Factoring Q
& A
Accounts Receivable (Factoring)
Q & A
Who uses factoring?Factoring works for any
business that generates invoices for goods or
services to other businesses, institutions, or
government agencies. This includes all types of
manufacturing, distribution, service industries,
as well as the construction industry, & medical
providers. If you are a business owner,
accounts receivable funding frees you from the
lengthy & burdensome process of invoice collection,
& gives you the opportunity to collect the
money owed to you by your customers immediately.
What's wrong with
my current arrangement? Absolutely nothing
--if your customers pay their invoices
as soon as they receive them.
But time is money and
the longer it takes you to receive payment for
your goods or services, the less that invoice
is worth-- which places you in the unfortunate
role of loan officer to your customers at
0% interest! And
because your working capital is tied up in unpaid
invoices, your own expenses may go unpaid-- placing
your own credit standing at risk!
How would I benefit
from factoring? Factoring allows several
distinct advantages. First of all, by receiving
your money for the invoices you submit within
24 to 48 hours, you would be able to pay your
day-to-day expenses --payroll, utilities, supplies
and rent-- for starters. Also, you could lower your
supply costs by taking advantage of cash, volume,
or term discounts.
What other
benefits are there? With additional
working capital, you could purchase new equipment
to increase production; or you might choose to
launch new marketing campaigns or products to
increase sales and grow your business. With improved cash flow, you have the freedom
to utilize your working capital where it can work
for you best.
How
much is it going to cost my business? The rate will vary based upon several factors
including: parameters of the funding source, services
offered, and the invoices being transacted.
How can I profit
if I have to sell my invoices at a discount?
If you were to analyze the cost of waiting
for your invoice payments today, chances are it
is costing you at least that much-- and you
still have to wait for your money!
But with cash in hand to negotiate
better terms with your suppliers, increase production,
and take your business to the next level,
those savings often far outweigh the funding source's
discount.Another significant benefit
is that the funding source will assume responsibility
for the collection process, communicate on a regular
basis, and provide you with a weekly aging report
of the factored receivables.
Who
exactly are these funding sources? They
are professional investment firms who, rather
than risk their capital in unpredictable returns
on investment, seek more secure investments in
the private sector for a pre-established yield.
These firms conduct their business with you in
a fair, ethical, & confidential manner --but
they also compete for your business in an electronic
marketplace-- allowing you, the business
owner, to receive the best rates possible.
How does all this
differ from a bank loan? Banks undoubtedly
play a critical role as the financial backbone
for many businesses. However, in today's entrepreneurial
marketplace, there is an increasingly growing
number of businesses finding it difficult to obtain
bank financing-- if only because their receivables
are outpacing their growing sales!Here is where banks & funding sources
take divergent paths.
· Banks provide loans at
an established interest rate; whereas funding
sources purchase invoices at an established discount
rate.
· Banks loans create additional debt for
your business;funding sources pay you cash for
your invoices-- creating revenue
·
While banks focus primarily
on your debt/equity ratio, funding sources focus
primarily on the creditworthiness of your customers.
·
While bank loans can often
take weeks to be approved & acquire, funding
sources pay you within 24 to 48 hours of invoice
submission.
·
Banks determine your loan
potential based on your financial assets; whereas
funding sources base the funding amount on your
invoices.
·
Whereas banks (as lenders)
are strictly regulated, funding sources are not and
can therefore offer greater flexibility to
accommodate you.
What will my customers
think? Although many businesses position
this as a simple "change in billing" to their
customers, many others position the new billing
procedure as a business growth strategy in order
to better serve their customers.
If factoring is
so good, why aren't more businesses doing
it? Actually, more businesses are doing it, and are
realizing that the benefits of accounts receivable
funding far outweigh the more conventional methods
in helping them manage their cash flow. When you hear about your competition bidding
on a job at a price that exceeded your cost of
production, chances are your competition is utilizing
factoring-- giving them a competitive edge!
How long
does it take to get started? Once you
have completed a client profile and provided an
accounts receivable aging report, the funding
source must perform due diligence on the accounts
you have listed.Once that is complete (generally five to
ten days), the funding source will submit a contract
for your approval, outlining the entire terms
of agreement. Once signed returned, funding
is available immediately.
Who pays for the
"due dilligence" performed by the funding source?
That is a one-time fee incurred by you.The fee will vary, depending
on the number & complexity of accounts provided
- but is also established & approved by you
prior to any signed agreement.
Once I sign the
agreement, how long am I committed? Although
funding sources vary on lengths of agreements,
they are sensitive to the fact that we all conduct
our business in an ever changing business climate, and
attempt to provide you with as much flexibility
as possible. These terms, too, will be
clearly stated in the agreement. What if I don't
like the funding source's service? Funding
sources will generally go to great lengths to
earn your trust, satisfaction, and long term
business.However, if a situation develops
which cannot be promptly resolved, Windfall
Capital is committed in seeking an alternative
funding source for you.
How can Windfall
Capital help my business? We
have access to billions of dollarsthrough our nationwide network
of well over a hundred of the industry's leading
funding sources. It is through this network that
allows Financial Solution to obtain the lowest discounts,
the greatest value, and the widest service
offerings to meet your specific business needs.
How do I
get started? You can get started
by calling us toll free for a confidential, no-obligation
evaluation.We look forward to hearing
from you today!
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