Feeling like cashing in your chips?

The COVID-19 pandemic has brought hardship to a number of businesses. And among those facing struggles are factoring companies.

Right now, projections are that more than 100,000 small businesses have already gone out of business permanently because of the pandemic, and more are expected to close as government-imposed restrictions and nervous consumers threaten a prolonged spending freeze.

That’s left many business owners, some of whom had just barely survived the recession in the early 2000s, with dim prospects. And many are likely wondering whether or not it’s worth trying to keep up operations.

That’s going to create a difficult situation for factoring companies, especially those that service the staffing industry. Unemployment in the U.S. is near record highs. As more businesses cut expenses or close their doors, staffing firms’ will likely struggle, which will have a downstream effect on the factoring companies that rely on staffing firms’ accounts receivable for income.

Factoring companies that have seen their clients go out of business and are bracing for the impact to their bottom line may want to consider selling their business or unloading some of their accounts through a sale. In this transaction, the buyer takes on not only the accounts but also the risk that comes with assuming responsibility for clients. The seller is offered the chance to walk away from a difficult situation with payment that’s nearly equal to the amount of the receivables.

Some of those who operate factoring companies may want to move on and start another business or retire altogether, free from the responsibilities of trying to service many troubled accounts. Collections is a difficult process. In some cases, it means chasing clients with whom relationships have been formed over many years. It could involve the threat of litigation or reporting them to a collections agency. By selling, the seller is free of all liabilities associated with the receivable accounts — they’re able to cash out and walk away.

Operating just about any company in a post-pandemic market is going to be difficult. Operating a factoring company that works with staffing companies may be a far greater challenge as high unemployment and the market’s projected slow recovery will likely put a strain on revenues. Rather than fight for payment, consider selling the business and cashing in before the market bottoms out.