Factoring Company Guide
Step One: Application
The process starts with you filling out a straightforward form we'll provide. It asks for basic details such as your company's name, address, the kind of business you do, and some info about your customers.
There might be a need for you to share some documents like an aging report of accounts receivable or credit limits of your customers. The factoring company is interested in assessing your customers' ability to pay, and this isn't based solely on their past dealings with your business. We're looking for a comprehensive understanding of their financial health.
In the beginning, you'll also talk about financial specifics with the factoring company. You'll discuss how many invoices you plan to factor each month (meaning how much cash you want readily available), the rates of advance and discount, and the speed of issuing the advance by the factoring company.
Typically, these elements might differ based on your customers' financial stability and your estimated monthly sales volume for factoring. Other variables could be your industry, business longevity, and perceived risk associated with your customers. For instance, dealing with many high-risk customers could mean higher factoring fees compared to having a few slow-paying government agencies as customers.
In factoring, the total dollar amount you factor is crucial. More the volume (the total dollar amount of the invoices you factor), better the rates you get.
The factoring company will examine the application you submit to decide if factoring suits your business. They will assess the potential risks and rewards using the details you've provided.
Upon approval, negotiations for terms and conditions can be expected. The negotiation takes into account several aspects of the deal. For example, a $10,000 factoring deal won't have as favorable conditions as a $500,000 one.
During the negotiation, you'll understand the cost of factoring your accounts receivable. Once an agreement is reached, the factoring company begins the funding process. They'll check your customers' credit, look for any liens against your company, and confirm the authenticity of your invoice. Only after these checks, they buy your receivables and give you the cash advance.
Factoring Company Benefits
Factoring Perks: Catapult Your Business to New Heights
- Toss out cash flow worries and zoom in on business growth.
- No more loan repayment blues. Hello, cash in 2-4 days!
- Keep the command of your business in your hands.
- Drastically reduce or even say goodbye to chasing payments.
- Master your cash flow by picking and choosing invoices to sell.
- Get the upper hand with slow-paying clients.
- Fuel your production and sales with a steady cash supply.
- Enjoy the luxury of professional services for payment collection and credit checks.
- Guarantee that your payroll is always on track.
- Always be ready for payroll taxes – no last-minute scrambles.
- Snag those bulk purchase discounts with ease.
- Beef up your buying power for even sweeter deals.
- Boost your credit rating with cash always at hand for bills.
- Expand your business horizons with ample cash reserves.
- Rev up your marketing efforts with a solid cash flow.
- Polish your financial statements to a shine.
- Dive into detailed, insightful reports about your accounts receivable.
Is Factoring For You
How Factoring Can Help Small Businesses Thrive
Factoring is like a financial boost that can help small businesses succeed in simple terms. Here's how it works:
Quick Access to Cash: Small businesses sometimes struggle to get the money they need for their everyday expenses or to grow. Factoring gives them a way to get cash quickly by selling their unpaid customer invoices to a company that specializes in this. It's like getting an instant payment for the work they've done or the products they've sold.
Better Money Management: Managing money is important for any business, and factoring can make it easier for small businesses. Instead of waiting for customers to pay, factoring provides a steady stream of money that keeps the business running smoothly. It's like having a reliable source of funds to pay bills, buy supplies, and invest in new opportunities.
Building a Good Reputation: Factoring can also help small businesses build a good reputation with suppliers and lenders. When they can pay their bills on time, it shows that they're trustworthy and responsible. This can lead to better deals with suppliers and open up more options for loans or other types of financial help in the future.
Growing the Business: With the extra cash from factoring, small businesses have the freedom to expand and grow. They can use the money to hire more employees, buy new equipment, or reach more customers through advertising. It's like having the resources to take their business to the next level and seize exciting opportunities.
Simplifying Finances: Keeping track of customer invoices and collecting payments can be a hassle for small businesses. Factoring companies take care of these tasks, so small businesses can focus on what they do best. It's like having a helpful partner who handles all the paperwork and makes sure the money comes in smoothly.
Lowering Financial Risks: Factoring companies also help small businesses reduce the risks associated with customers who don't pay on time or don't pay at all. They check the creditworthiness of customers and take responsibility for collecting payments. This gives small businesses peace of mind and protects them from losing money.
