Factoring Company Guide
The First Step: The Client Application
To start with, you'll need to fill out a basic form about your business that we'll provide. It asks for easy stuff like your business name, where you're located, what you do, and some information about who your customers are.
You might also have to share documents like an accounts receivable aging report or your current customers' credit limits. The important thing to remember is that we're trying to work out how likely your customers are to pay their bills, not just based on their history with you, but on their wider financial situation.
In this initial phase, you'll also have to sort out some key financial details with us. You'll need to think about how many invoices you want to factor each month (which tells us how much readily available cash you need), what the advance rate and discount rate will be, and how quickly we'll get the advance to you.
Usually, the specifics of these details will change depending on how financially stable your customers are, how many sales you plan to factor each month, the type of business you're in, how long you've been in business, and what kind of risk your customers pose. For example, having a lot of high-risk clients will mean you pay more in factoring fees than if you mostly deal with slow-paying government agencies.
In our business, the more invoices you factor (in terms of dollar value), the better your rates. That's why it's all about volume.
We'll use the information you provide in your client profile to decide whether factoring is the right solution for your business. This involves balancing the potential risks against the benefits based on the information you've given us.
Once you get the green light, you can expect to discuss terms and conditions. These negotiations take various aspects of the deal into account. As a result, if you're looking to factor $10,000, you're not going to get as good a deal as a company factoring $500,000.
During the negotiation stage, you'll start to understand what it really costs to factor your accounts receivable. Once you've come to an agreement with us, we get the funding process underway. We do some research into your customers' credit and any liens against your company, and we also verify the authenticity of your invoice before we buy your receivables and give you the money.
Factoring Company Benefits
Advantages of Factoring:
- Eliminate worries about cash flow and concentrate on developing your business.
- No need to stress about making regular loan repayments. Receive money as quickly as two to four days.
- Keep full authority over your business operations.
- Minimize or eliminate costs associated with chasing payments.
- Choose the quantity and timing of invoices to sell for improved cash flow management.
- Deal effectively with clients who delay payments.
- Increase your output and sales figures.
- Benefit from professional credit checking and debt collection services.
- Ensure timely payroll for your staff.
- Afford your payroll taxes comfortably.
- Avail bulk purchase discounts on material procurement.
- Increase your purchasing power, helping you secure early payment or bulk purchase discounts.
- Enhance your credit score by ensuring timely bill payments with adequate cash in hand.
- Always have cash reserves for business expansion.
- Fund your marketing campaigns effectively.
- Boost the quality of your financial records.
- Get comprehensive and detailed accounts receivable reports.
Is Factoring For You
The Importance of Factoring
"Until you collect the money, a sale remains incomplete."
Do you find yourself acting as a part-time banker for your customers?
Take a moment to review your accounts receivable aging schedule and tally the number of accounts that are overdue by more than 30 days. Congratulations, you are effectively extending credit to those customers. By not receiving prompt payment for your products or services, you are essentially providing interest-free financing to your customers. This might not align with your original business intentions, does it?
Consider this:
If your customers approached a bank and borrowed the same amount of money, would they expect to pay a significant amount of interest for the privilege? Undoubtedly!
Furthermore:
Not only are you not earning any interest on that money, but more importantly, you are also losing the opportunity to utilize that capital while waiting for your customers to settle their debts. What is the cost of not having this money readily available? Essentially, your customers are requesting you to finance their business by granting extended payment terms, often exceeding 30 days.
However, have you pondered the expenses incurred due to "missed opportunities" when your funds are tied up in accounts receivable?
Factoring History
Factoring: Unleashing Business Potential and Fueling Success
Welcome to the world of factoring, where businesses discover the secret to unlocking their true potential and achieving remarkable success. Whether you're a seasoned entrepreneur or a budding business owner, factoring can be the key to accelerating your growth and propelling your business towards new horizons.
It's surprising that factoring often remains an unsung hero, with many business owners unaware of its incredible benefits. However, factoring holds the power to revolutionize your cash flow, provide stability, and unleash a wave of opportunities.
But what exactly is factoring? At its core, factoring involves selling your accounts receivable (invoices) to a specialized financing company at a discounted rate. In today's competitive business landscape, offering credit terms to customers is essential for attracting and retaining clients. However, waiting for payments can strain your working capital and hinder your ability to invest, expand, and seize growth opportunities.
Factoring boasts a long and storied history, adapting and evolving alongside the needs of businesses over time. Today, factoring serves as a catalyst for growth, providing businesses with immediate access to the funds locked within their unpaid invoices. This infusion of working capital empowers you to cover expenses, invest in innovation, explore new markets, and achieve sustainable success.
Factoring knows no boundaries when it comes to industries or business sizes. Whether you're in manufacturing, services, wholesale, or beyond, factoring can be tailored to meet your specific needs. It offers flexibility, scalability, and the ability to adapt as your business evolves, ensuring you always have the resources to thrive.
