Factoring Company Guide
First Step: Filling Out the Application
Start your journey to enhanced liquidity with our simple application process. Fill in essential details about your business to access customized financial solutions.
You'll need to provide us with key documents like accounts receivable reports. This is to ensure a comprehensive assessment of your customers' financial health, beyond their interactions with your company.
In this first step, we'll also discuss your specific financial requirements, including invoice volume, expected rates, and advance timelines. These terms vary based on industry, business history, and customer risk.
The volume of invoices you factor is crucial. Larger volumes generally mean more favorable rates.
Your application helps us decide if factoring is the right fit for your business. Post-approval, we engage in negotiations, shaping the agreement to fit your company's size and financial needs.
During negotiations, you'll gain insight into the cost structure. Following agreement on terms, we conduct credit checks on your customers and verify your invoices before proceeding with the funding.
Factoring Company Benefits
Factoring Benefits: Get Ahead in the Game
- Forget about cash flow nightmares – focus on expanding your business.
- Ditch the stress of monthly loan payments. Get cash in a flash – 2 to 4 days!
- Stay in charge of your business destiny.
- Slash or completely eliminate those annoying payment collection costs.
- Call the shots on your cash flow by picking which invoices to sell.
- Stay one step ahead of clients who drag their feet on payments.
- Power up your production and sales with a constant cash stream.
- Take advantage of expert services for payment collection and credit checks.
- Make sure your payroll is always on point.
- Keep enough cash on hand for payroll taxes, no sweat.
- Enjoy the perks of bulk buying with ample cash reserves.
- Bolster your bargaining power for even better deals.
- Enhance your credit score with consistent, on-time payments.
- Have the cash ready for expanding your business ventures.
- Pump up your marketing with a healthy cash flow.
- Give your financial statements a healthy glow.
- Gain valuable insights from detailed accounts receivable reports.
Is Factoring For You
The Importance of Factoring
Completing a sale goes beyond just making the transaction. It's about collecting the money that is owed to you. Imagine being a part-time banker for your customers, providing them with interest-free financing.
Take a moment to examine your accounts receivable aging schedule. How many accounts are overdue by more than 30 days? By not receiving timely payment, you're effectively extending credit to these customers. This may not align with your original business intentions.
Consider this: If your customers approached a bank for the same amount of money, they would expect to pay a significant amount of interest. Yet, you're not earning any interest on the money you've extended to them.
What's more, you're missing out on the opportunity to utilize that capital while waiting for customers to settle their debts. The cost of not having this money readily available can be significant. Essentially, your customers are asking you to finance their business by granting them extended payment terms.
Have you thought about the expenses incurred due to missed opportunities when your funds are tied up in accounts receivable? It's time to take a closer look at the impact on your business and explore the benefits of factoring.
Factoring History
Factoring: Empowering Businesses for Success
Welcome to the world of factoring, where businesses find the financial support they need to thrive. Whether you're a business owner, an aspiring entrepreneur, or seeking innovative financial solutions for your employer, factoring can play a crucial role in helping you achieve your financial goals.
It's interesting to note that factoring has often been overlooked and remains relatively unknown in the business world. Despite this, it serves as the backbone for many successful American businesses, unlocking billions of dollars each year and enabling thousands of enterprises to grow and prosper.
So, what exactly is factoring? Simply put, it involves purchasing commercial accounts receivable (invoices) from businesses at a discounted rate. In today's competitive landscape, offering credit terms to customers is often necessary to secure business. However, this can create cash flow challenges, particularly for new or struggling companies that rely on steady and timely payments.
Factoring, with its long and rich history, traces back 4,000 years to the time of Hammurabi, the king of Mesopotamia, often considered the birthplace of civilization. Mesopotamians were pioneers in developing writing, establishing business codes, and introducing the concept of factoring.
Over time, factoring gained traction in various civilizations. The Romans, for instance, were early adopters, introducing the sale of promissory notes at discounted rates. In the American colonies, factoring played a crucial role before the revolution. Merchant bankers in London and Europe provided funds in advance for goods such as cotton, furs, and timber, allowing colonists to continue their operations without being hindered by delayed payments from European customers.
It's important to highlight that these historical arrangements differ from modern banking relationships. In fact, modern banks would have caused delays, waiting to collect payments from European buyers before disbursing funds to the colonists. This impractical process led to the emergence of factors in colonial times who provided advances against accounts receivable, enabling clients to maintain their operations while awaiting payment.
As the Industrial Revolution unfolded, factoring adapted to address credit concerns while maintaining its core principles. Factors began assisting clients in assessing customer creditworthiness, establishing credit limits, and guaranteeing payment for approved customers. Today, this approach, known as non-recourse factoring, is commonly practiced in the business world.
Before the 1930s, factoring primarily served the textile and garment industries, which inherited the practice from the colonial economy. However, after the war years, factors recognized the potential to expand factoring to other industries reliant on invoicing, leading to its broader adoption.
