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With any B-Plan Purchase
425 Page Capital Directory
Through Apr. 30


Business Plan Writer
$425 Flat Rate
No Templates Used
7 Day Turnaround

All Purchased Plans
Are Updated for 2017


Factoring Company SWOT Analysis

 

Strengths

 

Factoring companies are always in demand among businesses that deal with a substantial amount of accounts receivables. Even in strong economic conditions, companies need to factor their invoices in order to maintain their cash flow for inventory purchases. The fees generated by factoring companies are significant. Usually, a fee of 5% to 10% of an invoice is received. The barriers to entry for a factoring company that uses its own capital are very high. At minimum, a factoring business has startup costs of $1,000,000 or more depending on how large the business will initially be at the onset of operations. The licensing requirements of these companies is not intensive given that loans are not provided to individual consumers. Rather invoices are being purchased by the factoring company. The disclosures required to a business client are minimal. The most significant cost for a factoring company is marketing expenses.

 

Weaknesses


There is a strong degree of capital risk each time an invoice is purchased from a third party. Most invoices that are factored have a non-recourse policy. As such, if the buyer does not make payment then the company will take a loss. This can be devastating to these types of financial services companies. As such, it is imperative that proper credit disbursement procedures are put into place in order to reduce the risks associated with these businesses.  The operating costs are considered moderately high. A factoring company needs to allocate a large percentage of its revenues towards marketing and advertising.

 

Opportunities

 

Factoring companies expand their operations by acquiring successive rounds of capital in order to boost revenues. Additionally, client retention is one of the best ways for a factoring business to maintain stable operations. Once an ongoing relationship is developed, the risks associated with purchasing invoices is significantly ameliorated. Banks are usually willing to provide factoring companies with a warehouse line of credit in order to engage in business focused lending activities


Threats

 

The regulatory environment regarding lending is constantly changing. Again, as factoring companies deal with businesses, no much is expected to change in regards to this type of lending and financing. The primarily risk faced by these companies stems from competitive issues from banks that frequently provide asset based lending.

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