Abstract
A survey was conducted to provide information on the experiences of small firms using factoring and the risk/return trade-offs for bank lenders considering adding factoring to their current list of services to small-business customers. Of the sample firms, 58% were in business for 5 years or less. This appears to be consistent with the notion that younger firms with shorter track records and operating histories have difficulty in obtaining financing from banks. Furthermore, when asked directly whether they had problems obtaining traditional bank financing, 64% of respondent firms reported that they had approached three or more banks for lines of credit, and 54% of respondents reported having been rejected for bank financing three or more times. Only 9% of respondents reported that they had not been turned down for a loan or line of credit at least once. These responses suggest that many smaller, younger businesses that factor receivables are considered risky candidates for traditional financing sources.
