Factoring Company Guide
First Step: Filling Out the Application
Start your path to better cash flow management with our straightforward application. Just fill in basic information about your company and its customers. This step is fundamental in accessing the financial benefits of factoring.
You may need to provide financial documents, such as an accounts receivable aging report. This helps us understand your customers’ broader financial standing, not just their payment history with your business.
This step also involves discussing financial specifics with our team. Determine the volume of invoices for factoring and the rates you’re aiming for. These terms vary based on your industry, the longevity of your business, and customer risk profiles.
The volume of your factoring is a key factor. Larger volumes typically secure more favorable terms for your business.
Using your application, we assess whether factoring is appropriate for your business. Following approval, we negotiate the terms of the agreement, which are influenced by the amount you wish to factor.
Throughout the negotiation, we provide a clear understanding of the costs involved. Once terms are agreed upon, we
Factoring Company Benefits
Factoring Benefits: Your Strategic Advantage
- Redirect your energies from cash flow management to business growth.
- Eliminate the worry of loan repayments with fast, accessible cash.
- Maintain full autonomy over your business operations.
- Cut down or eliminate the cost of chasing payments.
- Gain precise control of your cash flow with targeted invoice selling.
- Stay ahead of slow-paying clients, securing your financial future.
- Boost your production and sales with a steady cash influx.
- Capitalize on professional services for efficient payment collection and credit checks.
- Ensure consistent, timely payroll management.
- Always be ready for payroll tax commitments.
- Access bulk purchase discounts, enhancing your bottom line.
- Strengthen your purchasing power and unlock more savings.
- Enhance your credit score through timely bill payments.
- Amass the capital needed for expansive business growth.
- Allocate more funds towards effective marketing.
- Witness an improvement in your financial statements' quality.
- Receive detailed, actionable insights on your accounts receivable.
Is Factoring For You
The Importance of Factoring
"Only when the payment is made, is a sale truly complete." This adage rings true, especially if you find yourself playing the role of a banker for your clients. Time for a financial health check.
Scrutinize your accounts receivable. Those overdue accounts? They signify interest-free credit you're extending. This is likely a detour from your original business objectives.
Think about it: your customers would incur interest charges on a bank loan. In your case, not only are you not earning interest, but you're also missing out on vital capital utilization. The opportunity cost here is significant.
By allowing extended payment terms, you're inadvertently financing your customers' businesses. It's essential to recognize the financial implications and adopt a more efficient approach to managing your accounts receivable.
Factoring History
Factoring: Empowering Businesses for Success
Welcome to the world of factoring, where businesses find the financial support they need to thrive. Whether you're a business owner, an aspiring entrepreneur, or seeking innovative financial solutions for your employer, factoring can play a crucial role in helping you achieve your financial goals.
It's interesting to note that factoring has often been overlooked and remains relatively unknown in the business world. Despite this, it serves as the backbone for many successful American businesses, unlocking billions of dollars each year and enabling thousands of enterprises to grow and prosper.
So, what exactly is factoring? Simply put, it involves purchasing commercial accounts receivable (invoices) from businesses at a discounted rate. In today's competitive landscape, offering credit terms to customers is often necessary to secure business. However, this can create cash flow challenges, particularly for new or struggling companies that rely on steady and timely payments.
Factoring, with its long and rich history, traces back 4,000 years to the time of Hammurabi, the king of Mesopotamia, often considered the birthplace of civilization. Mesopotamians were pioneers in developing writing, establishing business codes, and introducing the concept of factoring.
Over time, factoring gained traction in various civilizations. The Romans, for instance, were early adopters, introducing the sale of promissory notes at discounted rates. In the American colonies, factoring played a crucial role before the revolution. Merchant bankers in London and Europe provided funds in advance for goods such as cotton, furs, and timber, allowing colonists to continue their operations without being hindered by delayed payments from European customers.
It's important to highlight that these historical arrangements differ from modern banking relationships. In fact, modern banks would have caused delays, waiting to collect payments from European buyers before disbursing funds to the colonists. This impractical process led to the emergence of factors in colonial times who provided advances against accounts receivable, enabling clients to maintain their operations while awaiting payment.
