Invoice Factoring Updates

  no commentsPosted at 12:01 am in Uncategorized

From Entrepreneur:

Say you're a young startup–growing fast, but with little-to-zero positive cash flow–and you're straining to reach the next level or just to get through the end of the month. The bank-financing drought is showing no sign of letting up, and of course credit lines are reeled in tight.

What's the answer? For a growing number of startups, it is factoring. The practice involves a financing company, or “factor,” advancing you money based on its buying your receivables at a discount; your customers pay the factor the full value later, when the bill is due. Factoring gets you cash in hand immediately–but at a steep price. Factoring fees are much higher than interest rates charged by a commercial bank. Fees are quoted by the month, so a typical 3 percent fee is actually the equivalent of a 36 percent annual interest rate.

Dealing with a factor can also be much more difficult than with a commercial bank. Banks are highly regulated, offer competitive rates and commoditized lending services, so entrepreneurs can, with few exceptions, easily anticipate the cost and terms of their loan. But factoring is very fragmented. Most factor financing is provided by smaller, unconventional lenders. It is much less regulated and the quality, reliability and integrity of factors vary widely.

The reason more startups are turning to this more expensive, risky alternative is simple: It is often the only way to get cash. And if it is the route you decide to pursue, due diligence is the single most important step. Investigate how long the factor has been in business, where its offices and headquarters are and the background of its management team. Ask for referrals from current clients, and research complaints or lawsuits using web searches, the Better Business Bureau and the state's Attorney General's Office. Also, trust your gut: If you feel you can't build trust with the factor, don't pursue the loan.

If you go forward, review your contract with a magnifying glass, particularly these points:

What is the duration of the contract? The shorter the better–ideally, month to month. You want to switch to less expensive financing as soon as possible.Will the factor negotiate? Some factors allow contract negotiations while others offer only take-it-or-leave-it documents.Must you provide a personal guarantee? This allows the factor to go after you and your assets to be repaid. Some factors will lend without a personal guarantee or on a “non-recourse” basis.Will the factor take possession of your receivables if they are uncollected? Probably not, which means you'll need to collect on your own. Be prepared: If receivables are uncollected, you'll need to repay the factor's advance or you may lose financing altogether.How will the factor notify your customers? Ideally, the factor will create a lockbox to accept payments in care of your company. You maintain day-to-day contact with your clients so that everything appears seamless and they are not aware of your financial situation.Will you be required to factor 100 percent of your receivables? Cash flow and collections patterns fluctuate, and some weeks you may not need financing. If your factor requires you to finance all receivables, you will pay dearly for financing even when you don't need it. Single-invoice or spot factoring allows you to opt out.Is there a minimum or maximum sales requirement? Some factors require a certain sales volume. If you are not within the limits, you may lose your financing–so the fewer restrictions, the better.

Finally, always keep the end in sight. The real goal with factoring is to improve your cash flow, increase liquidity and rebuild net worth to qualify for commercial bank financing. Commercial bankers can help you figure out the financial targets that can help you re-qualify, but it is up to you to create the plan.

As a commercial lender, I have seen businesses resort to factor financing for one or two years at the most. If the company still didn't qualify for bank financing at that point, chances are, it was already out of business.

From Entrepreneur:

Say you're a young startup–growing fast, but with little-to-zero positive cash flow–and you're straining to reach the next level or just to get through the end of the month. The bank-financing drought is showing no sign of letting up, and of course credit lines are reeled in tight.

What's the answer? For a growing number of startups, it is factoring. The practice involves a financing company, or “factor,” advancing you money based on its buying your receivables at a discount; your customers pay the factor the full value later, when the bill is due. Factoring gets you cash in hand immediately–but at a steep price. Factoring fees are much higher than interest rates charged by a commercial bank. Fees are quoted by the month, so a typical 3 percent fee is actually the equivalent of a 36 percent annual interest rate.

Dealing with a factor can also be much more difficult than with a commercial bank. Banks are highly regulated, offer competitive rates and commoditized lending services, so entrepreneurs can, with few exceptions, easily anticipate the cost and terms of their loan. But factoring is very fragmented. Most factor financing is provided by smaller, unconventional lenders. It is much less regulated and the quality, reliability and integrity of factors vary widely.

The reason more startups are turning to this more expensive, risky alternative is simple: It is often the only way to get cash. And if it is the route you decide to pursue, due diligence is the single most important step. Investigate how long the factor has been in business, where its offices and headquarters are and the background of its management team. Ask for referrals from current clients, and research complaints or lawsuits using web searches, the Better Business Bureau and the state's Attorney General's Office. Also, trust your gut: If you feel you can't build trust with the factor, don't pursue the loan.

