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Main Subject - Overcoming the Myths of Receivables Factoring
Although factoring volume exceeded $112 billion in volume in 2005, which represented a 9.3% increase over the prior year, many decision makers tend to either employ other methods or choose not to go after additional financing to g
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
row their business. If a company is either in a high-growth mode or is experiencing serious cash flow issues and is not able to establish a working line of credit with a bank, why wouldn’t they turn to factoring? There are three
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
main concerns and objections that many decision makers have that can be overcome with educating the customer about the product.
Concern #1: Cost
The reality is that the cost of factoring is expensive compared to other types of
Concern #1: Cost
The reality is that the cost of factoring is expensive compared to other types of
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
inancing (typically bank loans or lines of credit). If a company has the credit standing to get a bank line of credit that offers flexible terms, they should do so. If they have overextended their line or don’t qualify altogethe
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
and need additional capital to expand the business, the CFO should at least crunch the numbers to see if factoring is a viable option. There are some industries that experience low margins and slow payers. In general, factoring
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
probably isn’t a good option for those types of companies. If, however, the margins are higher (over 12%), factoring may be a good way to take advantage of new sales opportunities and increase profits. Factoring fees can range
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
nywhere from 2% to 4% per month depending upon several variables, including average dollar amount per invoice, credit standing of the debtors, and the average time it takes to collect the receivables. If a company enjoys the size
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
of margin that can easily cover the factoring fees, it makes perfect sense to employ this type of financing, rather than forgo incremental profits and lose market share to a competitor.
Concern #2: Customer Perceptions
This is
Concern #2: Customer Perceptions
This is
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
a concern with most prospects that are unfamiliar with factoring. The issue centers around notification and collection. At the inception of a factoring relationship, each account debtor is notified that a secured party (the fact
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
r) has taken title to invoices in which they owe payment. The letter also states that all present and future invoices due must be paid directly to the factoring company until otherwise notified by the factor. This is necessary t
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
do this because if protects the factors collateral and to be protected by the UCC. Many business owners worry that they will be perceived in a negative light when the customers get these notices. There is no reason to worry. F
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
ctoring is hardly a new form of financing. Many industries (manufacturers, distributors, apparel & textile, trucking, and temporary staffing) rely on the services a factor provides. Factors only interact with customers on a rand
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
m basis, mainly at the inception of the relationship.
Several large companies such as Walmart, Costco, and Target, have internal divisions within their accounts payable department to work with those vendors who factor their recei
Several large companies such as Walmart, Costco, and Target, have internal divisions within their accounts payable department to work with those vendors who factor their recei
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
ables. Should a customer who is unfamiliar with factoring question the notice and ask what is going on, the owner or manager only needs to tell them they have chosen to use a company to manage and finance their accounts receivab
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
le.
Concern #3: Losing Control over Receivables
Some people feel that allowing a factor to collect their receivables takes control away from them. A prospect should consider that a factor has provided an advance on a piece of
Concern #3: Losing Control over Receivables
Some people feel that allowing a factor to collect their receivables takes control away from them. A prospect should consider that a factor has provided an advance on a piece of
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
aper and until they collect from the customers, they have nothing. However, it would be counterproductive for a factor to be overly aggressive in collecting receivables and risk alienating the customer base. Factors typically wo
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
k hand in hand with the client to collect receivables and oftentimes allow the company to make collection calls. When payment is substantially late, the factor’s staff will likely make collection calls, but normally in a profess
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
onal and courteous manner. A good factoring company will provide the client with comprehensive aging and performance reports, as well as credit screening for new customers. In effect, the client will not lose control of their re
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
eivables. They will actually be more on top of things because of the enhanced services the factor offers.
If more decision makers were educated about the benefits of
If more decision makers were educated about the benefits of
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
receivables factoring, they would likely take a look at how it could help expand their business. Traditional lenders can’t always provide the solutions, so it makes sense to keep an open mind to alternative forms of financing
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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