Flexibility for Success: Factoring is flexible and can adapt to the changing needs of small businesses. As their sales grow and they generate more invoices, they can access more funding through factoring. It's like having a financial solution that grows with them, providing the support they need to thrive.
In simple terms, factoring gives small businesses quick access to cash, helps them manage their money better, builds a good reputation, supports growth, simplifies finances, lowers financial risks, and offers flexibility for success. With factoring, small businesses can overcome financial challenges and create a path to long-term prosperity.
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
Unleash Your Business Potential with Quick Cash and Expert Credit Risk Assessment
Gain a Competitive Advantage at No Additional Cost
Accurately evaluating credit risk is a fundamental aspect of our factoring services. Our objective approach sets us apart, as very few clients can perform this function as effectively as we do.
As part of our comprehensive offering, we serve as your dedicated credit department for both new and existing customers. This gives you a significant edge over managing these tasks in-house, without incurring any extra fees.
Imagine a scenario where a salesperson is pursuing a new account with the potential for substantial purchases. In their eagerness to secure the business, they may overlook warning signs of credit difficulties and bypass your internal credit checks. While this may result in a quick sale, it offers no guarantee of timely payment, which is essential for sustained success.
With us, you can avoid such pitfalls. 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. Importantly, our involvement does not imply a tightening of credit that could negatively impact your business beyond your control.
Ultimately, the decision to do business 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 retain the freedom to extend credit terms as you see fit. You remain in complete control. Regardless of the decisions you make, our participation ensures 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 for established customers, which can be a costly oversight.
Most businesses only conduct credit checks when problems have already spiraled out of control. In contrast, we promptly inform you of any changes in the credit status of your existing customers, empowering you to take proactive measures.
In addition to providing specific customer credit information, we offer comprehensive reports on your accounts receivables. These reports include accounting details, transactional insights, aging reports, and financial management reports. This valuable data allows you to analyze sales performance, track account history, and make informed decisions to drive your business forward.
With over 70 years of successful experience managing cash flow and credit, we are excited to leverage our expertise for your benefit. Let us put our knowledge to work, helping you achieve your financial goals and unlock the full potential of your business. Experience the advantages of quick cash and expert credit risk assessment at no additional cost.
How To Change Factoring Companies
Changing Invoice Financing Companies: A Simple Guide
Introduction
Are you thinking of changing your invoice financing (factoring) company? If you're not happy with your current one, it might be a good time to make a move. Here's what you need to understand before switching:
Understanding UCC and its Role
A UCC, or Uniform Commercial Code, is a standard way for lenders, including factoring companies, to claim a business's assets as security. This way, they ensure their loans are safe. It's like a company's mortgage. Since invoices are constantly changing as some are paid and others are issued, lenders apply a 'blanket' UCC. This covers all invoices even if you're only factoring part of them.
Process of Switching Factoring Companies
To switch factoring companies, the new company pays off the old one. It's similar to refinancing your house. This is called a 'buyout'. The old company's claim is removed, and the new one files theirs.
Costs and Timeframes
How Much does the Buyout Cost?
The cost of a buyout can vary. If you have new invoices that the new company can use to pay off the old ones, it won't cost you anything. Any payments from the old invoices will be forwarded to you by the new company for free. However, if you have to reuse some invoices already factored by the old company, you might end up paying fees to both companies. In this case, you could end up paying more in the first month after the switch.
How Long does a Buyout Take?
Switching factoring companies could take a couple of days longer than setting up a regular factoring arrangement. This extra time is needed to confirm invoice details and get the final buyout amount approved by you.
Complex Situations
In some situations, the old and new factoring companies might agree to share the rights to the invoices until the old company is paid off. However, this is not common.
Questions You Should Have Asked Your Current Factoring Company
Before signing up with your current factoring company, you should have asked these questions:
- 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? If so, how long does it take for my customer's payments to reach my account?
- How long do you keep my original invoices before sending them to my customers? (This should be done the same day)
- Who will be my contact at your company? Is it one person, or will I have to deal with new people every time I call?
- Do I need to pay for postage for mailing my invoices? (This should be included in the fees)
- 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?
Conclusion
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.
