Factoring Company Guide
Step One: Completing the Client Application
First, you need to complete a straightforward client profile that we'll give you. You'll jot down basic stuff like your company's name, address, what kind of business you do, and some info about your customers.
You might also need to share documents related to your business finance, like an accounts receivable aging report or your customers' credit limits. Keep in mind, the factor (that's us) will try to figure out how creditworthy your customers are, not based on how they've paid you, but based on their overall credit situation.
In this early stage, we'll also talk about financial arrangements. For example, how many invoices do you want to factor each month (that is, how much cash do you need on hand)? What will the advance rate and discount rate be? And how fast can we give you the advance?
Usually, the answers to these questions depend on how financially stable your customers are and how much monthly sales you expect to be factored. Factors like what industry you're in, how long you've been in business, and how risky your customers might be can make a difference. For example, if you have a bunch of high-risk clients, you'll probably pay more in factoring fees than if your customers are slow-paying government agencies.
In our line of work, the more invoices you factor (that is, the higher your volume), the better your rates will be.
We'll look at the client profile you give us to see if your business is a good fit for factoring. Basically, we're just trying to weigh the risks against the rewards based on the info you've given us.
Once we've given the thumbs up, you can expect to start discussing terms and conditions. This part of the process takes into account different aspects of the deal. For example, if you're only factoring $10,000, you can't expect as good a deal as a company factoring $500,000.
During these talks, you'll get a clear idea of how much it'll cost to factor your accounts receivable. Once you've agreed on the terms with us, the process of getting your funding starts rolling. We'll do some digging into your customers' credit and check for any liens against your company. We also make sure your invoice is legit before we buy your receivables and give you the cash advance.
Factoring Company Benefits
Factoring Benefits: Your Business Lifeline
- Kiss goodbye to cash flow headaches and say hello to business growth.
- Forget about loan repayments. Cash in your pocket in just 2-4 days!
- You're the boss – keep full control over your business.
- Sayonara to the hassle and cost of chasing payments.
- Play the cash flow game your way by picking which invoices to sell.
- Beat those slow-paying clients at their own game.
- Supercharge your production and sales – cash flow won't be holding you back!
- Let the pros handle payment collection and credit checking.
- Always meet your payroll – no more sleepless nights.
- Payroll taxes? You've got them covered, every time.
- Snag those bulk-buy discounts you've been eyeing.
- Boost your bargaining power for even more discounts.
- Improve your credit score by always having cash for bills.
- Expand your empire with ample cash in hand.
- Market your business like a pro with a healthy cash flow.
- Watch your financial statements go from meh to marvelous.
- Dive into detailed reports on your accounts receivable.
Is Factoring For You
The Importance of Factoring
"Remember, a sale is incomplete without payment." Ask yourself, are you inadvertently offering free banking services to your customers? Let's examine the reality.
Take a moment to review your overdue accounts. Each one represents an interest-free loan you've extended. This arrangement is far from what you envisioned for your business, isn't it?
Consider this: when customers borrow from banks, they pay interest. Yet, in your case, you're not earning interest on these funds. Worse still, you're missing the chance to use this capital for growing your business. The cost of this missed opportunity can be substantial.
By allowing extended payment terms, you're essentially financing your customers' operations. It's crucial to understand the true impact of this on your business's growth and financial health.
Factoring History
Factoring: Empowering Businesses to Thrive
Welcome to the world of factoring, where businesses find the power to thrive and succeed. Whether you're a seasoned business owner, an aspiring entrepreneur, or someone seeking innovative financing options, factoring can be the game-changer you've been searching for.
Surprisingly, factoring often remains under the radar and unknown to many in the business landscape. Yet, it holds the key to unlocking success for countless businesses, fueling their growth and providing them with the financial support they need.
But what exactly is factoring? At its core, factoring involves selling your accounts receivable (invoices) at a discount to a specialized financial institution. In today's competitive market, offering credit terms to customers is essential for business success. However, delayed payments can create cash flow challenges, especially for small and medium-sized enterprises.
Factoring has a rich history that dates back centuries. Its roots can be traced to ancient civilizations that recognized the value of turning unpaid invoices into immediate cash flow. Over time, factoring evolved to meet the changing needs of businesses, becoming a vital financial tool in modern times.
Today, factoring serves as a catalyst for business growth and prosperity. By leveraging factoring, businesses gain quick access to funds that would otherwise be tied up in unpaid invoices. This infusion of cash provides the flexibility to cover operational expenses, invest in new opportunities, expand marketing efforts, and strengthen overall financial stability.
