Give me a Break Risicare, both are done to keep cash flowing. They both have similar costs and need to be looked at that way. Not everything is negative. Would it be nice to have the cash reserves to not do it....yes...is it the end of the world that they are doing it...no.
FMorgan,
Actually there's a huge difference between a company accepting VISA cards as a means of making sales and a company that's forced to use factors to convert its Accounts Receivable into cash.
I have an aunt, for instance, who owns a commercial bakery. She does high-end wedding cakes (e.g., some of which cost up to 25k amazingly enough). She accepts VISA and other credit cards as a convenience to her customers, because it's expected.
The fee she pays VISA (about 2.25% or so last I heard) actually is a one-time, non-recurring fee. It's part of the cost of doing business and nothing more.
However, her business is cash flow positive. After all, she gets paid on or before the wedding and her cogs is a fairly low percentage of the retail prices she charges.
The whole idea of her going out and factoring her accounts receivable would appear preposterous to her, especially at the kind of usurious interest rates SPNG is paying.
Factors are the lenders of last resort, and the fact that SPNG has to resort to factors to raise cash is grim news, not something to write home about.
As always, ymmv and probably does.
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