Factoring Company Guide
First Step: Filling Out the Application
Your journey to financial transformation begins with one straightforward step: filling out our application. This is where you start reshaping your business’s financial future.
Provide us with the essentials about your business, an insight into the lifeblood of your company. This information isn't just data; it’s the key to unlocking your financial potential.
In this initial phase, we discuss what your business needs financially. How much are you looking to factor? What are your ideal terms? This is a strategy session tailored to your business's unique position and aspirations.
The amount you choose to factor plays a significant role. More factoring volume translates to more advantageous terms, giving your business the leverage it needs.
Your application lets us evaluate if factoring aligns with your business’s trajectory. Post-approval, the negotiation phase begins. Here, the extent of your factoring directly impacts the terms, offering you the chance for more beneficial deals.
During negotiations, every aspect of the cost is made clear. Following agreement, we expedite the funding process – a critical step in realizing your business's financial empowerment.
Factoring Company Benefits
Factoring Benefits: Unleash Your Business Potential
- Redirect your focus to business growth, free from cash flow worries.
- Avoid loan repayment stress; access cash swiftly in 2-4 days.
- Retain complete control over your business operations.
- Significantly cut costs associated with payment collections.
- Gain precise control over your cash flow by selecting which invoices to sell.
- Stay ahead of slow-paying clients and safeguard your financial stability.
- Boost your production and sales capacity with reliable cash flow.
- Benefit from professional services in payment collection and credit assessment.
- Ensure consistent payroll management, avoiding employee dissatisfaction.
- Maintain sufficient funds to cover payroll taxes.
- Access bulk purchase discounts, thanks to readily available funds.
- Enhance your bargaining power, securing early payment or bulk buying discounts.
- Improve your credit rating with timely bill payments.
- Secure the necessary cash for expanding your business ventures.
- Allocate funds effectively for targeted marketing strategies.
- See tangible improvements in your financial statements.
- Receive in-depth reports on your accounts receivable for better financial planning.
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 History
Discover the hidden engine that has propelled American businesses to unprecedented heights: factoring. This isn't just another financial term; it's a revolution that's been silently shaping the fate of enterprises for centuries.
Curiously overlooked in most business curricula, factoring is the unsung hero in the business world, releasing billions of dollars, powering growth, and saving businesses from the brink. It's not just a financial tactic; it's a lifeline.
What is factoring? Imagine a financial maneuver that dates back to Hammurabi's Mesopotamia, the cradle of civilization, and has evolved to become a modern-day business savior. This ancient practice, buying receivables at a discount, is a testament to the ingenuity of human commerce.
From the Romans to the American colonists, factoring was the secret behind many successful ventures. In a world where traditional banking was a bottleneck, factoring emerged as the swift solution to financial woes.
Today, factoring stands tall as a beacon of hope and strategy for businesses navigating the turbulent waters of finance. From large institutions to private ventures, factoring is the key to unlocking potential, turning receivables into billions of dollars of growth and success.
Credit Risk
Boost Your Business with Quick Cash and Expert Credit Risk Assessment
Get the Edge Without Extra Fees
Accurately evaluating credit risk is a critical component of our factoring services. We excel at this function, providing an objective perspective that few clients can match.
As part of our comprehensive offering, we act as your dedicated credit department for both new and existing customers. This arrangement gives you a distinct advantage over managing these processes internally, without any additional charges.
Consider a scenario where a salesperson pursues a new account with the potential for significant sales. In their eagerness to secure the business, they may overlook warning signs of credit difficulties and bypass your internal credit checks. While this approach may result in a quick sale, it offers no guarantee of timely payment, which is essential for sustained success.
With us, you won't encounter such issues. 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. It's important to note that our involvement doesn't imply a tightening of credit that could adversely affect your business beyond your control.
Ultimately, the decision to do business with a new customer of questionable creditworthiness remains in your hands. (However, we 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 maintain full 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 regularly 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. Such neglect can lead to costly oversights.
Most businesses conduct credit checks only 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, allowing 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 data empowers you to analyze sales performance, track account history, and make well-informed decisions.
With over 70 years of successful experience managing cash flow and credit, we are eager to leverage our expertise for your benefit. Let us put our knowledge to work, helping you achieve your financial goals and giving your business the competitive edge it needs. Experience the benefits of quick cash and expert credit risk assessment without any extra fees.
How To Change Factoring Companies
Changing Your Invoice Factoring Service Provider
Need-to-know info about switching invoice factoring firms.
Are you considering a different invoice factoring firm?
Are you dissatisfied with your current one?
Planning on ditching your current factoring firm?
What should I know before I switch factoring companies?
Here's a guide answering all these queries and more:
Understanding UCC and its role in switching factoring firms:
Usually, factoring companies file a general Uniform Commercial Code (UCC) to secure their claim over the invoices they've funded.
The UCC helps factoring companies, banks, and lenders know who's lent money on which assets. As invoices change daily, factoring companies need to file a 'blanket' UCC that secures all your receivables, even if you're only factoring a part of your sales. This 'blanket' UCC acts as a signal to other lenders, showing a Security Agreement exists between you and the factoring company.
Your specific factoring details, like rates and which accounts are factored, are laid out in the Security Agreement, which is not publicly accessible. Essentially, a UCC works like a first mortgage on your business.
The Process of Switching Companies
The lender with the earliest UCC filing gets 'First Position' on the promised collateral. For instance, a factoring firm has first rights to collect payments on your invoices.
To switch factoring firms, the new factoring firm has to pay off the old one. At the same time, the old factoring company's claim is released, and the new company's claim is filed, similar to refinancing a house.
A 'buyout' is when the new factoring firm pays off the old one using funds from your first financing.
The Buyout Agreement details the transition process and is signed by the old factoring firm, new factoring firm, and your company. In this agreement, you agree to the 'buyout figure' provided by the old factoring company.
How is the Buyout Figure Determined:
The buyout figure is usually the total outstanding receivables minus any reserves and then plus any fees owed to the old factoring firm. It's a good idea to ask for a detailed breakdown of your figure to ensure you understand if there are any early termination fees or additional charges.
What does the buyout cost?
If you can provide new invoices to the new factoring company, which they can use to pay off the outstanding invoices at your old firm, then you wouldn't incur additional costs for the switch. However, most companies need to resubmit some of the invoices already factored with the old company to the new one. In this case, the 'overlap' invoices will incur fees from both factoring firms.
How long does a buyout take?
When you're switching factoring firms, plan for the first funding to take two to three more days than the normal setup process. The extra days will be used to verify the invoices and calculate buyout figures for your approval.
What if my situation is more complex?
Although it's not usual, the old and new factoring firms can collaborate via an Intercreditor or Subordination Agreement until the old firm is paid off. Depending on the situation, factoring firms have managed to 'draw a line in the sand,' where the old firm has rights to invoices up to a certain date, and the new firm has rights to all invoices after that date.
Questions you should have asked before signing up with your current factoring firm:
- Can I use multiple factoring firms at once? The universal answer is one, according to the Uniform Commercial Code/UCC.
- If I decide to switch factoring firms, how much notice do I need to give?
- What is the penalty for leaving without giving the required notice and can you provide an example of how the fees are calculated? Beware of 13-month contracts that require a certain monthly factoring volume.
For example, a 13-month contract where you've agreed to factor $100,000 per month at a rate of 3% means you promise to pay them $3,000 per month in factoring fees or $34,000 in total over the next year. If you want to leave after 6 months, they will charge you the fees for the remaining 6 months, which equals $13,000. This can be too expensive for most companies, especially those with low profit margins. You're stuck!
