Advantages of factoring to a company or a bank client

1. Regulation of cash flows.

2. Factor will check & advice on client’s customer credit rating /ratings.
3. Incidence of bad debt can be sign ficantly reduced or where factoring is a non-recourse bad
debts are eliminated completely.
4. When sales ledger and debtor control is taken out of company administration the
supervision and management time can be utilized more efficiently.
1. The fact that client debts are a factored will usually encourage debtors to pay factoring
company on time.
2. Cash flow is speeded up and regulated where the client reaches an agreement with the client
reaches an agreement with factor to receive an agreement with factor to receive payment at a
specified future date.
3. Advances taken can help client to obtain discount increase stock and step up production for
profitable expansion to take place.
4. It’s the alternative method to obtain finance especially when the bank has declined to grant
O/D facility.
5. For an exporting client it enable seller to offer open account terms which offers
competitiveness in the market.

Disadvantages of factoring
a). Expensive to the customer.