Factoring as a lifeline in the business rescue process

Merchant Factors is a financial institution with a specific focus on improving cash flow across a range of industry sectors in South Africa. Our working capital solutions have been utilized extensively over the past 25 years, not only by businesses experiencing rapid growth, but also by those requiring a much needed cash flow injection to get things back on track.

Our experience has shown that Factoring can and does provide a financially viable means to steer a company back on course. Our factoring solution can be tailored precisely for entities who are already in the Business Rescue process as per Chapter 6 of the Companies Act.

Benefits of factoring for companies in Business Rescue:

• Increase in sales and profits
• Cash to settle creditors timeously
• Increased margins and improved credit rating
• Saved management and Business Rescue practitioners time
• Minimising potential bad debt
• Improved return on capital
• Expansion without loss of equity or control
• Development of new product lines
• Purchasing advantages by being able to buy in larger quantities
• Purchase discounts through prompt payment of suppliers (discounts and increased profits should more than offset our charges)
• Available funds for special opportunities, emergencies and seasonal peaks
• A more competitive position for you in the marketplace
• An improved standing with suppliers and customers
• Since we in effect become your partner, you have the added advantage of our expertise, which will benefit the smooth operation of your company

How it works

You enter into a contract with us within business rescue in which you agree to factor your credit sales. In short, the subsequent workflow is as follows:

• You receive a purchase order from your customer
• You complete the work and deliver product or service
• You raise an invoice
• You send the invoice to the customer, and a copy to us together with the POD
• We pay up to 75% of the invoice
• We ask your customer to settle
• We wait for payment
• Your customer settles
• We give you the balance of 25% of the invoice, less our administration fee

Our professional credit controllers will administer your sales ledger on your behalf. They will assess your clients' creditworthiness, attend to credit control and debtor administration, take care of collections, and - if needed - institute legal action.

This means that you are always kept well informed of all transactions by means of clear, comprehensive sales and related management information by email, hardcopy or through the 24/7 online access via our website.

Qualifying criteria for a business to become a potential factoring client of Merchant Factors within Business Rescue

• You sell on credit terms not exceeding 120 days
• You deal business to business only. Sales to debtors who are individuals or sole proprietors are excluded
• You sell on an outright basis, not on consignment or "sale or return"
• You have no contractual obligations that need to be performed at a future date (such as retentions, progress payments, interim claims or draws)