As the Industrial Revolution unfolded, factoring adapted to address credit concerns while maintaining its core principles. Factors began assisting clients in assessing customer creditworthiness, establishing credit limits, and guaranteeing payment for approved customers. Today, this approach, known as non-recourse factoring, is commonly practiced in the business world.
Before the 1930s, factoring primarily served the textile and garment industries, which inherited the practice from the colonial economy. However, after the war years, factors recognized the potential to expand factoring to other industries reliant on invoicing, leading to its broader adoption.
In the present day, factors come in various shapes and sizes. Some operate as divisions within large financial institutions, while many others are independently owned entrepreneurial endeavors. The popularity of privately owned factors surged in the 1960s and 1970s when high-interest rates made traditional bank financing less accessible. This trend continued in the 1980s, driven by increasing interest rates and changes in the banking industry. As banks became more expensive and inflexible due to regulatory constraints, small business owners sought alternative financing options. Factoring emerged as an increasingly popular choice.
Each year, thousands of businesses leverage factoring to sell billions of dollars in accounts receivable. By doing so, they unlock cash flow, achieve profitability, drive growth, and, in some cases, secure their very survival. Factoring empowers businesses by providing them with the financial support they need to thrive in today's competitive market.
Credit Risk
Quick Cash Flow Solutions: Unlock Expert Credit Risk Assessment at No Additional Cost!
Precisely assessing credit risk is a fundamental aspect of our factoring business. Few, if any, clients can perform this task as objectively as we do.
With no extra charges, we serve as your dedicated credit department for both new and existing customers. This grants 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. In their zeal to secure the business, they may overlook warning signs related to credit difficulties. They might even bypass your internal credit checks to expedite the process. While this could lead to a successful sale, it doesn'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 avoid purchasing invoices from customers with poor credit ratings, minimizing the risk of nonpayment. However, please understand that our involvement does not impose stringent credit restrictions that would negatively impact your business beyond your control.
The ultimate decision to do business with a new customer of questionable creditworthiness still lies with you. (Nevertheless, we reserve the right to say, ""I told you so!"")
Although we may not purchase those invoices, you still have the freedom to extend credit terms as you see fit. You retain 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 previous practices.
We conduct thorough research on new clients and, equally importantly, regularly monitor the credit ratings of your existing customers. This sets us apart from many businesses that rarely perform routine credit updates on their established customer base. Neglecting this crucial step can be a grave mistake.
Typically, businesses only conduct a credit check when it's too late, and the problem has already escalated. On the contrary, 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 benefit from 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
Changing Your Invoice Finance Provider
Thinking about switching your invoice finance provider? Whether it’s due to dissatisfaction or a strategic move, this guide is your comprehensive handbook. We'll navigate through the complexities of UCCs, the transition process, and key considerations before you commit to a new financial partner.
Uniform Commercial Code (UCC) Explained
A UCC filing is a standard practice for invoice finance companies. It’s akin to a safety net, ensuring their rights are protected:
- It keeps track of asset rights.
- Alerts potential lenders about existing financial arrangements.
- Guarantees that your financier has priority claim over your invoices.
Transitioning Between Providers
Switching providers is similar to refinancing a mortgage. It involves a "buyout" where your new provider takes over the balance from the old one, formalized by a Buyout Agreement.
Calculating the Buyout Amount
The buyout amount typically includes the total unpaid invoices minus any reserves, along with fees from your old financier. Always ask for a detailed breakdown to understand any additional charges or early termination fees.
Cost Implications of a Buyout
Transitioning can be financially neutral if you use new invoices. However, reusing financed invoices might incur double fees. Some financiers offer discounts, but timely notification to your old provider is crucial to avoid extra charges.
Time Considerations
Switching may extend the usual processing time due to buyout calculations and approvals. The amount can fluctuate based on accruing fees and ongoing payments. Partnering with an experienced company can make this transition smoother.
Complex Scenarios
In certain cases, both your old and new financiers might have rights to your invoices until the previous balance is settled, though this isn’t the norm.
Questions to Ponder Before Committing
- Is it feasible to work with multiple invoice finance companies at once?
- What is the notice period for changing providers, and are there associated penalties?
- How does the new provider handle payments, and what’s the turnaround time?
- Who will be your primary contact at the finance company, and how many different people will you work with?
- Will you be responsible for postage costs for sending invoices?
- Are there extra charges for credit checks or setting up new clients?
- When does the provider start holding reserves?