FACTORING of ACCOUNTS RECEIVABLE
Who are best candidates?
- Companies who are no longer eligible for conventional lines of credit
- Must sell to good credits - business customers only
- No encumbrances (existing debt must be paid off)
- Companies who need working capital but want to avoid personal guarantees
- Companies with high up-front costs coupled with long customer payment terms
- Factoring does not depend on a company’s cash-flow, profitability, business & personal credit and time-in-business.
- Minimum volumes are usually $ 25,000 per month, maximum $ 5,000,000 per month
- No Balance Sheet Debt - cancelable at any time
- Company has option on which invoices to sell and when they are sold
- Advance rates up to 93% of invoice amount
- Can be paperwork intensive unless managed and standardized
- Customers must be notified (risk of customer alienation and stigma is minimal)
- Becomes cost-efficient at $ 60,000 per month
- No personal guarantees required.
- No compensating balance requirement
- No collateral audits
- Use of a managed program can reduce costs significantly
- No application fees or hidden charges
- Mostly non-recourse (except in cases of outright fraud)
- Using proceeds to pay creditors on discount can cut cost in half
- Allows competitive advantage by enabling longer payment terms to customers
How long does it take?
- 3 - 5 days, from submission of initial funding request and documentation.
What is a successful outcome?
- Support or restoration of positive cash-flow