What are the limitations of factoring ?
More Expensive Than A Bank Loan - Accounts receivable factoring is more expensive than bank financing because of the transactional work with the invoices the factoring company does to advance more money more quickly. Costs vary significantly between factors and comparing rates and fees can be challenging. Consequently, invoice factoring cost drivers need to be carefully understood.
- SHRINKS AS BUSINESS CONTRACTS: Factoring can grow rapidly with you but also contracts as quickly if your business is contracting. So factoring may not be a good solution for businesses with great seasonality or other significant downward fluctuations in revenue.