WHAT
WILL
FACTORING
COST ME
?
This
frequently
asked
questions
about
factoring
is
provided
to
clarify
the many
misconceptions
about
factoring.
What is
factoring,
what is
not and
how it
can
really
help
your
business.
Any
questions
that are
not
covered
here can
be
answered
by email
of by
simply
calling
1-800-346-0136.
Q:
IS
FACTORING
A TYPE
OF LOAN?
A: NO!
Factoring
is
defined
as the
purchase
of a
company's
receivables
as
opposed
to a
loan
using
the
receivables
as
collateral
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Q:
WHAT
KIND OF
RECEIVABLES
CAN BE
FACTORED?
A: Most
any
business
to
business
receivables
can be
factored.
The
major
determining
factor
is the
credit
worthiness
of your
clients.
Part of
the due
diligence
is to
examine
the
payment
history
of your
clients.
If they
have at
least a
(six) 6
month
history
of
prompt
payments,
they
will be
eligible
for
factoring.
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Q:
MY
BUSINESS
IS
EXPANDING
WITH NEW
CLIENTS
COMING
IN
DAILY,
DO I
HAVE TO
WAIT SIX
(6)
MONTHS
FOR THEM
TO BE
FACTORED?
A: No, a
benefit
to
factoring
is
having
the
factor
help you
make
wise
credit
decisions
regarding
your
customers.
New
customers
will be
viewed
on a
case by
case
basis.
Generally,
if you
have a
solid
customer
who has
solid
references,
they
will be
accepted
for
factoring
immediately.
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Q:
WOULDN'T
A BANK
LOAN
MAKE
MORE
SENSE?
A: Banks
often
have
restrictive
lending
requirements
relating
to cash
flow,
profitability,
equity,
and
years in
business
which
prohibit
them
from
making
loans.
Factoring
companies
are not
in the
lending
business.
The
decision
to
purchase
invoices
is
influenced
by the
quality
of your
customer
base and
their
performance
as
opposed
to years
in
business
or
financial
strength.(
3 C’s =
Credit-Cash
Flow-Collateral
)
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Q:
HOW FAST
WILL I
RECEIVE
MY
MONEY?
A: Fast!
Once
approved,
most
factors
pay
within
24 to 48
hours of
receipt
of the
invoice.
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Q:
IF I
HAVE A
TAX
PROBLEMS,
WILL YOU
FUND ME?
A: It
depends
on
monthly
volume
in
relation
to the
tax lien
and if
the
government
agency
will
work
with us.
After we
complete
our due
diligence
we will
make
every
effort
to
satisfy
your
needs.
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Q:
DOES MY
COMPANY
NEED TO
HAVE
GOOD
CREDIT?
A: No!
As long
as your
customers
are
credit
worthy
and have
shown a
good
payment
history.
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Q:
DO YOU
FUND
COMPANIES
IN
BANKRUPTCY?
A: With
permission
of the
court we
will
consider
funding
a
bankrupt
company.
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Q:
WHO
COLLECTS
THE
PAYMENTS?
A: The
factoring
company!
When
they
purchase
your
invoice,
your
customer
will be
notified
that the
payment
should
be sent
directly
to a
(lock
box) in
your
name.
The
customer
will
never
know the
collection
has been
sold.
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Q:
DO YOU
NOTIFY
OUR
CUSTOMER
TO PAY
YOU, THE
FACTOR?
A: Since
factoring
is now
so
common,
almost
all
account
debtors
will
work
with
you. The
negative
connotation
of
factoring
is
yesteryear.
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Q:
DO I
NEED TO
SELL ALL
OF MY
INVOICES?
A: NO!
You
decide
which
invoices
you need
to sell
to
manage
your
cash
flow
needs.
However,
there
are
monthly
minimum
requirements,
which
vary
from
factor
to
factor.
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Q:
WHY
WOULD A
COMPANY
SELL
THEIR
RECEIVABLES?
A:
Companies
that
find
cash
flow as
a
recurring
problem
often
can't
afford
to have
cash
tied up
in
receivables
30-45
days.
They
need the
cash to
meet
immediate
present
financial
demands
of their
business.
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Q:
WHAT IF
I WANT
TO STOP
FACTORING?
A: You
can
terminate
your
factoring
agreement
with
most
factoring
companies
at any
time
with a
45 day
written
notice.
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Q:
WHAT
WILL
FACTORING
COST ME
?
A: One
of the
most
frequently
asked
questions
about
Factoring
is the
cost.
Factoring
generally
cost
about
the same
as if
you took
credit
cards or
offered
a C.O.D.
discount
to you
customers.
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