Peter F. Drucker said, “Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.”

The flagging economy has presented many challenges to businesses. One of the most daunting - especially for small and medium-sized firms - has been the lack of access to ready cash.

There is an innovative way to deal with this issue - through the use of a factoring exchange. The concept has been growing in popularity, but many businesspeople are still unfamiliar with it.

A factoring exchange is designed to allow businesses the opportunity to sell their accounts receivables to investors. Such an exchange offers clear benefits for both the buyer and the seller.

Selling their accounts receivable can be extremely advantageous to a company that is struggling to meet such short-term financial obligations as rent, payroll, utilities, etc. It is also very useful for companies who want to grow, expand and continue to invest in their own success, but are forced to put their plans on hold by a lack of working capital.

Accounts receivables typically require an extensive waiting period before payment is received – sometimes as long as 180 days. During that time the business is unable to utilize the asset represented by the amount due. It sits fallow on the balance sheet and the company is unable to leverage the value it represents.

By selling the account receivable using a factoring exchange, the business can get cash within just a few days. The money can be put to use immediately, whether for paying bills or to grow the business through marketing, equipment purchase, inventory, additional employees – whatever the company needs most.  

From the investment side, purchasing accounts receivable makes good business sense because this class of assets is historically less unpredictable and volatile when compared to the market as a whole. It offers investors a unique way to diversify and even out the amount of risk in their portfolio.

Using a factor exchange to monetize accounts owing can be a great way for a company to “turn a problem into an opportunity”.

Robin Trehan, is associted with private equity group of Credit Capital Funding. Also. More information www.creditcapitalfunding.com and www.businesscreditfunding.com