In many situations, factoring is more appropriate than bank financing, because factoring:

Is based only on the accounts receivable. A client's ability to raise cash by factoring is based on the total accounts receivable, rather than on traditional measures of financial strength and stability.

Provides continuing cash flow without the requirement of periodic payments or interim payoffs.New sales continuously create new power to obtain cash, and the business does not have to deal with renewal of loans or worry about maturity dates.

Gives a business increased access to cash as sales and receivables increase. There is no ceiling beyond which the factor must stop providing cash. The more sales a business makes, the more cash it can draw. The factor does not concentrate on the business debt/equity ratio to provide funds, as banks do.

Offers a dependable, continuing source of cash without the necessity of making separate loan applications.

Avoids the necessity of obtaining funds from venture capitalists, who receive an interest in the business and generally have a say in how the business is run.