In the present day, factors come in various shapes and sizes. Some operate as divisions within large financial institutions, while many others are independently owned entrepreneurial endeavors. The popularity of privately owned factors surged in the 1960s and 1970s when high-interest rates made traditional bank financing less accessible. This trend continued in the 1980s, driven by increasing interest rates and changes in the banking industry. As banks became more expensive and inflexible due to regulatory constraints, small business owners sought alternative financing options. Factoring emerged as an increasingly popular choice.
Each year, thousands of businesses leverage factoring to sell billions of dollars in accounts receivable. By doing so, they unlock cash flow, achieve profitability, drive growth, and, in some cases, secure their very survival. Factoring empowers businesses by providing them with the financial support they need to thrive in today's competitive market.
Credit Risk
Unleash Your Business Potential with Quick Cash and Expert Credit Risk Assessment
Gain a Competitive Advantage at No Additional Cost
Accurately evaluating credit risk is a fundamental aspect of our factoring services. Our objective approach sets us apart, as very few clients can perform this function as effectively as we do.
As part of our comprehensive offering, we serve as your dedicated credit department for both new and existing customers. This gives you a significant edge over managing these tasks in-house, without incurring any extra fees.
Imagine a scenario where a salesperson is pursuing a new account with the potential for substantial purchases. In their eagerness to secure the business, they may overlook warning signs of credit difficulties and bypass your internal credit checks. While this may result in a quick sale, it offers no guarantee of timely payment, which is essential for sustained success.
With us, you can avoid such pitfalls. We make credit decisions based on a comprehensive understanding of the new customer's credit situation. We refrain from purchasing invoices from customers with poor credit ratings, minimizing the risk of nonpayment. Importantly, our involvement does not imply a tightening of credit that could negatively impact your business beyond your control.
Ultimately, the decision to do business with a new customer of questionable creditworthiness remains yours. (However, we reserve the right to say, "We warned you!")
While we may not purchase those invoices, you retain the freedom to extend credit terms as you see fit. You remain in complete control. Regardless of the decisions you make, our participation ensures you have access to comprehensive, objective, and high-quality information to make informed credit decisions, surpassing your previous practices.
We conduct thorough research on new clients and diligently monitor the credit ratings of your existing customers. This stands in stark contrast to the common practice of neglecting routine credit updates for established customers, which can be a costly oversight.
Most businesses only conduct credit checks when problems have already spiraled out of control. In contrast, we promptly inform you of any changes in the credit status of your existing customers, empowering you to take proactive measures.
In addition to providing specific customer credit information, we offer comprehensive reports on your accounts receivables. These reports include accounting details, transactional insights, aging reports, and financial management reports. This valuable data allows you to analyze sales performance, track account history, and make informed decisions to drive your business forward.
With over 70 years of successful experience managing cash flow and credit, we are excited to leverage our expertise for your benefit. Let us put our knowledge to work, helping you achieve your financial goals and unlock the full potential of your business. Experience the advantages of quick cash and expert credit risk assessment at no additional cost.
How To Change Factoring Companies
Changing Your Invoice Finance Provider
Thinking about switching your invoice finance provider? Whether it’s due to dissatisfaction or a strategic move, this guide is your comprehensive handbook. We'll navigate through the complexities of UCCs, the transition process, and key considerations before you commit to a new financial partner.
Uniform Commercial Code (UCC) Explained
A UCC filing is a standard practice for invoice finance companies. It’s akin to a safety net, ensuring their rights are protected:
- It keeps track of asset rights.
- Alerts potential lenders about existing financial arrangements.
- Guarantees that your financier has priority claim over your invoices.
Transitioning Between Providers
Switching providers is similar to refinancing a mortgage. It involves a "buyout" where your new provider takes over the balance from the old one, formalized by a Buyout Agreement.
Calculating the Buyout Amount
The buyout amount typically includes the total unpaid invoices minus any reserves, along with fees from your old financier. Always ask for a detailed breakdown to understand any additional charges or early termination fees.
Cost Implications of a Buyout
Transitioning can be financially neutral if you use new invoices. However, reusing financed invoices might incur double fees. Some financiers offer discounts, but timely notification to your old provider is crucial to avoid extra charges.
Time Considerations
Switching may extend the usual processing time due to buyout calculations and approvals. The amount can fluctuate based on accruing fees and ongoing payments. Partnering with an experienced company can make this transition smoother.
Complex Scenarios
In certain cases, both your old and new financiers might have rights to your invoices until the previous balance is settled, though this isn’t the norm.
Questions to Ponder Before Committing
- Is it feasible to work with multiple invoice finance companies at once?
- What is the notice period for changing providers, and are there associated penalties?
- How does the new provider handle payments, and what’s the turnaround time?
- Who will be your primary contact at the finance company, and how many different people will you work with?
- Will you be responsible for postage costs for sending invoices?
- Are there extra charges for credit checks or setting up new clients?
- When does the provider start holding reserves?