Factoring FAQs
Frequently asked questions about factoring
1 (800) 317-4933
How soon can you issue a factoring proposal?
A proposal can be issued very quickly after
we have received your application/information.
Is accounts receivable funding a new financing option?
No. Accounts receivable funding is one of the oldest
forms of financing. It has been around in one form or another for
more than 4,000 years. Until the mid 1980s, most people thought
accounts receivable funding was only used in the textile and
garment industries. Today, accounts receivable funding is a widely
used and viable financing solution for all types of businesses that
extend credit terms to their customers.
How can accounts receivable funding help my business?
By providing an immediate source of cash flow for your
company. You can use this cash to provide working capital, meet
payroll, pay taxes, replenish inventory, increase advertising,
purchase equipment, improve your credit rating, and more.
How is accounts receivable funding from your company
different than accounts receivable financing from a bank?
When making a funding decision, we focus on the creditworthiness of
your customers while banks will focus on your company’s financial
history and cash flow. Plus, since accounts receivable funding is
not a loan, there is no debt on your company’s balance sheet.
Best of all, we will make a quick funding decision, while banks may
take weeks—even months—to approve a loan.
Will my company be eligible for accounts receivable
funding if it has a bank loan or line of credit?
If a
bank has a lien on your company’s accounts receivable, you should
let us know right away. We will ask the bank to subordinate that
lien in our favor. Because this is a common occurrence, most banks
will accommodate the request, but we must know this information in
advance.
My company owes back taxes. Can I still apply for
accounts receivable funding?
Yes, Tax problems are
handled on a case-by-case basis. Please let us know immediately so
that we can discuss the payoff of your back taxes or a lien
subordination with the IRS.
I have had a past bankruptcy, is accounts receivable
funding still an option?
Previous credit problems or
bankruptcies are considered on a case by case basis.
What information will you need from my company to begin
the accounts receivable funding process?
Along with the
application, be sure to include your company’s most recent accounts
receivable and accounts payable aging reports, Articles of
Incorporation or DBA filing, a master customer list and a sample
invoice. For startup companies, please also submit a business plan
and projected sales forecast, and an owner/officer history and
profile.
Which customers would be good candidates for accounts
receivable funding?
Ideally, we would like to fund all
of your customers. First, we need their names, addresses, phone
numbers and the amounts of credit desired. This will save you time
when submitting invoices to us. Also, anytime you obtain new
customers, send the same information to us, and we will check them
out for you.
Can your company purchase only a portion of my company’s
invoices?
Absolutely, but remember that higher numbers
of receivables purchased on a regular basis can result in more
competitive rates. Terms can be especially flexible when there are
large numbers of invoices issued to a larger, rather than smaller,
pool of your customers.
How long does it take to receive the first funding?
After we receive
your signed contract, the initial funding on an invoice is within
hours after invoice verification. If you wish, you can send your invoices to be
funded with the signed contract. After the initial funding, your
company can receive funds usually within an hour after
verification.
Do you verify invoices with my customers?
Invoice verification is an essential, and accepted, part of funding.
Because factors verify invoices with customers, they can tell
clients if there is a customer service problem right away. A
non-factoring client may not notice the problem until the invoice
becomes past due. By that time, it may be too late to save the
account. For the process to run smoothly, we suggest that you call
your customers or send them a letter in advance to let them know
that you are now working with a factor. If you need assistance in
writing the notification letter, we will be happy to provide you
with a sample letter.
What should I do if my customer mistakenly sends the
payment to my company?
This might happen, especially
with the first invoice. If this occurs, the check must be sent to us
immediately. Your company should never deposit invoice checks that
were already purchased by the factor. We also ask that you notify
your customer to pay us directly in the future.
What happens if my customer doesn’t pay the invoice?
This depends on whether your company entered into a non-recourse or
recourse agreement with the factor. In a non-recourse agreement, the
factor will absorb the credit-related loss. However, with a recourse
agreement, your company will have to reimburse the factor—either by
having the invoice deducted from the next advance or replace it with
another collectable invoice.
How can I be certain that the factor will treat my
customers well?
The last thing we want is for you to
lose a customer. We are not a collection agency. We will never
harass your customers for money. Maintaining your customers’
goodwill and confidence are of utmost importance to us!
For additional information please submit the Contact Form. The office that handles your local area will contact you as soon as possible.
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