Factor in Some Good News for the Factoring Industry

The New Year has arrived and with it comes the hopes and expectations for results to exceed those in previous years. Let’s face it, we all want to increase sales and profitability whether it’s in January or the middle of the summer.

With traditional financial institutions continuing their stranglehold on lending to businesses, the factoring industry has experienced a renewed interest from companies seeking additional capital to fuel their growth and maintain even cash flow.

Believe it or not many businesses are doing quite well in the current economic climate despite all of the negative news we read on a daily basis. Companies like Apple and Google continue to have record profits and their stock prices continue to climb.

We’ve also seen an influx of initial public offerings from internet startups such as LinkedIn, Pandora, Groupon and Zillow. With any new IPO, only time will tell how well these companies will perform in the months and years to come. Coming from a person that took a company public a few years ago, get ready for 10-Qs, 10-Ks, earnings calls and every other disclosure required by the Securities and Exchange Commission.

Economic indicators are showing positive signs as well. According to the United States Department of Commerce, the U.S. Gross Domestic Product (GDP) increased at an annual rate of 1.8 percent in the third quarter of 2011. Earnings statistics in Q3 2011 were quite impressive. Based on 443 companies of the S&P 500 index, 76 percent of stocks reported higher earnings per share compared to Q3 2010. Also, 69 percent of S&P 500 topped earnings estimates.

As much as we would like to revel in all of this good economic news, it still needs to be tempered with a dose of reality. The housing market continues to struggle to gain any traction. It is estimated the home values lost over 700 million in 2011. The national unemployment rate is around 8.6 percent with several states such as California and Nevada still in double digit figures.

So what does all of this news mean for the average factoring company?

We take the position that factoring is a valuable tool for businesses in both good times and bad. Whether companies are expanding or maintaining their current structure, accelerated cash flow through factoring is always a viable solution. We advise our clients that if their company’s profit margins allow them to absorb the cost and increase sales, the margins will increase and be a win for both the factor and the client.

Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California.

For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his company’s website at www.oxygenfunding.com.