Collaborating with a reputable factor brings even more advantages to the table. Factors bring expertise in credit analysis, collections, and risk management, alleviating the burden of managing receivables and allowing you to focus on core business activities. This partnership ensures a smooth cash flow, minimizes the risks of late payments, and provides the financial stability necessary to navigate challenges and seize opportunities.
Factoring liberates businesses from the limitations of traditional financing options. It offers a faster, more accessible alternative that empowers you to drive growth, invest in expansion, and realize your vision. With factoring, you can unlock working capital, fuel innovation, hire top talent, and position your business for long-term success.
Join the ranks of businesses that have harnessed the power of factoring and experience the transformation it brings. Embrace a future of financial stability, enhanced liquidity, and accelerated growth. Factoring is the secret weapon that unlocks your business's true potential and propels you towards unprecedented success.
Credit Risk
Quick Continuous Cash: Access Expert Credit Risk Assessment at No Extra Cost!
Accurately evaluating credit risk is a vital part of our factoring business, and few clients can match our objectivity in performing this function.
As part of our service, we act as your dedicated credit department for both new and existing customers, providing you with a significant advantage over handling these functions internally.
Imagine a scenario where a salesperson is pursuing a new account with the potential for substantial purchases. The salesperson's focus on winning the business may lead them to overlook warning signs related to credit difficulties. They might even bypass your internal credit checks to expedite the process. While this may secure the sale, it doesn't guarantee payment, and without payment, there is no sale.
With us, this situation doesn't arise. We make credit decisions based on a comprehensive understanding of the new customer's credit situation. We avoid purchasing invoices from customers with poor credit ratings, minimizing the risk of non-payment. However, please understand that our involvement doesn't tighten credit to the extent that it negatively impacts your business beyond your control.
If you have a new customer with questionable creditworthiness, the decision to do business with them remains yours. (Nevertheless, we reserve the right to say, "I told you so!")
While we may not purchase those invoices, you retain the freedom to extend credit terms as you see fit. You remain in control. Regardless of the decisions you make, our participation ensures you have access to more comprehensive, objective, and high-quality information for informed credit decisions compared to your previous practices.
We conduct thorough research on new clients and regularly monitor the credit ratings of your existing customers. This contrasts with the norm in many businesses, where routine credit updates on the established customer base are rare. Neglecting this can be a grave mistake.
Typically, businesses only conduct a credit check when it's too late, and the problem has already spiraled out of control. In contrast, we promptly inform you of any changes in the credit status of your existing customers.
In addition to providing specific customer credit information, you'll also benefit from comprehensive, detailed reports on your accounts receivables as a whole. Our process includes accounting details, transactional insights, aging reports, and financial management reports. This data empowers you to incorporate it into your sales tracking, account history, and in-depth analysis.
With over 70 years of successful cash flow and credit management experience, we are eager to leverage our expertise for your benefit. Let us put our knowledge to work for you and help you achieve your financial goals.
How To Change Factoring Companies
Changing Your Invoice Finance Provider
Considering a change in your invoice finance provider? Whether due to dissatisfaction or a strategic shift, our guide offers clear insights into the process. We cover everything from the nuances of UCCs to the steps of transitioning, along with essential questions to guide your decision for a new partner.
Uniform Commercial Code (UCC) Explained
Learn about UCC filings – a standard procedure for invoice finance companies safeguarding their interests:
- It records and tracks rights to assets.
- Provides transparency about existing financial agreements to other lenders.
- Guarantees the financier's primary claim on your invoices, much like a mortgage on a property or a title for a vehicle.
Transitioning Between Providers
Transitioning to a new provider involves a "buyout", similar to refinancing a mortgage. Your new financier will settle the balance with your previous one, as detailed in a Buyout Agreement.
Calculating the Buyout Amount
This amount typically includes the sum of unpaid invoices less reserves, plus fees from the former financier. It's important to ask for a detailed statement to fully understand any extra charges or termination fees.
Cost Implications of a Buyout
Transitioning can be cost-effective when managed with new invoices. However, reusing previously financed invoices could lead to dual fees. Some financiers may offer fee discounts, but it's crucial to inform your old provider promptly to avoid extra costs.
Time Considerations
The process might extend your usual operational timeline due to the complexities of buyout calculations and approvals. The buyout amount can vary based on accruing fees and ongoing payments. Choosing an experienced company can help make this transition smoother.
Complex Scenarios
In some instances, both your previous and new financiers might temporarily share rights to your invoices until the balance is settled, though this is not common practice.
Questions to Ponder Before Committing
- Is it feasible to engage with multiple invoice finance companies at the same time?
- What is the notice period for changing providers, and what penalties, if any, are involved?
- What are the payment processing times with the new provider?
- Who will be your main contacts at the finance company, and how many people will be involved?
- Are there any costs for mailing invoices?
- Are additional fees applicable for credit checks or onboarding new clients?
- When does the new provider start holding reserves?
