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A factor is the company that fronts your clothing company the money while your waiting to paid by your retail clothing accounts once you have shipped the product and processed the invoice.

We spoke about the process of factoring earlier in this blog in this article Purchase-Order Finance your clothing line orders using no-money upfront! Overcoming Cash-Flow problems! with Factoring, but I think we should dig a little deeper.

What makes my clothing line worth factoring?

There are many types of factoring businesses small and large scale that give start-ups a chance. Just remember the lower your sales volume the higher your interest/commission rates are going to rise and it might not be worth factoring. Commission rates vary from one company to another depending on how long you have been in business, the credit risk factor, and the amount being factored. The good thing about factoring is that once you hand over your store accounts they become active in pursuing payments from your clothing store accounts. Factoring can definitely be a lifesaver when net terms have been set for payment on an invoice and you are in the middle of the season, plus re-orders may need to be shipped out or in production….in those times cash-flow may get a little stiff.

Has your company made use of factoring or were the rates not favorable? Were your sales volume too low? Share your experience?

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Fred

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