Factoring Company Guide
First Step: Filling Out the Application
Initiate your journey towards financial improvement with our straightforward application. Provide us with basic details about your company and its operations. This step is crucial in optimizing your cash flow management.
Be prepared to share financial documents, such as accounts receivable reports. This information is vital for us to understand the financial status of your customers beyond your direct interactions with them.
During this stage, you will outline your financial needs. How much are you planning to factor? What advance rate are you looking for? These terms are influenced by your industry, the history of your business, and the risk profile of your customers.
The scale of your factoring is an important consideration. In general, a higher volume of factoring leads to more beneficial terms for your business.
Your application helps us to determine if factoring is a viable option for your business. After approval, we proceed to negotiate the terms, with the scale of your factoring influencing the agreement. Larger amounts usually result in better terms.
We ensure that all costs are clearly communicated during the negotiation. Once the terms are set, we begin the funding process, efficiently and swiftly providing your business with the necessary cash advance.
Factoring Company Benefits
Perks of Factoring Services:
- Devote more time to growing your business, rather than worrying about cash flow problems.
- There's no need to stress over monthly loan payments. You can get the money within two to four days.
- Enjoy full control of your business operations.
- Reduce or eliminate the costs that come with collecting payments.
- Exercise greater control over your cash flow by choosing the specific invoices to sell and the timing.
- Deal effectively with clients who are slow in paying their dues.
- Boost your business output and sales figures.
- Benefit from professional services for collection and credit checking.
- Ensure you can always meet your payroll needs.
- Settle your payroll taxes with ease.
- Offer cash discounts on your materials.
- Boost your buying power, which lets you enjoy discounts for bulk purchases or prompt payments.
- Better your credit score by consistently having enough cash to pay your bills on time.
- Have readily available cash for expanding your business.
- Allocate funds for marketing your business.
- Improve the look of your financial statement.
- Get comprehensive and detailed reports on your accounts receivable status.
Is Factoring For You
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The Importance of Factoring
"Without payment, a sale is just a promise."
Ask yourself, are you inadvertently funding your customers’ businesses? Take a close look at your accounts receivable. Those overdue payments? They're essentially interest-free loans you're giving to your customers. This diverges from your core business goals, doesn't it?
Imagine if your customers were borrowing from a bank. They would certainly be paying interest. Meanwhile, you're not earning any interest, and more importantly, you're missing out on using that capital to grow your own business. What's the real cost of having your money tied up in receivables?
It's not just about the interest you're losing; it's the growth opportunities you're missing while your funds are locked in accounts receivable. Are you sure you want to be in the business of financing your customers?
p>Imagine if your customers got the same amount of money from a bank. They'd be paying significant interest. But here you are, not earning any interest and, worse, losing the chance to invest that money back into your business. What could you be achieving with that capital right now?
Factoring History
Factoring: Boosting Business Potential and Financial Success
Welcome to the world of factoring, where businesses uncover the secret to unlocking their full potential and achieving financial success. Whether you're a seasoned entrepreneur, a startup founder, or a business professional seeking new financing options, factoring is the tool that can propel your business forward.
Surprisingly, factoring often remains hidden in the shadows, with many business owners unaware of its incredible benefits. Yet, it holds the key to driving growth, ensuring cash flow stability, and opening doors to new opportunities.
So, what exactly is factoring? At its core, factoring involves selling your outstanding invoices at a discounted rate to a specialized financing company. In today's competitive landscape, offering credit terms to customers is a necessity for business growth. However, waiting for payments can strain cash flow, hampering your ability to invest, expand, and thrive.
Factoring has a rich and storied history that spans centuries. It originated from the realization that businesses shouldn't be held hostage by unpaid invoices. Over time, factoring evolved and adapted to meet the unique financial needs of businesses in different eras, becoming a reliable tool in the modern business landscape.
Today, factoring is a catalyst for unleashing business potential. By partnering with a reputable factor, businesses gain immediate access to the funds tied up in their invoices. This influx of cash empowers entrepreneurs to cover operating expenses, seize growth opportunities, and invest in crucial areas like marketing, technology, and talent acquisition.
Factoring knows no bounds when it comes to industries or business sizes. Whether you're a manufacturer, a service provider, or a B2B company, factoring can be customized to fit your specific needs. It offers flexibility, scalability, and the ability to adapt as your business evolves.
Beyond providing quick cash flow, factors bring additional expertise to the table. They evaluate the creditworthiness of your customers, manage collections, and take on the risk of non-payment. This frees up your time and resources to focus on core business activities, knowing that your factor is diligently working to secure payments on your behalf.
Factoring liberates businesses from the shackles of traditional financing options. It provides a fast, efficient, and accessible alternative that supports growth, innovation, and long-term success. With factoring, you can break through financial barriers, expand your operations, and seize new opportunities in your industry.
Join the ranks of businesses that have harnessed the power of factoring and experience the transformation it can bring. Embrace a future of financial stability, increased liquidity, and enhanced growth prospects. Factoring is the key that unlocks the doors to your business's ultimate potential.
