Factoring Company Guide
The First Step: The Client Application
First, you fill out a basic profile for your company that we provide. This profile will ask for simple things like your company's name, address, what your business does, and some info about your customers.
You might also need to give us things like an accounts receivable aging report or the credit limits of your existing customers. Keep in mind that we're trying to figure out how creditworthy your customers are, beyond their credit history with your business. We're interested in their overall financial health.
At this stage, you'll also discuss basic financial details with us. For example, you'll decide how many invoices you want to factor each month (which helps us know how much cash you need to have on hand), what the advance rate and discount rate will be, and how fast we'll get the advance to you.
Most of the time, the answers to these questions will depend on how financially solid your customers are, how many sales you expect to factor each month, the industry you're in, how long you've been running, and how risky your customers might be. So, if you have lots of risky clients, you'll end up paying more in factoring fees than if you just have a few government agencies that are slow to pay.
In the factoring industry, the more you factor (in terms of dollar amount), the better your rates will be. That's why volume is crucial.
We'll look at the client profile you filled out to decide if factoring is a good fit for your business. Essentially, we're weighing the risks against the potential benefits, using the info you gave us.
Once we say yes, you can expect to start negotiating the terms and conditions. This negotiation will consider different aspects of the deal. So, if you want to factor $10,000, you can't expect to get as good a deal as a company that wants to factor $500,000.
During these negotiations, you'll get a good understanding of what it costs to factor your accounts receivable. After you agree on terms with us, we start the funding process. We'll check out your customers' credit and any liens against your company. We also need to make sure your invoice is legit before we buy your receivables and give you cash.
Factoring Company Benefits
Factoring Advantages: Catalyze Your Business Success
- Shift your attention from cash flow stress to strategic business growth.
- Relieve yourself from the constraints of loan repayments with rapid cash access.
- Keep complete control over your business’s trajectory.
- Slash or completely avoid the costs involved in payment collection.
- Exercise superior control over your cash flow by selecting invoices to sell wisely.
- Overcome the challenges posed by late-paying clients.
- Use a reliable cash flow to increase your production and sales.
- Leverage expert services for efficient payment collections and credit checks.
- Ensure timely payroll management, securing employee satisfaction.
- Always be prepared for payroll tax obligations.
- Seize the opportunity for discounts through bulk purchases.
- Amplify your buying power for more economical purchases and early payment discounts.
- Consistently pay your bills on time, enhancing your credit rating.
- Generate the capital you need for business expansion.
- Invest in marketing your business effectively with a solid financial foundation.
- Witness significant improvements in your financial statements.
- Receive detailed reports providing valuable insights into your accounts receivable.
Is Factoring For You
The Importance of Factoring
"A sale isn't real until you see the money." Do you find yourself unknowingly acting as a banker for your customers? Time to rethink that role.
Dive into your accounts receivable. Those invoices over 30 days late? Congratulations, you're in the lending business now – and you're not even charging interest. That's not why you got into this game, right?
Think about it: if your customers needed cash from a bank, they'd be paying interest. But with you? They're getting a free ride. And that's costing you – big time. Opportunities, growth, cash flow – all on hold while you wait for them to pay up.
You need to be in charge of your cash, not your customers. Let’s get serious about what those unpaid invoices are really costing you.
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 Cash Flow Solution: Unlocking Success with Expert Credit Risk Assessment
No Additional Cost for Access to Comprehensive Credit Expertise
Accurately evaluating credit risk is a vital aspect of our factoring business. Few clients possess the same level of objectivity as we do in performing this function.
At no extra cost, we serve as your dedicated credit department, supporting both new and existing customers. This provides you with a significant advantage compared to handling credit evaluations internally.
Imagine a scenario where a salesperson pursues a new account with potential for substantial purchases. In their eagerness to secure the business, they might overlook warning signs related to credit difficulties and bypass your internal credit checks. While this approach may lead to a sale, it does not guarantee 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 refrain from purchasing invoices from customers with poor credit ratings, minimizing the risk of nonpayment. However, please note that our involvement does not imply a tightening of credit to the extent that it negatively impacts your business beyond your control.
Ultimately, the decision to engage with a new customer of questionable creditworthiness remains yours. (Although, we do reserve the right to say, ""We 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 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, equally important, regularly 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. Such oversight can prove to be a costly mistake.
Typically, businesses conduct credit checks only when it's too late, and the problem has already escalated. In contrast, we promptly notify you of any changes in the credit status of your existing customers.
In addition to providing specific customer credit information, we offer comprehensive and detailed reports on your accounts receivables as a whole. Our process includes accounting details, transactional insights, aging reports, and financial management reports. This valuable data empowers you to integrate it into your sales tracking, account history, and in-depth analysis.
With over 70 years of successful experience in managing cash flow and credit, we are excited to leverage our expertise for your benefit. Let us put our knowledge to work for you, helping you achieve your financial goals, unlocking your business's true potential, and paving the way for sustained success.
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?
