"But the check's in the mail!"

ACCOUNTS RECEIVABLE FACTORING

Waiting 30, 60 or 90+ days for payment can be frustrating to say the least.  If you are interested in improving your company's cash flow, read on.

Receivables Factoring Explained

Accounts Receivable Factoring is when a business sells its unpaid accounts receivable invoices to a specialized financial institution called a "Factor," for a discount. This service is useful to a business that cannot afford to wait 30, 60, or 90 days to collect payment from customers because cash is needed immediately.

Although largely unknown, the factoring industry is quite large (with over $200 billion factored annually) and has been used as a financial service by multi-billion dollar corporations for many years. Only over the last several years has this service been made available to small and medium sized businesses as an alternative to traditional bank financing, which generally requires at least two years in business with a profit.

Many new and growing companies have trouble receiving traditional bank financing due to profitability, years in business, and financial strength. Factoring allows these companies to take advantage of their outstanding invoices to raise cash without incurring any additional debt. Factoring is not a loan!

Rather than waiting for long billing cycles to close, a business has the option to sell some or all of its outstanding invoices to a factor (for a discount) and receive funding within 24 hours or less. The Factor will eventually collect the full amount of the invoice from the account debtor.

The funding from the factor happens in two parts: 1) Your business will receive an advance up to 90% of the invoice amount sold to the factor; 2) When the factor collects the full amount of the invoice from the account debtor, your business will receive the remainder of the advance minus the factors fee (usually 1.5 - 3% depending upon each situation).

Receivables Funding Process

An invoice is created. The factoring process begins when an invoice has been created for products or services already delivered to another business or government. The business creating this invoice has the option to factor and receive immediate funding.

Open a factoring account.
If your factoring account has not been established yet contacts us for help in opening an account and getting started. It normally takes 5 to 7 business days to open an account and begin Factoring. Once your account is open you will be able to receive funding for your receivables within 1 business day.

Send in the invoice for Factoring.
After an account has been established you may fax any new or outstanding invoices that you wish to receive funding for, to the factor. There is no minimum or maximum sized invoice. You may factor as much or as little as you want.  Use this service at your discretion.

Due Diligence
Once the factor receives the invoice from you, due diligence will be performed. The Factor makes sure your customer (the account debtor) is credit worthy and is willing and able to pay the invoice when it is due. This process usually takes less than 24 hours. Based on the financial strength of your customer, an advance funding amount is worked out and a fee schedule is determined.

Funding Advance
When the due diligence process is completed, an immediate advance payment will be wired to your business bank account. The advance is usually between 80% and 90% of the original invoice amount.

Collection
The Factor will do the administrative work of collecting payment on the invoice. This enables you up to concentrate on other areas of your business. A notice is sent to the account debtor instructing them to send payment to the Factor at the time the invoice is due.

Final Funding
When the Factor receives payment in full from the account debtor, your business will receive the remainder of your advance payment minus the Factor's fee.

Our Relationship with YOUR Customer
The Factor treats your customers with professionalism and respect.  We present  ourselves as an accounts receivables management service that has just given your business an unlimited credit line. After all, the Factor has a vested interest in your customers satisfaction and would never want to do anything to upset them and lose their business (and yours). The Factor communicates to your customer through letters and telephone calls. The letters ask your customer to redirect invoice payments and the phone calls are only to verify the existence of an invoice. Should your customer begin to default on payments the Factor will raise the issue with you first before speaking to your customer. 

Factoring is a phenomenal financial tool for any sized business. Contact us today for a free no obligation phone consultation with one of our factoring consultants. We will personally assist you in opening your factoring account or in answering any questions you may still have.

To get started download your application by clicking here