Factoring is a type of financing where businesses sell their accounts receivable (invoices) to companies known as factors. As a financial tool, factoring helps businesses improve their cash flow. Factoring is neither a form of debt, nor is it equity financing. And, it is not as some people assume, a loan.
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My company does not have much collateral. Will Factoring still work?
Factoring does not create debt or require additional collateral. It is very simple to use. With the cash flow problem solved, the business has the working capital to pay salaries, reduce debt, improve vendor relations and focus on critical success factors--operations, sales and growth.
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How does accounts receivable (Factoring) funding work?
Simply put, accounts receivable funding is the purchase of accounts receivable from a business at a discount. It is designed for businesses that need money immediately, and can't afford to wait 30, 60, or 90 days for a customer to pay. In most cases, either the business owner can't meet his cash demand (because, for example, his customers are slow to pay or income is low due to a seasonal slowdown), or his business is growing so rapidly that its cash flow can't keep up with its growth.
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What type of business can take advantage of this alternative funding source?
Any business that generates an invoice to another business or government entity and delivers a verifiable product or service qualifies.
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Must I agree to a minimum or maximum volume?
No. Finance one invoice or as many as you need to meet your cash flow needs. Stop and continue as needed, depending on your cash flow needs.
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What is required before an invoice may be funded?
Your customer must be creditworthy and your product or service must be completed, delivered and accepted by that customer.
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Is there any application or due diligence fee that you charge?
There is no application fee. We charge a one time due diligence fee of $200-$500 depending on how extensive our research is. This fee covers costs of UCC searches, UCC filings and credit searches.
On subsequent fundings, you may only be charged the discount fee and possibly a funding fee to cover credit insurance, paying suppliers, credit searches, document preparation, etc.
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Can a business with a history of bad credit (or a new business with no credit) qualify?
Yes! Another benefit of accounts receivable funding is that it depends on your customers' creditworthiness, not yours. And, as part of our service, we do the research to assess your customer's creditworthiness for you.
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Can my business qualify if we already have existing credit lines, SBA loans or are a debtor in possession (Chapter 11)?
Yes! Our credit line complements any loan you may have or are seeking. We work with your existing lenders to enable you to access additional funding.
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Isn't Factoring just for failing companies?
No. Factoring in the past had gained a reputation as a financial "last resort" for faltering businesses. While factoring can help problem businesses, it is primarily a source of financing for new or rapidly growing businesses. Factoring allows businesses to improve their cash flow and quicken their growth by shortening their receivable cycle. By selling their invoices, businesses can eliminate the 30, 60, up to 90 (or more) days wait for their customers to pay on their accounts.
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Do other businesses use Factoring?
Although factoring is not common knowledge to all businesses, it is often used in the business world. Many Fortune 500 companies use factoring as a financial tool.
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Does my business need good credit to Factor?
Businesses do not have to have outstanding credit to factor. Instead, our funders primarily analize your customers credit. This is benificial to new companies that do not have established credit history needed to secure loans or other financing.
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How can my business benefit from Factoring?
You can focus on business operations instead of cash flow concerns
Increase production and sales
Finance expansion without debt
Pay off outstanding debt
Improve credit rating with timely payments
Improve balance sheet by increasing cash and decreasing A/R
Fund marketing or e-commerce projects
Meet payroll or payroll taxes
Take advantage of trade discounts, or those discounts offered by suppliers for early payments
Eliminate need for outside investments, such as loans, credit cards
More working capital businesses have the capibility to purchase higher volumes of supplies, thus making them eligible for volume discounts from suppliers
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How long does it take to receive funds after faxing in an invoice?
When your product or service has been invoiced, you simply fax the invoice as arranged. Instead of waiting 30, 60 or 90 days for payment from businesses, your business can receive cash within 24 - 48 hours for goods or services.
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How is Factoring different than a loan?
Conventional borrowing increases business expenses and normally requires additional collateral. Some companies, especially smaller ones, are turned down by banks because of loan underwriting criteria.
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But what are my customers going to think?
It's likely that many of your customers already deal with factors and may not even be aware of it.
Sometimes payments for invoices directed to a P.O. Box are actually going to a factor. Shell Oil, Georgia-Pacific, IBM and other substantial companies factor millions of dollars of their receivables every year. Funding obtained through the sale of receivables is most often used by a firm to expand and take on larger projects; not merely for cash flow or payroll.
