Why Factor?

When a business is deciding to factor its invoices, EHB Capital Solutions recommends that the business evaluate the situation using a cost-benefit analysis. The business should compare the cost of factoring to the business’ rate of return on the cash advancement and the opportunity costs. This comparison should decide the extent to which the business should factor its invoices.

When contemplating the opportunity cost of foregoing the factoring, the next best alternatives are the following:

1. Benefits Forgone at Status Quo: The business may choose to remain at the status quo. In this case it will sacrifice the following benefits:
   
   
1. Concentrate on Core Competencies tae
   
   
2. Avoid bitter Disputes with Customers
   
   
3. Ability to Project Future Cash Flow
   
   
4. Capital to Drive Growth and Fulfill Obligations

2.  Benefits Forgone with Bank Loan: The business may choose to apply for a bank loan.
                      In this case it will sacrifice the following benefits:

1. Quicker Access to Funds:
   
   
2. Cheaper Cost of Capital:
   
   
3. No Loan Covenants:
   
   
4. Healthier Balance Sheet: