We Specialize in
FACTORING
Factoring is a financial tool that allows a business to generate cash from outstanding client invoices. Purchase orders and accounts receivable can both be leveraged for short-term loans. In some cases, factoring also eliminates the need to go through the collection process. If production has been impeded by slow-paying clients, factoring can start things flowing again.
OVERVIEW
To foster positive client relationships, some businesses offer extended payment terms as an incentive to choose their business over the competition. While it can be an excellent sales tool, this tactic can also leave the business waiting to receive payment for months at a time. As the business waits, bills continue to arrive, causing stress on finances.
The lack of payment may also impede the business’s ability to procure materials for other incoming orders. Then, the new client has to be put on hold due simply to cash flow issues. That can lead to client dissatisfaction and loss of revenue. With factoring, the business gets money from their invoices even before the client pays them.
A factoring agent will review the accounts receivable or outstanding invoices and offer a percentage of their value to the borrower. In many cases, this is as high as 80% of the invoice value. Once an agreement is signed, funds can be issued in as few as 24 hours. Then, the factoring agent recovers the loan amount directly from the client. So, the business receives fast cash and offloads collection responsibility.
LOAN HIGHLIGHTS
Equipment loans can be used to purchase new equipment, lower operating costs, and generate working capital.
Leasing equipment can sometimes be a better option than buying.
Lenders use the equipment as collateral on the loan.
These loans can be fast and easy to qualify for since the business’s credit history isn’t usually scrutinized.
PROS
- Factoring eliminates the waiting period between delivery and payment.
- Factoring agents typically fund a majority of the outstanding account’s worth.
- Funds from factoring loans are not generally tagged for specific uses, making them a flexible option.
- Even businesses with bad credit can qualify as long as their clients have a good rating.
CONS
- The factoring agent can affect the relationships between your business and your clients.
- There can be penalties to the borrower if their clients do not satisfy their outstanding balances.
- Invoices can only be factored singly, which means only high-dollar accounts are worth factoring.