Credit Risk
Quick Cash Advantage: Unlock Expert Credit Risk Assessment at No Extra Cost!
Precisely evaluating credit risk is a vital aspect of our factoring business. Very few, if any, clients can perform this task as objectively as we can.
At no additional fee, we serve as your dedicated credit department for both new and existing customers. This gives you a significant advantage over managing these functions internally.
Imagine a scenario where a salesperson is pursuing a new account with the potential for substantial purchases. Their focus on winning the business may cause them to overlook warning signs related to credit difficulties. They might even bypass your internal credit checks to expedite the process. While this could secure the sale, it won't guarantee payment, and without payment, there is no sale.
Rest assured, this won't happen with us. We make credit decisions based on a comprehensive understanding of the new customer's credit situation. We won't purchase the invoices of customers with poor credit ratings, minimizing the risk of nonpayment. However, please don't consider our involvement as a tightening of credit to the extent that it negatively impacts your business beyond your control.
The ultimate decision to do business with a new customer of questionable creditworthiness remains yours. (Nevertheless, we reserve the right to say, ""I told you so!"")
While we may not purchase those invoices, you still retain the freedom to extend credit terms as you see fit. You remain in control. Regardless of the decisions you make, our participation ensures that you have access to more comprehensive, objective, and high-quality information for informed credit decisions compared to your past practices.
We thoroughly research new clients and, equally importantly, regularly monitor the credit ratings of your existing customers. This contrasts with the rare routine credit updates on the established customer base in many businesses. 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. On the other hand, 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 enjoy the benefits of comprehensive, detailed reports on your accounts receivables as a whole. As part of our process, you'll receive 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 experience in cash flow and credit management, we are eager to leverage our expertise for your benefit. Let us apply our knowledge to help you achieve your financial goals and unlock the full potential of your business.
How To Change Factoring Companies
How to Change Invoice Factoring Companies
All you need to learn about switching your invoice factoring service.
Looking for a different invoice factoring service? Not happy with your current one? Thinking about saying goodbye to your current factoring service? What should you know before you switch invoice factoring services?
Here's what you need to know and more:
What's a UCC and why does it matter if I want to change factoring services?
Usually, an invoice factoring service will file a Uniform Commercial Code (UCC) to ensure their claim on the invoices they fund is priority. This is standard. The UCC helps invoice factoring services, banks, and commercial lenders keep track of who has a claim on which assets. Because the invoices you collect and pay change every day, factoring services need to file a 'blanket' UCC to claim all your receivables. The UCC simply warns other lenders that a Security Agreement exists between your business and the invoice factoring service. Your factoring deal details, such as the rates and which accounts are factored, are explained in the Security Agreement, which isn't public. A UCC is kind of like a first mortgage on your business.
The Process of Buyout
The lender with the earliest dated UCC filing is said to have first dibs on the pledged assets. To switch factoring services, the new service must pay off the old one. A 'buyout' is when the new factoring service pays off the old one with the money from your first funding with them. The Buyout Agreement outlines the transition process and is a three-party agreement signed by the old factoring service, the new factoring service, and your business.
How the Buyout Amount is Calculated:
Generally, the buyout amount is calculated by taking the total outstanding Gross Receivables, subtracting any reserves, and then adding in fees due to the old factoring service. Understanding the buyout amount is important because once you authorize that amount and the old service is paid off, you are only dealing with the new service.
What is the cost of the buyout?
If you can provide brand new invoices to the new factoring service, which they can use to pay off the outstanding invoices at your old service, then there would be no extra cost for you to make the change. But in most cases, companies need to resubmit at least a portion of invoices already factored with the old service to the new service. Depending on the size of the transaction, some factoring services offer reduced fees on invoices part of a buyout.
How long does a buyout take?
When you're changing factoring services, expect the first funding to take a two to three more days than the normal setup process. By aligning yourself with a factoring service familiar with the buyout process they can guide you through timing to minimize any delays in your funding as a result of the transition.
What if my situation is more complicated?
Although it is not common practice, it's possible that the old and the new factoring services can work together via an Intercreditor or Subordination Agreement until the old service is paid off.
Questions You Should Have Asked Your Current Factoring Company
- How many factoring companies can I use at one time? (You can only use one)
- What's the process and penalty for leaving without giving notice?
- Do you use a bank lockbox to process my customer payments?
- How long do you keep my original invoices before sending them to my customers?
- Who will be my contact at your company? Is it one person or multiple?
- Do I need to pay for postage for mailing my invoices?
- Do you charge me for credit checks on new customers?
- Do you hold my invoices in batches and charge fees on all invoices in a batch until the last one is collected?
- Do you start holding reserves once a customer's invoice is 60 days old, even though I have a 90-day recourse period?
Understanding these factors will help you make a better decision when choosing a new factoring company and avoiding unnecessary costs or complications in the future.
