Factoring Company Guide
First Step: Filling Out the Application
Commence your journey to financial empowerment with our straightforward application. Provide us with essential business information to pave the way for your company's growth.
Documents like accounts receivable aging reports are necessary to assess the financial health of your customers. We look beyond past transactions to understand their overall financial stability.
This stage also involves determining your financial needs, discussing factors like invoice volume, advance rates, and funding speed. These terms are based on your industry specifics, customer risk profiles, and business longevity.
Factoring volume is key. The larger the invoice amount, the more favorable your factoring rates.
Using your application, we evaluate whether factoring aligns with your business objectives. Following approval, we negotiate a factoring agreement that suits your business's scale and financial needs.
Through our negotiation process, you'll fully understand the costs involved. Once terms are set, we proceed with customer credit checks and invoice validation before initiating your cash advance.
Factoring Company Benefits
Transform Your Business with Factoring:
- Shift your focus from cash flow to business expansion.
- Free yourself from the burden of loan repayments with quick, accessible cash.
- Retain complete control over your business direction and strategy.
- Minimize or eradicate the costs associated with payment collection.
- Optimize your cash flow by selling invoices on your terms.
- Stay financially ahead of clients with delayed payment habits.
- Enhance your production and sales figures with consistent cash availability.
- Benefit from professional services for collecting payments and credit checking.
- Always meet your payroll obligations without fail.
- Have sufficient funds for payroll taxes at all times.
- Enjoy discounts on bulk purchases, reducing operational costs.
- Improve your negotiation power for early payments and large purchases.
- Bolster your credit rating with timely bill settlements.
- Secure enough capital for your business’s expansion plans.
- Invest in marketing your business effectively.
- See a noticeable improvement in your financial statements.
- Access in-depth, comprehensive reports on your accounts receivable.
Is Factoring For You
How Factoring Helps Small Businesses Grow
Factoring is a helpful tool that can contribute to the growth of small businesses in simpler terms. Here's how it works:
Access to Quick Cash: Small businesses often struggle to access funds they need for daily operations or expansion. Factoring allows them to get quick cash by selling their unpaid customer invoices to a factoring company. This immediate cash infusion gives them the financial resources to cover expenses and seize growth opportunities.
Better Cash Flow Management: Cash flow is crucial for small businesses to pay bills, purchase inventory, and invest in growth. Factoring improves cash flow by providing a steady stream of money from the factoring company for the outstanding invoices. This helps small businesses maintain a healthy financial situation and avoid cash flow gaps.
Improved Credit Standing: By using factoring, small businesses can build a good credit history. They can pay suppliers on time and establish a reputation for reliability. This can lead to better credit terms with suppliers and easier access to loans or other financing options in the future.
Business Expansion: Factoring gives small businesses the financial flexibility to expand their operations. They can use the cash from factoring to invest in marketing, hire more employees, purchase equipment, or open new locations. This helps them take advantage of growth opportunities and increase their market presence.
Outsourced Invoice Management: Managing customer invoices can be time-consuming and complex. Factoring companies handle this task for small businesses. They take care of invoicing, collecting payments, and managing customer credit checks. This frees up valuable time and resources for small businesses to focus on core operations and serving their customers.
Reduced Financial Risk: Factoring companies assume the risk of non-payment from customers. They conduct credit checks and monitor payments, protecting small businesses from bad debts. This reduces financial risk and provides peace of mind to small business owners.
Flexibility to Grow: Factoring is a flexible financing option that grows with the business. As sales increase and generate more invoices, small businesses can access more funding through factoring. This adaptability allows them to fund their growth without being limited by traditional loan structures.
In simple terms, factoring gives small businesses quick cash, improves their cash flow, helps build good credit, supports business expansion, streamlines invoice management, reduces financial risk, and offers flexibility for growth. By using factoring, small businesses can overcome financial hurdles and create opportunities for long-term success.
Factoring History
Factoring: Empowering Businesses to Thrive and Flourish
Welcome to the world of factoring, where businesses discover the power to thrive and flourish. Whether you're a seasoned entrepreneur or a budding business owner, factoring can be the key to unlocking your business's true potential.
It's surprising that factoring often remains overlooked, with many business owners unaware of its immense benefits. Yet, factoring serves as a catalyst for growth, providing businesses with the financial boost they need to succeed.
But what exactly is factoring? At its core, factoring involves selling your accounts receivable (invoices) to a specialized financial institution at a discount. In today's competitive landscape, offering credit terms to customers is essential for attracting and retaining business. However, waiting for payments can strain your cash flow and hinder your ability to invest, expand, and take advantage of new opportunities.
Factoring has a rich history that spans centuries, evolving and adapting to meet the changing needs of businesses. Today, factoring empowers businesses to access immediate cash flow by converting their unpaid invoices into working capital. This influx of funds enables you to cover expenses, invest in growth initiatives, and navigate the ups and downs of the business world with confidence.
Factoring is not limited to specific industries or business sizes. Whether you're in manufacturing, services, or retail, factoring can be tailored to meet your unique needs. It provides the flexibility to grow and adapt alongside your business, supporting your journey towards success.
