I am currently coaching an entrepreneur considering entering into a factoring arrangement for his company. While there are cases where factoring is the only appropriate tool. I am not recommending it in this case.
Let me explain. The company is worried about future liquidity. So the entrepreneur went to a large bank in his city to get a line of credit. They took him through the wringer for four months until they told him NO. Exceedingly frustrated, he is now considering factoring with a company backed by private high-net-worth individuals who he thinks might be able to help him with connections in addition to the factoring.
Five lessons here:
Stay away from big banks
Refrain from assuming all banks are created equal. His experience could be completely different down the street.
Be wary of factoring. It isn't straightforward with liens, lock boxes, and customer notifications. If you need it – it's one thing. But we don't know if that's true here or not.
Always explore SBA options before looking at alternative lenders.
If you’re looking for mentors or advisors, there are plenty of other ways to skin this cat.