Article: Factoring Account Receivables: How It Works
How Factoring Account Receivables Works
The First Step:
You begin by filling out a simple client profile, which we will provide you. This profile
will cover basics such as your company's name and
address, the nature of your business, and information
about your customers.
You may need to supply an accounts receivable aging report, existing customers' credot limits,
or other related documents. Remember the factor will attempt to determine the creditworthiness of
your customers independent of their credit history with your business. We want a broader view of their
overall credit status.
During this initial stage you will also cover basic financial arrangements with the factor.
For instance, what will be the monthly volume of invoices you want to factor(i.e. how liquid do you need to be)?
What will the advance rate and the discount rate be? How quickly will the factor issue the advance to you?
In most cases, the answers to these questions will vary depending on the financial strength of your customer(s)
and the anticipated monthly sales volume to be factored. Variations between industries, length of time in operation,
and general reputation of how risky a customer of yours may be. For instance, a long list of high-risk clients
will cost you more in factoring fees than a short list of government agencies with a slow-pay history.
In the factoring account receivables business, volume is all important. The higher your volume(the dollar amount
of invoices you factor), the more favorable your rates will be.
The factor will use the client profile you submit to determine if your business is suitable for factoring.
This process is simply the factor analyzing the risks versus the rewards, using the information you provided.
Once approved, you can expect to negotiate terms and conditions. The negotiation process takes several
aspects of the deal into consideration. For instance, if you want to factor $10,000, you can't expect as
good a deal as a company that wants to factor $500,000.
During the negotiation process, you will become well aware of what it costs to factor your accounts receivable.
After you reach an agreement with the factor, the funding wheels begin to roll. The factor conducts due diligence
by researching your customers' credit and any liens placed against your company.
The factor also confirms the legitimacy of your invoice before buying your receivables and advancing cash to you
Factoring Account Receivables Services
Contact our accounts receivable factoring specialists at:
Online Invoice Facoring Request Form
invoices can offer many benefits to cash-hungry companies.
marketing efforts, and working capital are
invoices provides the means for a manufacturer to
Why Receivable Factoring
Factoring is especially appealing to young and rapidly growing companies. Since the invoice factoring process shortens their business cash flow cycle, these businesses can grow faster. The ability to make more products to sell while waiting for invoices to be paid is largely eliminated. Such businesses usually net much more profit with receivables factoring than without, even when the discount is considered.
Receivable Factoring Company vs. Bank Loans
Factoring has been around for thousands of years. Factoring companies pay cash for the right to receive the future payments on your receivables and invoices. An unpaid accounts receivable or invoice has value. It is a debt your customer has agreed to pay in the near future.
Account Receivable Factoring Frequently Asked Questions
Contact our account receivable factoring specialists at:
We are currently providing account receivable factoring services nationwide including the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho State, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico,
New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.