Working with a reputable factor brings additional advantages. Factors offer expertise in credit analysis, collections, and risk management. They assume the responsibility of managing your receivables, allowing you to focus on core operations and strategic decision-making. This partnership ensures a steady cash flow, minimizes the risks associated with late payments, and frees up valuable time and resources.
Embracing factoring means breaking free from the constraints of traditional financing options. It offers a fast, flexible, and accessible solution for businesses seeking growth and stability. With factoring, you can seize new opportunities, expand your market presence, and invest in the future of your business.
Join the ranks of businesses that have harnessed the power of factoring and experience the transformative impact it can have. Unleash your business's true potential, fuel its growth, and create a path to long-term success. Factoring is the bridge that connects your aspirations to reality, empowering you to thrive in today's competitive business landscape.
Credit Risk
Quick Continuous Cash: Expert Credit Risk Assessment at No Extra Cost – Your Key to Financial Empowerment!
Mastering credit risk assessment is crucial in factoring, and our unparalleled expertise in this field is at your service without any additional cost. We are your dedicated credit department, offering insights and analysis that far exceed the capacity of most businesses.
Picture this: a salesperson chasing a lucrative deal, blinded to the credit risks. Such oversights can lead to sales without payment – a hollow victory. With our expert assessment, these risks are mitigated, ensuring you don't fall into this common trap.
We scrutinize each customer's creditworthiness, making decisions that safeguard your interests. But rest assured, the final say on any transaction is always yours – with the added advantage of our informed insights.
Our continuous monitoring of client credit ratings and comprehensive financial reports give you a clear view of your business's financial health, a stark contrast to the usual neglect in regular credit checks. This vigilance is your shield against unforeseen financial challenges.
With over 70 years of experience in cash flow and credit management, we're not just offering a service; we're providing a partnership for your success. Let our expertise be the catalyst for your financial achievements.
How To Change Factoring Companies
Changing Invoice Financing Providers
Want to switch your invoice financing provider? Not satisfied with your current one? Planning to bid goodbye to your present provider? Not sure what to know before making the switch? Here's a simple guide with all the answers.
Understanding UCC and its role in changing providers
Typically, an invoice financing company (also called a factor) will file a Uniform Commercial Code (UCC). This is like staking a claim on the invoices they've funded. This helps to keep track of who's got a claim on what assets, especially because invoices change every day - some are paid, some are collected, and some new ones are created.
So, the factor files a 'blanket' UCC covering all your invoices, even though you might not be getting funding for all your sales. It's just not practical to file a new UCC for every single invoice. The UCC is like a warning sign for other lenders that there's a deal between your business and the factor.
The specifics of your agreement with the factor, like rates and which accounts are factored, are outlined in a private Security Agreement. A UCC is kind of like having a first mortgage on your business.
The process of changing factors
The factor with the oldest UCC is said to be in the 'First Position' on the collateral. This means they have the first right to collect payments on your invoices and any related items.
If you want to change factors, the old one must be paid off by the new one. This is similar to refinancing your house. The old factor's claim is released and the new one's claim is filed.
The process where the new factor pays off the old one using money from your first funding is called a 'buyout'. The Buyout Agreement, which outlines the transition process, is signed by the old factor, new factor, and your company. In this agreement, you approve the 'buyout figure' provided by the old factor.
How is the Buyout Figure Calculated:
The buyout figure is usually calculated by subtracting any reserves from the Gross Receivables Outstanding and adding in fees due to the old factor. It's good to ask for a breakdown of this figure so you can understand if there are any early termination fees or other charges added to your usual factoring fees.
Once the old factor is paid off, you only have to deal with the new factor. If you're changing from an 80% advance rate to a 90% advance rate, you might have enough money to pay off the old factor without needing more invoices.
How much does the buyout cost?
If you can give the new factor new invoices to pay off the old ones, there's no additional cost for the switch. As payments come in on the old invoices, those payments are forwarded to the new factor who then sends them to you.
However, if you need to resubmit some invoices already factored with the old factor to the new one, those invoices will incur fees from both factors. As a result, your factoring fees for the first month after the change could be higher than normal. If the new factor's rate is lower, you can calculate how long it will take to recover this cost and make a cost-benefit analysis.
How long does a buyout take?
When changing factors, expect the first funding to take a couple of days more than the usual setup process. This extra time is needed for invoice verification and for calculating the buyout figures.
What if my situation is not that easy?
In some cases, the old factor and the new one can work together via an Intercreditor or Subordination Agreement until the old factor is paid off. The old factor has rights to invoices up to a certain date and the new one has rights to all invoices after that date.
Questions you might have wished you asked before signing up with your current factor:
- How many factors can I use at one time? (The universal answer is one, according to the UCC.)
- If I want to change factors, how much notice do I need to give?
- What is the penalty if I leave without giving the required notice?
- Do you use a bank lock box to post my customer payments? If so, how long does it take for a customer's payment to post to my account from the date the bank receives it?
- How long do you hold my original invoices before sending them to my customers?
- How many different people will I work with at your company?
- Do I need to pay for postage for you to mail my invoices?
- Do you charge me every time I have a new customer to check or set up?
- Do you start holding reserves once a customer hits 60 days even though I have 90 day recourse?