High liquidity has far-reaching advantages. It strengthens your relationship with your suppliers and your bank, as it avoids unnecessary reminder fees or interest on arrears and enables you to use your overdraft facility efficiently. In addition, it has a positive impact on your balance sheet and the rating of your business.
Additional liquidity is also needed for investments or for realising expansion plans. In most cases, the reason for liquidity problems lies in large amounts of receivables, long payment terms, seasonal fluctuations in sales or payment defaults. In such situations, factoring is the best form of financing for more liquidity just when you need it.