What is Factoring?

Factoring is a type of financing where businesses sell their accounts receivable (invoices) to companies known as factors. As a financial tool, factoring helps businesses improve their cash flow. Factoring is neither a form of debt, nor is it equity financing. And, it is not as some people assume, a loan.

WHY WOULD A COMPANY SELL THEIR RECEIVABLES?

Companies that find cash flow as a recurring problem often can’t afford to have cash tied up in receivables 30-45 days. They need the cash to meet immediate present financial demands of their business.

How is accounts receivable funding from your company different than accounts receivable financing from a bank?

When making a funding decision, we focus on the creditworthiness of your customers while banks will focus on your company’s financial history and cash flow. Plus, since accounts receivable funding is not a loan, there is no debt on your company’s balance sheet. Best of all, we will make a quick funding decision, while banks may take weeks-even months-to approve a loan.

Will my company be eligible for accounts receivable funding if it has a bank loan or line of credit?

If a bank has a lien on your company’s accounts receivable, you should let us know right away. We will ask the bank to subordinate that lien in our favor. Because this is a common occurrence, most banks will accommodate the request, but we must know this information in advance

I have had a past bankruptcy, is accounts receivable funding still an option?

Yes, we will still consider your application even if you have credit problems or a past bankruptcy.

Can your company purchase only a portion of my company’s invoices?

Absolutely, but remember that higher numbers of receivables purchased on a regular basis can result in more competitive rates. Terms can be especially flexible when there are large numbers of invoices issued to a larger, rather than smaller, pool of your customers.

What happens if my customer doesn’t pay the invoice?

This depends on whether your company entered into a non-recourse or recourse agreement with the factor. In a non-recourse agreement, the factor will absorb the credit-related loss. However, with a recourse agreement, your company will have to reimburse the factor-either by having the invoice deducted from the next advance or replace it with another collectable invoice.

Isn’t Factoring just for failing companies?

No. Factoring in the past had gained a reputation as a financial «last resort» for faltering businesses. While factoring can help problem businesses, it is primarily a source of financing for new or rapidly growing businesses. Factoring allows businesses to improve their cash flow and quicken their growth by shortening their receivable cycle. By selling their invoices, businesses can eliminate the 30, 60, up to 90 (or more) days wait for their customers to pay on their accounts

HOW QUICKLY DO I GET PAID?

Most factors pay within 24 to 48 hours of receipt of the invoice and any required supporting documentation.

HOW ARE THE FEES FOR FACTORING SERVICES DETERMINED?

Fees vary from company to company and from client to client. They are determined by a combination of your customer base creditworthiness, average payment cycle, invoice size and factoring volume.