Frequently Asked Questions
Q: Who buys our Accounts Receivable?
A: It will vary depending on the amount you need purchased and what industry you are in. If the amount is under $5,000 per month and you are a service-oriented business, we typically buy them. If the amount is greater than $5,000, then we broker them to any of over a dozen reliable factor groups that we have a good relationship with who have very comptetive rates. In all cases, we will get you the best deal that we can find whether with us or one of our associated factors.
Q: What are the requirements for buying my invoices?
A: It will vary from one factor to the next. But in general, the work or service must have been completed, delivered and accepted, and your client must be a creditworthy risk.
Q: What is the difference between recourse and non-recourse factoring?
A: Recourse or Non-Recourse Factoring is based on who assumes the financial risk for the inovice payments. Click Here for more details on each type.
Q: Can we qualify with a history of credit problems such as bankruptcy, IRS liens or judgments ?
A: Yes - many of our factors are experienced in making arrangements with the IRS or the courts.
Q: Can we qualify if we already have existing credit lines or SBA loans?
A: Our factors compliment and work in cooperation with your existing lenders to enable you to access even larger amounts of financing.
Q: Can we qualify if we are just starting in business and have no credit history ?
A: Yes you can in many cases, if your customers are creditworthy. The acceptance criteria is more weighted toward your customers credit worthiness and payment history than yours.
Q: What type of receivables can I sell?
A: Collectively, our factors buy just about any valid receivable for a service performed or a product delivered to any Business or Governmental entity.
Q: Can you give me an example of how it works ?
A: You have completed the work and delivered the goods or service and you are ready to invoice your client. The amount of your invoices are at least $2,500 or more - our factors can handle millions of dollars if necessary. Let us know the amount of the invoice you wish to turn into immediate cash. You will overnight the original invoices to the factor. The factor processes the invoices within 24 hours, many times much less than that. When the invoices have been verified and it has been assigned to the factor, the factor will immediately wire or overnight the Advance (70% to 85% of the invoice) to you. When the factor receives full payment from your client, they send the remaining funds (15% to 30%) less their fee (2.5 to 5.0 points) to you once their check clears the bank.
Q: How do the factors collect the money?
A: The same way you collect it - by invoicing your client for the service you performed or product you provided.
Q: Do we bill on our letterhead or yours?
A: That will depend on the which factor buys your receivables. In some cases, you continue to bill normally. Checks may be made payable to you, but mailed to the factors address. In many cases, the factor takes care of all the billing and there is nothing for you to do.
Q: What is my customers' reaction when I sell my invoices?
A: They will realize that you are undergoing rapid growth and need capital to maintain the quality of your product or service. Selling your receivables is similar to an open-ended Line of Credit . See Factoring 101 for more details.
Q: What is the smallest invoice a factor will accept?
A: Each factor has their own standards. We have some clients that send multiple invoices ranging from $1,000 to $1,000,000. If we do the factoring ourselves, the smallest invoice we deal with is $100.
Q: What is the largest invoice a factor will accept?
A: You name the amount 1, 2, 3, 4, 5 million dollars. There is not really any top end. We are in business to service any size business.
Q: What happens if my client does not pay?
A: The due diligence is a very important part of the factoring process. The factor will purchase all of your accounts on a non-recourse basis in some cases, so any default on your customers part after all other avenues of collection will result in litigation. The factor will include your company in the process not to disrupt your relationship. The factor is taking the risk which somewhat explains the fees. In some instances, the factor will do recourse factoring where the risk is equally shared and the invoice will come back to you for payment after a certian period of time.
Q: Are there any geographical restrictions to your service?
A: We have factors that will buy invoices of any credit worthy business or government agency in the USA and Canada. International receivables may require special arrangements.
Q: Will factoring be good for my business?
A: Receivables financing has helped thousands of businesses. We want to help your business grow without getting involved in your day to day business.
Q: Why factor versus borrowing from a bank?
A: Factoring companies have flexibility that banks can only wish for. Due to regulations and certain requirements, banks exclude businesses without assets. Factoring can create instant cash from your receivable without getting a loan, pledging assests, selling stock or extensive paperwork.
Q: What will it cost me to sell my receivables?
A: This will vary from one factor to the next. But all the rates will clearly be identified so that you know exactly what each transaction will cost. Rates depend on the duration of the factoring, the creditworthyness of your clients, the size of the invoices, the factoring terms, etc.
Q: How do the factors make their money?
A: The factors collect their fee when the invoice is paid out of the proceeds received. They buy the invoice at a discount - the discount is their fee. They basically get paid to wait.
Q: How do you make your money?
A: We get our fee from the factor as a share of their fee if we broker the invoices. Of course, if we are the buyer ourselves, then we make our money on the discount.
Q: Are there other types of receivables that you have buyers for?
A: Yes, we have buyers for medical receivables, construction receivables and international receivables. While these are still considered receivables, they have different funding requirements and are treated differently. Please contact us if you have these and would like to sell them.
Q: Are there other types of funding activities that you can provide?
A: Yes, we can arrange debt or equity financing for your business. Additionally, we have buyers for almost any type of income stream you can imagine. Please contact us with what you need assistance with.
Q: What is a receivable based "Credit Line"?
A: Invoices to your customers for goods delivered or services rendered can be converted into a "credit line" from which you may draw cash to better manage your business. Draw only as much as you need and pay only for what you use. This "credit line" effectively multiplies your working capital by "turning it" more often.
Compared to bank lines, this "credit line" uses far less collateral, requires only minimal paperwork, can be in place in less than than a week and, best of all, grows with your business. This "credit line" compliments any loans that you have or are seeking, yet allows you to access additional funding.
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