Now that this service is available to companies like yours, you can enjoy both the perception and the reality of being a growing company, moving forward.
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I already use factoring. How do I know that I'm getting a good deal?
Let us know the details as an attachment to your worksheet. We will make some inquiries to your investors and give you an offer.
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Are government receivables acceptable?
Yes. Factors handle a considerable amount of government or municipal-related receivables.
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Can we qualify with a history of credit problems such as bankruptcy, IRS liens or judgments?
Yes. That's another advantage of utilizing this service. Factors often make arrangements with the IRS or the courts.
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Can we qualify if we already have an existing credit line or SBA loan?
Yes. Factors can complement and work in cooperation with your existing lenders.
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What type of application is required?
We require a simple, one-page worksheet to evaluate your situation. Once that has been submitted, we can begin to provide cash assistance to a business within 7 to 14 working days in most cases.
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Can you give me any examples of typical cases completed?
Food Supplement Manufacturer - This manufacturer started with a great idea, and is now on the way to success in the big leagues. Even though the idea was greeted with open arms from investors, the cost of financing was high. Factoring provided the cash needed at resonable prices. This allowed the company to grow without giving up the most precious asset of all...Ownership.
Instrument Manufacturer - This company used a factor to purchase additional inventory products, take volume discounts, and grow the business . . . all at the same time. The solutions to cash flow needs were met by quick access to cash to fill manufacturing and installation demands.
Consulting Company - This high profile consulting company used factoring to capitalize on large contracts they could not otherwise bid on. Their cash flow needs were met by factoring through quick purchases of existing invoices. This allowed them to absorb the larger contracts within their projected profitability scheme.
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Why would I give up ownership of my company?
Our program does not require you to give up an ownership interest in your company to a "capital partner." This makes the program much more attractive to you, the business owner, who wants to retain the ownership of the company and ensure your company's future.
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What do I tell my customers when they ask about this change?
Simply state that "Our business is growing so fast that we now have set up a special arrangement with (name of the factoring investor) to assist us in the process."
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Will you contact my customers?
YES. We need to verify each draw with your customer, confirm the dollar amount, confirm that the work has been completed to their satisfaction and have them sign a joint check agreement.
You should tell your client in advance that you have secured an unlimited line of working capital (using your accounts receivable as collateral) and they should be expecting our call. Remember, they have been using your money to finance their projects. Your customers understand cash flow and how important financing is to grow a business. This step is VERY important.
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How will my customers be treated?
A Factoring company is not a collection agency. We treat every one of your customers with the highest level of courtesy and professionalism. Our aim is to help your business to grow. Should an invoice ever be past due, in the majority of cases, the Factor call you to help you handle the situation with your customer.
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Sounds great, but, how much will Factoring cost my company?
That depends on many different aspects of your business situation. To get a no obligation proposal costs you nothing. The cost for factoring your invoices can only be determined by the formulas based on specific information you provide us in the worksheet and your aging report.
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Why do you need my Aging Report to give a proposal?
Our investors do not know you or your business. The aging report will only be used to calculate your net cost of receiving cash to operate your business. Once Cash Flow Improvement Specialists receives your worksheet and Aging Report, it is sent to only one investor for calculation. It is not shared with any other group or business for any other purpose. Our business is built on trust and we would not have any reason to break that trust with our clients.
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What states do you fund in?
We work in all 50 States and Canada. Since we are consultants, we need no special licensing for any of our consulting transactions.
If you know of a person or business that could possibly benefit from our services, please send us E-mail and we will contact the person/company. We really appreciate your referrals and have a rewards program established if we add your referral to our growing client list.
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Can I send old, overdue invoices to be Factored?
No. Like most factoring companies, our investors may have a collections department, but they are not a collection agency.
You run your business, we’ll run the numbers!TM
Cash Flow Improvement Specialists, Inc.
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IMPORTANT NOTICE!!! CHECK ACCEPTANCE POLICY. In the unlikely event that your check is returned for insufficient or held funds, we will debit your checking account electronically for the face amount of the check plus the state allowed fee. This Policy allows us to resolve the problem without reporting you to a credit bureau and harming your credit rating. The transaction will appear on your bank statement, and no one will have to contact you about payment.
Your submission of a cash flow worksheet and the consulting is free. You or your company are under no obligation to accept any cash offer we make for the funding of an accounts receivable financing (factoring) or purchase order funding worksheet, or the like.
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