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WHY AR FINANCING HOW IT WORKS ELIGIBLE INVOICES GLOSSARY FAQ GETTING STARTED
Frequently Asked Questions
Q: What is factoring, how does it work?
A: Factoring is the purchase of accounts receivable for immediate cash. Once you have delivered a product or performed a service for a credit worthy company, contact us prior to sending out the invoice. We will confirm with your customer that the work has been completed or the goods delivered and accepted we will advance up to 70% of the face value of the invoice. When your customer pays the invoices, you receive the balance less the discount.
Q: How do I qualify?
A: The credit decision is based on the strength of your customer, not your firm. It's easy to qualify if you meet the following criteria:
Your customer must be another creditworthy business,
Your invoice must be a valid one for goods sold and delivered and services rendered - to your customer's satisfaction
We will verify each invoice with your customer
Q: Doesn't AR Financing or Factoring cost too much compared to other types of financing?
A: Actually the cost of factoring is quite reasonable when compared with what the factor does for you. If perhaps you have already gone to your bank to try to get financing and have been turned down because your Balance Sheet is not strong enough, factoring is an attractive alternative . Second, you're not giving up any equity as you might have to do for other types of financing. That's because you are not borrowing money. You are selling an asset. And let's look at the positive side of things — the other services a factor will perform for you. A factor does your credit investigation work for you. The factor does your collection work for you. Additionally, a factor may give irrevocable letters of guarantee to your suppliers so you won't need cash up front for purchases. This is all part of the value added service provided.
Q: Why is there a processing fee?
A: It costs several hundred dollars to process your request — perform lien searches, check credit information on your customers, etc. This fee offsets some of the costs and demonstrates your commitment to establishing the relationship.
Q: Do my customers have to know I am selling their invoices? I don't want them to think I have a financial problem?
A: More and more companies today are factoring their invoices, including major corporations. In 1993 over $57.52 billion dollars was factored and this figure is growing every year, not decreasing. This is not some sort of secret, clandestine type of financing. You may want to tell them that you are in a growth stage and need ready cash for purchases, expansion, advertising your product or service, etc.
Q: How will I know what invoices are paid and what aren't?
A: You will receive a monthly report showing you which invoices have been paid and which remain unpaid. You will also have your very own account executive whom you can call at any time for updated information. You will have better control because the factor will be able to spot trends in late payments and notify you if they think any of your customers are having problems of their own.
Q: Won't I lose control over the amount of credit I advance to a customer?
A: No. You can reach your own level of comfort with factoring. Remember, you decide which invoices you want to sell and when you want to sell them. You don't have to worry about credit limits because you're not taking any risks. The factor is taking the risks.
Q: If the factor assumes the risk of collection once they purchase an invoice, why do I have to personally sign a guarantee?
A: You are not guaranteeing the invoices. You are personally guaranteeing the validity of the invoices — that they are true invoices and that the money is indeed owed to you for goods sold and delivered or services rendered. You also personally guarantee that if, by chance, one of your customers remits a check to you in error, you will immediately forward that check to the factor.
Q: The factor is advancing only a percentage of the invoices I submit to them. Do I ever receive the balance?
A: Yes. As soon as the factor gets paid by your customer for an invoice, they will deduct the amount they already advanced to you plus the discount fee from the total payment and they will remit the remainder to you. You don't have to wait for the end of the month or any other period of time. You don't even have to ask. It is done automatically as soon as they receive a payment from your customer. click here for more information
Q: How do I get started?
A: To get started, please submit the following:
Accounts Receivable Aging Schedule
Customer List
Your company D&B Report (dial 800-333-0505)
After an analysis of your receivables, we will confirm interest in the receivables and issue the proposal with a list of required documents to start the due diligence process.
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