Can Spot Factoring improve profitability?

Company ABC has a new opportunity with a reputable, well-recognized company. Taking on this new client could potentially double their annual sales volume. Unfortunately, ABC has reached their credit limit and had not paid their last quarter Revenue Canada remittance. As a result ABC’s bank turned down their request for additional financing.

ABC is referred to Philmark. They fill out a two-page application and fax it back together with their most recent financial statements and a copy of their current A/R. Within two business days, Philmark agrees to purchase $50,000.00 of their current invoices. Philmark agrees to advance $45,000.00 (90 %) of this amount. Total cost is anticipated to be 4.0%. The remaining 10% balance less the factoring costs is received shortly after the invoices are paid 30 days later.

Factoring – to increase profitability

See how this Profit and Loss Statement shows how spot factoring can increase a company’s capability for expansion and profitability.

Without Spot Factoring
With Spot Factoring
$ 300,000
$ 600,000
Cost of Goods Sold
$ 100,000
$ 200,000
Fixed Costs
$ 50,000
$ 50,000
Variable Costs
$ 60,000
$ 120,000
Spot Factoring Costs
$ -
$ 24,000
Net Profit $
$ 90,000
$ 206,000

Seize the opportunity – get the cash you need now!

Company ABC is able to double their sales volume due to having the cash needed to seize the opportunity.

After including the projected additional financing costs of $24,000 this company would have improved its net profitablity and bottom line by $116,000 !