It is an interesting perception that invoice finance providers are the lenders of last resort.
Historically I think there is some truth that businesses that were factoring had exhausted there other options. This was typically down to poor financial performance. This may still be the case but for very different reasons.
Overdrafts are no longer readily available to companies. Especially where the main asset on their balance sheet is the debtor book. If you wish to know more you may want to look at the Brumark Case but I won’t go into detail here other than to state that now in many cases invoice finance may be the only real option for many businesses.
Large companies that expect credit terms will almost certainly be used to seeing invoices that have factoring companies assignment notices on them. The perception of factoring has changed dramatically and it is now a very viable option for many successful growing businesses.
While it may be the only option for many businesses this relates to what the banks can offer rather than the poor state of the business looking for working capital to assist growth. On that basis, while factoring may well be the only option it is not considered to be the ‘lender of last resort’ any more.
It can probably be aruged that part of the reason that Companies that use factoring & invoice discounting are fairing better is because those who run these business possibly show a little more entrepreneurial nous, and can see that invoice financing is a good way to grow their business. Where perhaps those that don’t posses quite such forward thinking attitudes are more likely to look for conventional funding, which is not necessarily easy to come by in the present climate.