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What is Factoring?
Factoring occurs when a business sells its accounts receivables. With this method of financing, you receive advance payments for your accounts receivable or invoices. You get cash right away. Receivables that can be factored are those that come from any company and government agencies and that have not been pledged to a lender or other entity.
Do You Need Factoring?
• Do you have too much of your available capital tied up
in accounts receivable?
• Are you profitable, but sometimes short of cash?
• Can you benefit from having more capital without
acquiring any debt or additional monthly payments?
• Are you experiencing a growth in sales or production?
• Do you need capital to make payroll, pay bills, pay
contractors, pay vendors, or to buy supplies?
• Could you benefit from paying your bills early?
• Can you receive early payment discounts by paying
your suppliers early?
• Are you growing quickly and cannot afford to wait the
usual 10 to 120 days that it takes to be paid?
• Are you spending too much time tracking and
collecting accounts receivable?
• Do you miss growth opportunities because cash is tied
up or you do not want to take on a partner?
Benefits of Factoring
• Receive your cash immediately instead of waiting for
payments from your customers
• Permanently fix cash flow difficulties
• Increase working capital and pay bills, taxes, and staff
• Get cash to expand your business
• Protect and improve your business' credit rating
• Get better credit terms
• Receive ongoing financing without long term debt and
• Off balance sheet financing
• Take advantage of early payment discounts, trade
discounts and volume discounts by having the cash
• Take advantage of spur of the moment opportunities
that require cash
• Increase sales by offering credit terms to prospective
• Receive capital that grows with your sales
• Minimize or even eliminate collection time and
• Improve your credit rating
• Receive asset protection: no one can make a claim
against receivables you no longer own
• Reduce overhead associated with processing invoices
and handling collections
• Offer credit terms to customers and stop offering early
payment discounts to customers
How Our Factoring Service Works
Our factoring service is fast and easy, with no long term contracts. Our investors (factors) purchase your receivables and provide you with immediate cash. This is not a loan, which must be repaid by you. The factors are repaid as your customers pay their invoices. They assume the risk of bad debt, eliminating any expense from your income statement.
Initially, your account will be set up within 10 days. You submit an application along with details on your accounts receivable. We respond with preliminary approval while the factor’s due-diligence team analyzes your receivables. We design a factoring program that is appropriate for you.
Once an agreement is established and the account is set up, the process works as follows:
1. Your business initially bills the companies and sends
copies of the claims to the factoring company as
often as desired
2. Cash is deposited into your bank account within 24
3. The factor informs the company that it is managing
4. The factor waits to get paid by your customer.
5. Once paid, the factor refunds the reserve, less a
small financing fee.