Factoring

 

"Accounts-receivable financing is commonly called factoring. It is a form of asset-based financing, but it's not a loan - it's a sale."
 

How does Factoring Work?

You sell your product to your customer (delivered and installed). Instead of waiting for the invoice to be paid, you well the receivable to a financing company, called a factor. You receive immediate payment, minus a fee. The factor later collects the entire receivable.

Here are some of the main advantages of factoring receivables:

  • Obtain funding for your outstanding receivables within 24 hours.
  • Improve your business cash flow and credit rating.
  • Offer better terms to large customers and increase sales.
  • Extend credit to large customers without asking for COD.
  • No new debt is created. Factoring is not a loan.
  • Pay your suppliers faster, take advantage of early pay discounts.
  • Eliminate long billing cycles and the hassle of collecting money.
  • Instant credit guarantees for new customers.
 
   

Why A/R Factoring?
 
  • No Application Fee
  • No Facility Fee
  • No Administrative Fee
  • No Per Bill Fee
  • No Proposal Fee
  • No Lockbox Fee
  • Competitive Rates
  • Up to 92% Funding
  • Same day funding
  • Non Recourse*
  • Very little paperwork for approval
  • Choose your accounts to factor
  • Choose your invoices to factor
  • No Monthly Minimum
  • No Long Term Contract
  • No restriction on use of funds
  • No audits or financials needed
  • No Debt Created
  • Online access to your account anytime
  • Credit Check in 10 minutes
 

What can you Factor?

  • Any commercial business, excluding Medical and Construction.
  • Any business from the startup phase, with zero receivables, up to two million in outstanding accounts receivables.
  • Any business with receivables that has been “dismissed” from a banking relationship.
  • Any business with receivables that has been told “NO” by the banking community.
 

Summary of Factoring

lf you can get paid faster, you can then turn around and collect discounts from your suppliers. Factoring is also a way to eliminate the risk of non-payment by your customers, and to improve your balance sheet by increasing your working capital.

Factoring deals can be concluded quicker and more inexpensively than with Asset-based Lending, since the Factor does not need to audit your financial records at great length.

Traditional factoring is designed for long-term relationships. It involves the purchase of receivables without recourse and with notification to the your customer. The factor buys the receivables created by a your sales and then collects the proceeds directly from the your customer. After the factor buys a receivable, it assumes the credit risk on that receivable. If the your customer doesn't pay because of a credit problem, the factor must assume the loss.

Essentially, the factor offers you credit protection, collection, bookkeeping services and financing. In addition to advances against receivables purchased, once a relationship is established, factors often provide over-advances during peak shipping seasons. Factors also offer financing services and accommodations such as inventory loans, letters of credit/import financing and equipment financing. Export financing is also available through alliances with international factoring networks. Principally because credit guarantees are important in textiles and apparel and because of factoring's roots in the textile industry, about 70 percent of the volume of old-line factors is still in textiles, apparel and related industries.

Since the factor takes the credit risk on the sale, it must first approve the sale through its credit department. Because of the credit guarantee, traditional factoring is limited to industries in which credit information is available. The charge for the credit and collection service, called the factoring commission, varies with your sales volume, the size of the transactions and competitive conditions.

 
 

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