What Is Factoring?Factoring or selling your outstanding account receivables is one of more than 60 different types of income streams that can be sold for cash to run and grow your business. In factoring , you sell your outstanding account receivables to a factor at a discounted rate. Why at a discount? Because of the Time Value Of Money
your money has more buying power today than it will have in the future. Tomorrow's goods and services may cost you more later. Factorying is designed for small, medium, and large 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.
In factoring, you are given an advance of usually 70 -90% of the value of the invoice. This advance is dependent on the credit worthiness of your customers. The remainder is held as bad debt reserves. Once the account receivable is paid to the factor by your customer, the agreeded upon discount rate is removed and the remainder of the bad debt reserve is sent back to you, the business owner. You determine how the money will be spent. See "How Factoring Works" below.
Factoring Account Receivables ,A Time Proven Cash Flow Generator
Factoring account receivables has a long and rich tradition, dating back 4,000 years to the days of Hammurabi. Hammurabi was the king of Mesopotamia, which gets credit as the "cradle of civilization." In addition to many other things, the Mesopotamians first developed writing, put structure into business code and government regulation, and came up with the concept of factoring.
Hammurabi and the Mesopotamians became an extinct civilization, but factoring endured. Almost every civilization that valued commerce has practiced some form of factoring, including the Romans who were the first to sell actual promissory note at a discount. The first documented use of factoring occurred in the American colonies before the revolution. During this time, cotton, furs and timber were shipped from the colonies. Merchant bankers in London and other parts of Europe advanced funds to the colonists for these raw materials, before they reached the continent. This enabled the colonists to continue to harvest their new land, free from the burden of waiting to be paid by their European customers. These were not banking relationships as they exist today. If the colonists had been forced to use modern banking services in eighteenth century England, the process would have been much slower and many would not have met the qualifications to obtain a loan. The banks would have waited to collect from the European buyers of the raw materials before paying the seller of these goods, the colonists. (And at that point, who needed the bank?) Factoring is a $264 billion dollar industry in the US alone and 80% of that is made up from Fortune 500 and Fortune 1000 companies. Some of the large factors that you might be familiar with would be GMAC, GE, Wells Fargo, Amex to name a few. Some companies that use this well established business practice (factoring account receivables) as a principal source of working capital are IBM, Coke, Georgia Pacific, Shell Oil to name a few. Factoring Is Not!$ A LOAN! You are not borrowing money.$ Factoring is not dependent on your credit worthiness but that of your clients. $ Factoring creates no Debt Apply For Accounts Receivable Funding How Does Factoring Compare To Bank Loans?
$ Traditional bank loans uses all of your company's assests as collateral and, generally requires personal guarantees.$ Banks are heavily regulated; large finance companies generally are public and driven by pressures in the financial markets. When times are tough, banks and finance companies limit lending. A small business, too new to have a track record, with a weak balance sheet, with a history of financial problems, in turnaround mode or undergoing big changes, often cannot find a willing lender at any price. That is why factoring is usually the right solution for small to mid-sized businesses. Factoring puts your business in a position to be bankable. $ Banks often have restrictive lending requiremwnts relating to cash flow, profitability, equity, and years in business, which limit them from making loans to many small to mid-sized businesses. $ Account receviables factoring relies on the credit-worthiness of your customers, not your balance sheet or history, are quicker at funding, can help you avoid bad accounts, more flexible and willing to think outside of the box to get most deals funded.
How Does Factoring Work?If you are doing business with credit worthy businesses such as government agencies, construction, trucking, or healthcare to name a few industries, you can aquire the working capital needed for growth and survival.NOTE: The Funding source is the only person that can determine the rates you will be charged. These numbers are for training purposes only!
You factor $10,000 of invoices You are approved in 5 to 7 days for 80% advance = $8000 sent to your bank account. 20% will be held as bad debt reserves = $2000. Your client pays their bill in 30 days. Factor charges %5 for the 1st 30 days. Bad debt reserve - Factors fee = $2000 - $500 = $1500 is returned to your company. When Does Factoring Make Good Financial Since?When you can not obtain first time or additional bank financing. Apply For Accounts Receivable Funding 
Advantages Of Factoring Your Account Receivables$Increase your businesses cash flow without creating more debt.$Factoring is not based on your credit worthiness but that of your customers. As part of our service, we do the research to assess your customer's creditworthiness for you.
$Your business qualifies if you already have existing credit lines, SBA loans or are a debtor in possession (Chapter 11). We work with your existing lenders to enable you to access additional funding. $There is no long term contracts. Sell as many or as few invoices as you need to meet your businesses cash flow needs. $As the business owner, you decide how to spend the money to increase the growth of your business and there is no debt to repay. $You will have money to expand your business operations, put out more products, pay bills, receive discounts for early payment, etc. $Once you are approved, you can get your money in 48 hours or less for each set of invoices you sell.
Dispelling The Method That Factoring Cost To Much
While factoring maybe a little more expensive than traditional banking, the cost is no where near what some have calculated it to be. When you finger the discount cost for early payment for your supplies and the added revenue your business could general, what would be the cost of factoring for your company?
Using 5% as the factors rate for 12 months to keep it simple. Monthly Amount Factored = $10,000
Yearly Amount Factored = $120,000
Factor Rate Cost = 60% Only $48,000 went back to the company. Does this make sense? What company would give up 60% of their income just to finance their business? They wouldn't be in business for long. Fortune 500 and 1000 businesses would not be using factoring if it took 60% of their income. The whole purpose is to increase your cash flow. -----------------------------------------------------------------
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Yearly Amount Factored = $120,000
Factor Rate Cost = 5% Total cost for the year = $6000 @ 5% You received $114,000+ $ New Business Revenue = X NOW THIS IS USING YOUR HEAD!!! If you had the money from the invoices you just created, every time you create them, you could ask for a discount on the goods you purchase for early payment. This alone would off set most or all of the cost of factoring. Apply For Accounts Receivable Funding Do You Qualify For Factoring?
$ Yes, if you are waiting 30, 60,90 days or longer to be paid.$ Yes, if your business sometimes suffer from a cash flow shortage and you've missed out on significant growth opportunities. $ Yes, if your bank just rejected your loan application or requires you to pledge additional collateral that you do not have. $ Yes, if you want to stop worrying about cash flow and start focusing on what really matters in a business- operating it. $ Yes, if you need to improve or establish your credit rating. $ Want to send the message to your custormers, that your business is solid, rapidly growing, and in high demand.
What Kinds Of Businesses Use Factorying?Regardless if your business is small, medium, or large, your invoices for goods or services rendered to your customers can be converted into immediate cash to better manage and expand your business. Some of the more common industries that rely on accounts receivable funding to maintain a steady flow of cash include:
ANY BUSINESS GENERATING INVOICES
TO BUSINESS, HEALTHCARE OR GOVERNMENT CAN BE CONSIDERED FOR FACTORING.
Apply For Accounts Receivable Funding
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