Mr Fun,
Just one clarification of your post.
<The most prevalent one today said LU was factoring receivables by selling them to their pension plan. Second, these receivables are not bad debt, so selling them for a discount is just bad business. Third, even if LU could factor its receivables, pension plans can't make those kinds of investments.>
Factors per se, won't take bad debt. In fact, it is just the opposite. Most factors are extremely strict in the receivables they will take on. Companies factor primarily for cash flow, typically for 1% over prime. In the rag industry, it is very, very common. The problem with this financing is the cost and restrictions it places on sales due to the fantastic quality of receivables they must generate to keep the factor happy.
Additionally, most factors are owned by banks...they have enough bad debt of their own. <VBG>
Collection agencies would be interested in their bad debt.
No chance in hell they will factor, however, a DSO of this level for all the companies in this industry is alarming. It is typically easy for companies who are growing rapidly to control DSO, due to the fact that sales are constantly in increasing.
Thanks for your input.
Kent |
