Factoring is one of, if not the oldest form of financing; dating back to ancient Mesopotamia and in common practice in Medieval England. In modern times, even with a proven business model, factoring is still a high-risk endeavor that makes many too uncomfortable to try. However, when well-managed, factoring is an auspicious and highly profitable business. For those of you who are Factors that have been running your business for some time, you understand the field and have probably grown more comfortable operating in the factoring world. Yet, think back to your first days as a Factor, or when you were considering becoming a Factor – Were you nervous? Uncertain? Uncomfortable? Did you have a fear of the unknown? I believe the answer is “Yes”.
Now, if you have been a Factor for years, you are likely an expert in underwriting, invoice verification, insurance, money lending, risk analysis, etc. This level of expertise affords a certain degree of comfort which diminishes the initial anxiety experienced when you were a less seasoned Factor. I think Peter McWilliams best captured this experience when he stated, “Comfort zones are most often expanded through discomfort.” Now, if you are a relatively comfortable Factor (we will get back to the notion of “relatively” later) – are you glad you decided to expand your boundaries and brave the factoring waters? My guess is, “Yes”. Otherwise, you probably wouldn’t still be in the factoring business (or reading this blog for that matter). By getting out of your comfort zone, you were able to gain new expertise and, likely, a significant new income stream as well.
Shifting Comfort Zones
Supply Chain Financing (SCF)/Reverse Factoring is a relatively novel business model for the small and middle market and likely a source of uncertainty and discomfort. Supply Chain Finance is not unchartered territory. You know factoring and this is simply reverse factoring. That being said, there are differences and an example of a key difference between SCF and factoring is invoice verification. Supply Chain Finance eliminates invoice verification. In the ArtisPay SCF model, the buyer approves all invoices prior to payment which eliminates one of the most burdensome hurdles of traditional factoring, but consequently allows for rapid and seamless SCF growth.
Another difference with SCF is you are underwriting a buyer instead of the client and multiple debtors. However, underwriting a buyer is essentially the same process as underwriting a debtor, and you have likely underwritten countless debtors countless times in factoring. At ArtisPay, a large part of our job is to help you navigate these familiar, yet different waters. The newness and nuances of Supply Chain Financing can make anyone uncomfortable, but that is a good thing, discomfort is a catalyst for growth – it makes you change, stretch, and adapt. Comfort is relative. When we challenge ourselves, we strive for discomfort and when we achieve expertise, we find comfort in discomfort. The simplicity of ArtisPay allows for comfort in the discomfort, and a hallmark of true sustained growth is finding discomfort comforting.
A founder of Artis Trade Systems, Jamie Clemons, CPA, started his career working in business risk consulting at Protiviti after attending the University of Arizona on an academic scholarship where he graduated Summa Cum Laude with dual degrees in Finance and Accounting. During his time in consulting, Jamie served clients in various industries including Airline, Banking, Software, Pharmaceutical, and Education among others.