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Frequently Asked Questions

What is factoring?
Factoring is the purchase of your accounts receivable (invoices) at a discount in order to provide you with the cash flow you need. The funding source that buys the invoices is called a Factor. Factoring is a widely accepted financing option used by companies of all size.

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Is factoring a recent financing option?
Factoring has been around for centuries. It is one of the oldest types of financing, first seen in the United States in the garment and textile industries. Today, factoring is widely used as a viable funding for all businesses that extend credit to credit-worthy commercial customers.

How does factoring differ from bank financing?
Factoring is faster and less complicated than bank financing. Factoring companies make decisions based primarily on the credit worthiness of your customers, while a bank's credit decisions rely mainly on your company's financial history, cash flow, and collateral. We fund quickly, often within days of receiving an application, when banks generally take weeks or months. In addition, when you factor your accounts receivable, your company incurs no debt, as there is no interest to pay or principal to repay. Factoring can also help companies that banks traditionally shy away from, such as start-ups, companies with tax liens, or even companies in bankruptcy.

How long does it take to receive funding?
Typically within 24 hours of receiving your company's information, we'll issue you a proposal. Upon acceptance, we conclude our due diligence and complete documentation. Funding can happen as early as within a few days of initial contact with your company. Ongoing, it is common to fund within 24 hours of your invoice submission.

Do I have to factor all of my invoices?
No. You decide which invoices you wish to factor depending on the additional cash flow that your company needs. We provide you with a flexible financial service that allows you to receive the cash flow that you need to be successful.

What can I do with the cash flow I receive from factoring my accounts receivable?
Our clients use the cash to meet payroll, payroll taxes, pay suppliers, and take advantage of supplier discounts, purchase inventory or equipment, and take on more orders.

What will my customers think?
Factoring represents over $150 billion a year worth of revenue in the US alone. It is an accepted and prevalent form of commercial finance. It is likely that some of your customers do business with vendors using a factoring service.

Why would a business sell its accounts receivable?
Businesses with cash flow problems cannot wait 30 to 60 days or more for payment on their invoices. They need immediate cash to meet the financial obligations of their companies. Factoring provides this cash to businesses through the purchase of accounts receivable, often within 24 hours after invoice is created.

Which companies benefit the most from factoring their invoices?
We believe every company-and each funding situation-is unique. We view every situation as an opportunity to create a flexible, dynamic "win-win" structure. Factoring works well for startups as well as high-growth businesses, including those cyclical in nature. Factoring is also well suited for under-capitalized companies with strong customers, turnarounds or companies with cash-flow problems.

Who makes a good factoring client?
Companies who sell a product or service to commercial or government entities and need cash fast to make payroll, payroll taxes, pay suppliers, or fulfill other financial obligations make excellent factoring clients.

What is the major benefit of factoring?
You receive immediate cash for accounts receivable instead of waiting 30, 60 or even 90 days for customers to pay. The process works as if you have COD (Cash on Delivery) terms with your customers. You enjoy increased cash flow, while we provide credit and collection expertise and services, freeing you to concentrate on your core business. Most importantly, our decision to finance your company is based on your customers' credit-worthiness instead of your balance sheet or credit history.

Is factoring a type of loan?
No. Factoring is not a loan. It is the purchase of an asset, your accounts receivable, at a discount by a financial institution called a Factor. A loan places debt on your balance sheet and costs interest. By contrast, factoring puts money in the bank without any obligation to pay it back. While approval of a bank loan considers all of your company’s assets as well as it’s financial history and balance sheet, a factor relies mainly on the credit worthiness of your customers.

Who will be responsible for collections and receiving payments?
First of all a factor is not a collection agency. We only buy invoices that we expect timely payment from. Factoring will require a change of address so payments can be mailed to the factor. We will handle collections for you when necessary, in a professional and courteous manner, knowing that your customers are your livelihood. You may be involved in the collection process or leave it completely up to us.

What does factoring cost?
Rates vary depending on individual and specific circumstances such as the credit worthiness of your customers, average invoice size, total factoring volume, and average payment cycle. When you factor you not only receive the benefit of immediate cash, but other value added services such as credit analysis, collection work, and accounts receivable reporting and management. These services can help to offset the cost of factoring while freeing up time for you to better manage your company.

Isn’t factoring too expensive?
The best question is “will factoring generate more income than it costs?” If the answer is yes, the decision to factor is one of simple arithmetic and becomes a sound business decision. If your bottom line is strengthened by factoring, why would you choose not to factor? Factoring has been used for years as an alternative financing technique that has provided the needed working capital to help many companies survive and become very successful. It works, that has been proven over and over again. If you do not have access to traditional financing, then the issue of factoring’s comparable higher cost becomes moot. That being said, there are scenarios where factoring may not be a good fit for a business, such as when a company is operating on low profit margins (less than 10%) or doing business with less than credit worthy customers.