Factoring is not limited to specific industries or business sizes. It benefits a wide range of businesses, from manufacturers and distributors to service providers and contractors. Whether you're a startup, a growing company, or an established enterprise, factoring can be tailored to your unique needs, fueling your growth journey.
Working with a factor brings additional advantages. Factors offer valuable expertise in credit analysis, collections, and risk management. They assume the responsibility of collecting payments from customers, allowing businesses to focus on their core operations. This collaborative partnership ensures a smoother cash flow cycle and minimizes the risks associated with late or non-payment.
Embracing factoring means breaking free from the limitations of traditional financing options. It offers a flexible and accessible alternative, empowering businesses to take control of their finances and capitalize on growth opportunities. With factoring, you can transform the way you do business, unlock your full potential, and achieve long-term success.
Join the ranks of businesses that have harnessed the power of factoring and experience the difference it can make. Discover the freedom to thrive, fuel your growth ambitions, and navigate the ever-changing business landscape with confidence. Factoring is the key that unlocks the door to your business's brighter future.
Credit Risk
Unleash Your Business Potential with Quick and Reliable Cash Flow
Expert Credit Risk Assessment Included at No Additional Cost
Accurately assessing credit risk is a critical aspect of our factoring business. Very few clients can perform this function as objectively as we do.
As part of our comprehensive service, we act as your dedicated credit department for both new and existing customers, providing you with a valuable advantage over handling these tasks in-house.
Imagine a scenario where a salesperson is pursuing a new account with significant potential for sales. In their eagerness to secure the business, they might overlook warning signs of credit difficulties and bypass your internal credit checks. While this approach may lead to a quick sale, it doesn't guarantee timely payment, and without payment, there is no true success.
With us, such situations are avoided. We make credit decisions based on a comprehensive understanding of the new customer's credit situation. We exercise caution by not purchasing invoices from customers with poor credit ratings, minimizing the risk of nonpayment. It's important to note that our involvement does not imply a tightening of credit that would negatively impact your business beyond your control.
Ultimately, the decision to engage 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 still have the freedom to extend credit terms as you see fit. You retain full control. Regardless of the decisions you make, our participation ensures that 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 on the established customer base, which can lead to costly mistakes.
Most businesses conduct credit checks only when it's too late and the problem has already escalated. In contrast, we promptly inform you of any changes in the credit status of your existing customers, allowing you to take proactive measures.
In addition to providing specific customer credit information, we offer detailed reports on your accounts receivables as a whole. Our comprehensive reports include accounting details, transactional insights, aging reports, and financial management reports. This data empowers you to analyze your sales performance, track account history, and make informed decisions.
With over 70 years of successful experience in managing cash flow and credit, we are eager to leverage our expertise for your benefit. Let us put our knowledge to work for you, helping you achieve your financial goals and unlocking your business's true potential. Experience the benefits of quick and reliable cash flow, supported by expert credit risk assessment at no additional cost.
How To Change Factoring Companies
Guide to Switching Invoice Factoring Companies
Want to Learn About Changing Invoice Factoring Companies?
Are you considering a switch to a new factoring company? Displeased with your current provider? Wondering about the ins and outs of swapping factoring companies? Here's everything you need to understand.
What is a UCC and How Does it Relate to Switching Factoring Companies?
Factoring companies often file a blanket Uniform Commercial Code (UCC) to secure a primary interest on the invoices funded. The UCC is essentially a system used by lenders to keep track of who has lent money against which assets...
The Buyout Process
The oldest UCC filing signifies the 'first position' on the pledged collateral. This means that your factoring company has the primary right to collect payments on your invoices...
To switch factoring companies, the new provider must repay the old one...
How is the Buyout Figure Calculated?
The buyout figure is calculated by deducting any reserves from the Gross Receivables Outstanding and then adding the due fees to the old factoring company...
What is the Cost of the Buyout?
The cost of the buyout can potentially be zero if you can submit new invoices to the new factoring company for them to pay off the outstanding invoices at your old factor...
How Long Does a Buyout Take?
When switching factoring companies, it's best to expect the first funding to take two to three days longer than the usual setup process...
What if My Situation is More Complicated?
In some instances, the old and new factoring companies can collaborate through an Intercreditor or Subordination Agreement until the old factor is fully paid off...
Questions You Should Have Asked Before Joining Your Current Factor:
Before joining a factoring company, you should have a clear understanding of many aspects. Here are some crucial questions you should've asked:
- How many financing companies can I use at once?
- How much notice do I need to give if I want to change financing companies?
- What's the penalty if I want to leave without giving the required notice, and can you provide an example of how the fees would be calculated?
And other concerns such as: Do you use a bank lock box to post my customer payments?...