You’re talking to your niece or nephew at a family barbecue and you notice they have a mouthful of metal. They just got braces. Do you comment on it and risk making your niece or nephew feel even more self-conscious or do you act like you didn’t notice?selling receivables

It’s a conundrum involving disclosure. You might feel a similar pang of discomfort if your small to mid-sized business is selling receivables to a factoring firm for working capital and your customer asks about it. What do you tell him or her? Here are some useful suggestions.

First of all, do not fret. The conversation probably will not come up if the client is from a large company.

“Quite frankly, all the interaction a factor is going to have is generally going to be with the customer’s Accounts Payable Department,” says the Managing Director of the factoring company  Open Capital. “So if our client is working with a purchasing agent, buyer or Project Manager in a large company, there is going to be a huge disconnect between our point of contact and Accounts Payable. They’re probably not going to know that you’re using a factor if they are from a big company.”

If you are dealing with a client from a smaller firm, you tell them that your business is growing. Most factors only deal with prospective businesses whose sales are steady or increasing. Factors avoid failing businesses. If you find yourself in this conversation, you tell the client that:

  1. Business is growing.
  2. Cash flow is not supporting this growth.
  3. Your business needs a flexible, more accessible source of funding than what the bank can provide.
  4. Given you are a small business, factoring allows you to focus your resources on the most critical things, not just accounts receivables.

The question of whether your business is selling receivables to a factor is immaterial.

Really, at the end of the conversation, it doesn’t matter if you’re selling receivables as long as your customer is receiving the same quality of goods or services that they’re accustomed to receiving. It doesn’t matter where they mail the check.

If you would like to explore the opportunity of improving your cash flow needs with factoring, call Open Capital at (855) 424-2952.