Understanding the Risks and Benefits of Factoring: Insights from 118 Executives
Factoring has emerged as a vital financing solution for businesses seeking to convert accounts receivable into immediate cash. This survey conducted by JPS involving 118 executives sheds light on their experiences and perspectives on factoring, particularly focusing on instances where they felt their choices could have led to unfavorable outcomes.
Factoring involves selling accounts receivable to a third-party company, known as a factoring company, to receive cash quickly. This method is beneficial for businesses that need urgent liquidity without going through lengthy loan approvals. Services can offer cash on the same day, making it a preferred choice during times of financial strain.
Despite its advantages, not all businesses have had a successful experience with factoring. JPS's recent survey aimed to uncover the reasons behind such experiences and how companies can avoid making similar mistakes. Below, we explore the survey findings to gain insights into the perception of factoring among business leaders.
The survey conducted from September 29 to October 6, 2025, targeted business leaders and executives who have utilized factoring services. The total number of respondents was 118, providing a diverse range of insights related to their experiences with factoring.
The majority of respondents indicated that over half of them had last used factoring more than three years ago, with only a small percentage having used it within the last year. The results suggest that while factoring is a valuable tool in emergencies, it is not frequently utilized as a regular cash flow management method.
A significant number of respondents (32.16%) found their factoring service through personal recommendations. This was followed by 26.90% who used internet searches. While personal referrals can be beneficial, it is essential for businesses to thoroughly vet their options to ensure the factoring company meets their specific needs.
About 70% of the executives favored two-party factoring over three-party factoring when seeking to liquidate receivables. Understanding the differences between these two forms can greatly influence the outcomes of their financing arrangements.
36.44% of the respondents reported having had negative experiences with factoring. This highlights the need for more careful planning and decision-making when utilizing such financial services.
Business executives indicated that unexpectedly high fees and unclear contractual agreements were among the primary reasons for feeling dissatisfied with their factoring experience.
The survey found that many who had negative experiences attributed their issues to inadequate research and comparison with other financial options. Lack of diligence in assessing service providers often leads to unfavorable terms.
While a majority compared two to three options, about 22% did not consider alternatives at all, which could lead to regrettable decisions.
A majority of participants stressed the importance of comparing several factoring services and consulting with financial experts to ensure a trustworthy choice. Diligently checking the agreement details and taking time to make decisions can prevent future complications.
Many executives relied on official company websites and comparison sites to educate themselves prior to using factoring services. However, nearly 28% reported they did not consult any resources, signifying a gap in preparatory research.
The survey reveals that 30.51% of executives are willing to use factoring actively in the future, and 38.14% may consider it based on circumstances, indicating a potential market for this financial service if conducted cautiously.
The survey highlights the pitfalls and possibilities of utilizing factoring as a financial strategy for businesses. The majority of the executives indicated a willingness to engage with factoring again, provided that they are informed and careful in their choices. Therefore, the need for a transparent, well-regulated environment for companies offering factoring services is more pressing than ever. By collecting and analyzing the data presented, we hope this report aids in the journey toward informed financial decision-making for businesses seeking liquidity strategies.
Company Name: JPS Co., Ltd.
Established: June 2018
Representative: Shingo Yamashita
Location: 3F, Bell Maison Myogadani, 4-6-21 Kohinata, Bunkyo-ku, Tokyo
Website: JPS Official Website
What is Factoring?
Factoring involves selling accounts receivable to a third-party company, known as a factoring company, to receive cash quickly. This method is beneficial for businesses that need urgent liquidity without going through lengthy loan approvals. Services can offer cash on the same day, making it a preferred choice during times of financial strain.
Despite its advantages, not all businesses have had a successful experience with factoring. JPS's recent survey aimed to uncover the reasons behind such experiences and how companies can avoid making similar mistakes. Below, we explore the survey findings to gain insights into the perception of factoring among business leaders.
Survey Overview
The survey conducted from September 29 to October 6, 2025, targeted business leaders and executives who have utilized factoring services. The total number of respondents was 118, providing a diverse range of insights related to their experiences with factoring.
Key Findings
Q1: When Did You Last Use Factoring?
The majority of respondents indicated that over half of them had last used factoring more than three years ago, with only a small percentage having used it within the last year. The results suggest that while factoring is a valuable tool in emergencies, it is not frequently utilized as a regular cash flow management method.
Q2: How Did You Find Your Factoring Company?
A significant number of respondents (32.16%) found their factoring service through personal recommendations. This was followed by 26.90% who used internet searches. While personal referrals can be beneficial, it is essential for businesses to thoroughly vet their options to ensure the factoring company meets their specific needs.
Q3: What Type of Factoring Did You Use?
About 70% of the executives favored two-party factoring over three-party factoring when seeking to liquidate receivables. Understanding the differences between these two forms can greatly influence the outcomes of their financing arrangements.
Advantages and Disadvantages of Each Type:
- - Two-Party Factoring: Quick cash conversion with no need to inform the client about the transaction, although it often incurs higher fees.
- - Three-Party Factoring: More cost-effective with potentially lower fees, but requires notifying the client, which can affect business relationships.
Q4: Did You Experience Failures with Factoring?
36.44% of the respondents reported having had negative experiences with factoring. This highlights the need for more careful planning and decision-making when utilizing such financial services.
Q5: Reasons for Negative Experiences
Business executives indicated that unexpectedly high fees and unclear contractual agreements were among the primary reasons for feeling dissatisfied with their factoring experience.
Q6: At What Stage Did You Decide to Utilise Factoring?
The survey found that many who had negative experiences attributed their issues to inadequate research and comparison with other financial options. Lack of diligence in assessing service providers often leads to unfavorable terms.
Q7: How Many Options Did You Compare?
While a majority compared two to three options, about 22% did not consider alternatives at all, which could lead to regrettable decisions.
Q8: Tips for Avoiding Future Failures
A majority of participants stressed the importance of comparing several factoring services and consulting with financial experts to ensure a trustworthy choice. Diligently checking the agreement details and taking time to make decisions can prevent future complications.
Q9: Pre-Utilization Information Sources
Many executives relied on official company websites and comparison sites to educate themselves prior to using factoring services. However, nearly 28% reported they did not consult any resources, signifying a gap in preparatory research.
Q10: Future Factoring Utilization
The survey reveals that 30.51% of executives are willing to use factoring actively in the future, and 38.14% may consider it based on circumstances, indicating a potential market for this financial service if conducted cautiously.
Conclusion
The survey highlights the pitfalls and possibilities of utilizing factoring as a financial strategy for businesses. The majority of the executives indicated a willingness to engage with factoring again, provided that they are informed and careful in their choices. Therefore, the need for a transparent, well-regulated environment for companies offering factoring services is more pressing than ever. By collecting and analyzing the data presented, we hope this report aids in the journey toward informed financial decision-making for businesses seeking liquidity strategies.
About JPS
Company Name: JPS Co., Ltd.
Established: June 2018
Representative: Shingo Yamashita
Location: 3F, Bell Maison Myogadani, 4-6-21 Kohinata, Bunkyo-ku, Tokyo
Website: JPS Official Website
Topics Business Technology）
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