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.
1 (800) 608-0530 START THE FUNDING PROCESS