Corporate Finance New York

Factoring FAQs

How soon can you issue a factoring proposal?
A proposal can be issued usually within 24 hours after receiving (1) the Application (2) Copy of your Accounts Receivable Aging (3) Copy of your Accounts Payable Aging (4) Your Customer list with at least your top 10 customers. With the proposal, you will be asked to provide additional standard items required to complete the application process.

Is accounts receivable funding a new financing option?
Accounts receivable funding is one of the oldest forms of financing. It has been around in one form or another for more than 4,000 years. Until the mid 1980s, most people thought accounts receivable fund­ing was only used in the textile and garment industries. Today, accounts receivable funding is a widely used and viable financing solution for all types of businesses that extend credit terms to their customers.

How can accounts receivable funding help my business?
By providing an immediate source of cash flow for your company. You can use this cash to provide working capital, meet payroll, pay taxes, replenish inventory, increase advertising, purchase equipment, improve your credit rating, and more.

How is accounts receivable funding from your company different than accounts receivable financing from a bank?
When making a funding decision, we focus on the creditworthiness of your customers while banks will focus on your company’s financial history and cash flow. Plus, since accounts receivable funding is not a loan, there is no debt on your company’s balance sheet. Best of all, we will make a quick funding decision, while banks may take weeks—even months—to approve a loan.

Will my company be eligible for accounts receivable funding if it has a bank loan or line ‘of credit?
If a bank has a lien on your company’s accounts receivable, you should let us know right away. We will ask the bank to subordinate that lien in our favor. Because this is a common occurrence, most banks will accommodate the request, but we must know this information in advance.

My company owes back taxes. Can I still apply for accounts receivable funding?
Yes, Tax problems are handled on a case-by-case basis. Please let us know immediately so that we can dis­cuss the payoff of your back taxes or a lien subordination with the IRS.

I have had a past bankruptcy, is accounts receivable funding still an option?
Yes, we will still consider your application even if you have credit problems or a past bankruptcy.

What information will you need from my company to begin the accounts receivable funding process?
Along with the application, be sure to include your company’s most recent accounts receivable and accounts payable aging reports, Articles of Incorporation or DBA filing, a master customer list and a sample invoice. For startup companies, please also submit a business plan and projected sales forecast, and an owner/officer history and profile.

Which customers would be good candidates for accounts receivable funding?
Ideally, we would like to fund all of your customers. First, we need their names, addresses, phone numbers and the amounts of credit desired. This will save you time when submitting invoices to us. Also, anytime you obtain new customers, fax the same information to us, and we will check them out for you.

Can your company purchase only a portion of my company’s invoices?
Absolutely, but remember that higher numbers of receivables purchased on a regular basis can result in more competitive rates. Terms can be especially flexible when there are large numbers of invoices issued to a larger, rather than smaller, pool of your customers.

How long does it takes to receive the first funding?
The initial funding takes between 1-3 business days after we receive your signed contract. If you wish, you can send your invoices to be funded with the signed contract. After the initial funding, your company can receive funds usually within 24 hours after verification.

Do you purchase outstanding invoices?
Yes. For the first funding only, we can purchase your invoices from your outstanding accounts receivable.

Are accounts receivable funding fees tax deductible?
Most accountants agree that accounts receivable funding fees are an expense and should be treated as such.

Do you verify invoices with my customers?
Invoice verification is an essential, and accepted, part of funding. Because factors verify invoices with customers, they can tell clients if there is a customer service problem right away. A non-factoring client may not notice the problem until the invoice becomes past due. By that time, it may be too late to save the account. For the process to run smoothly, we suggest that you call your customers or send them a letter in advance to let them know that you are now working with a factor. If you need assistance in writing the notification letter, we will be happy to provide you with a sample letter.

What should I do if my customer mistakenly sends the payment to my company?
This might happen, especially with the first invoice. If this occurs, the check must be sent to us immediately. Your company should never deposit invoice checks that were already purchased by the factor. We also ask that you notify your customer to pay us directly in the future.

What happens if my customer doesn’t pay the invoice?
This depends on whether your company entered into a non-recourse or recourse agreement with the factor. In a non-recourse agreement, the factor will absorb the credit-related loss. However, with a recourse agreement, your company will have to reimburse the factor—either by having the invoice deducted from the next advance or replace it with another collectable invoice.

How can I be certain that the factor will treat my customers well?
The last thing we want is for you to lose a customer. We are not a collection agency. We will never harass your customers for money. Maintaining your customers’ goodwill and confidence are of utmost importance to us!

What is the Advanced Rate?
The Advanced Rate is the percentage advanced on your invoices. For example, you sent a $10,000.00 invoice to be factored, the factor advances 90% of that invoice to you ($9,000.00) via wire transfer to your bank account within 24 hours.
The additional 10% of the invoice is sent to you by the factor (less service fee) once the invoice is paid by your customer.
Typical advances are 90% to 92% of the invoice, but the actual Advanced Rate (as high as 95%) is based on the age of the invoice (10,30,60,90,120 Days), the financial strength and credit worthiness of your customers.

How much does it costs?
Our services are tailored to your specific business so the fees will depend upon your specific needs. There are two types of fee. The first is the cost of the money you use, which is extremely competitive. The second is a service fee, which encompasses the collections service.
Fees will also vary depending on the advanced rate, invoice aging, and the total dollar amount you intend to factor on a monthly basis, there are also volume discounts. However, specific Factoring Fees cannot be quoted without information on your customers, invoices, amounts you wish to factor, and your type of business.
You should know that we offer one of the lowest factoring fees in the country. And, the fact is, we want to be your factor, so we will be more than competitive. We will be happy to provide you with a proposal.

 I am currently factoring with another company, can you compare our rates and perhaps lower are factoring fees?
As one of the lowest factoring fee factor in the industry, we should be able to beat most other offers. If you are factoring now and would like a factoring fee/rate comparison, please CLICK HERE to complete the short-form. The representative that handles your region will contact you shortly.