when it can pay back its debt.

Traditional banks have more requirements in order to give some credit to small businesses and entrepreneurs, since they migh represent a higher risk.

In the case of factoring, these companies rely on the accounts receivable and are more flexible with small businesses and entrepreneurs.

Possibilities and Opportunities of Factoring for SMEs and Entrepreneurs

Factoring is a relatively new way of raising capital, and many people haven’t heard of it, specially entrepreneurs.

This method of financing is much faster than a bank loan, and does not affect the company’s credit rating.

With the use of new financial technologies, it is easier to access to such tools, like the one offered by Xepelin, and create a better control over your financial needs.

As there are more and more entrepreneurs and small businesses that are facing growth, but the challenge to gain liquidity, factoring has become a great financial opportunity to walk away from the traditional banking system, and find support on other companies who already know the challenges of the entrepreneurial path.

Therefore, factoring has become a great possibility to access financing for the short term needs.

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