If you go forward, review your contract with a magnifying glass, particularly these points:

What is the duration of the contract? The shorter the better–ideally, month to month. You want to switch to less expensive financing as soon as possible.Will the factor negotiate? Some factors allow contract negotiations while others offer only take-it-or-leave-it documents.Must you provide a personal guarantee? This allows the factor to go after you and your assets to be repaid. Some factors will lend without a personal guarantee or on a “non-recourse” basis.Will the factor take possession of your receivables if they are uncollected? Probably not, which means you'll need to collect on your own. Be prepared: If receivables are uncollected, you'll need to repay the factor's advance or you may lose financing altogether.How will the factor notify your customers? Ideally, the factor will create a lockbox to accept payments in care of your company. You maintain day-to-day contact with your clients so that everything appears seamless and they are not aware of your financial situation.Will you be required to factor 100 percent of your receivables? Cash flow and collections patterns fluctuate, and some weeks you may not need financing. If your factor requires you to finance all receivables, you will pay dearly for financing even when you don't need it. Single-invoice or spot factoring allows you to opt out.Is there a minimum or maximum sales requirement? Some factors require a certain sales volume. If you are not within the limits, you may lose your financing–so the fewer restrictions, the better.

Finally, always keep the end in sight. The real goal with factoring is to improve your cash flow, increase liquidity and rebuild net worth to qualify for commercial bank financing. Commercial bankers can help you figure out the financial targets that can help you re-qualify, but it is up to you to create the plan.

As a commercial lender, I have seen businesses resort to factor financing for one or two years at the most. If the company still didn't qualify for bank financing at that point, chances are, it was already out of business.

Written by Admin on June 7th, 2010

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Factoring is one of the best ways to help increase cashflow. If you haven't started yet, start searching for the best companies to factor your invoices now.Recent PostsInvoice Factoring Factoring receivables pertains for the practice in which smaller companies sell invoices Good Invoice Factoring Advice See some Factoring invoices Facts CategoriesFactoringUncategorizedArchivesJune 2010May 2010 Back to top

© 2010 Small Business Factoring

View the Original article

Invoice Factoring Updates

By: Admin

From Entrepreneur:

Say you're a young startup–growing fast, but with little-to-zero positive cash flow–and you're straining to reach the next level or just to get through the end of the month. The bank-financing drought is showing no sign of letting up, and of course credit lines are reeled in tight.

What's the answer? For a growing number of startups, it is factoring. The practice involves a financing company, or “factor,” advancing you money based on its buying your receivables at a discount; your customers pay the factor the full value later, when the bill is due. Factoring gets you cash in hand immediately–but at a steep price. Factoring fees are much higher than interest rates charged by a commercial bank. Fees are quoted by the month, so a typical 3 percent fee is actually the equivalent of a 36 percent annual interest rate.

Dealing with a factor can also be much more difficult than with a commercial bank. Banks are highly regulated, offer competitive rates and commoditized lending services, so entrepreneurs can, with few exceptions, easily anticipate the cost and terms of their loan. But factoring is very fragmented. Most factor financing is provided by smaller, unconventional lenders. It is much less regulated and the quality, reliability and integrity of factors vary widely.

The reason more startups are turning to this more expensive, risky alternative is simple: It is often the only way to get cash. And if it is the route you decide to pursue, due diligence is the single most important step. Investigate how long the factor has been in business, where its offices and headquarters are and the background of its management team. Ask for referrals from current clients, and research complaints or lawsuits using web searches, the Better Business Bureau and the state's Attorney General's Office. Also, trust your gut: If you feel you can't build trust with the factor, don't pursue the loan.

If you go forward, review your contract with a magnifying glass, particularly these points:

What is the duration of the contract? The shorter the better–ideally, month to month. You want to switch to less expensive financing as soon as possible.Will the factor negotiate? Some factors allow contract negotiations while others offer only take-it-or-leave-it documents.Must you provide a personal guarantee? This allows the factor to go after you and your assets to be repaid. Some factors will lend without a personal guarantee or on a “non-recourse” basis.Will the factor take possession of your receivables if they are uncollected? Probably not, which means you'll need to collect on your own. Be prepared: If receivables are uncollected, you'll need to repay the factor's advance or you may lose financing altogether.How will the factor notify your customers? Ideally, the factor will create a lockbox to accept payments in care of your company. You maintain day-to-day contact with your clients so that everything appears seamless and they are not aware of your financial situation.Will you be required to factor 100 percent of your receivables? Cash flow and collections patterns fluctuate, and some weeks you may not need financing. If your factor requires you to finance all receivables, you will pay dearly for financing even when you don't need it. Single-invoice or spot factoring allows you to opt out.Is there a minimum or maximum sales requirement? Some factors require a certain sales volume. If you are not within the limits, you may lose your financing–so the fewer restrictions, the better.

Finally, always keep the end in sight. The real goal with factoring is to improve your cash flow, increase liquidity and rebuild net worth to qualify for commercial bank financing. Commercial bankers can help you figure out the financial targets that can help you re-qualify, but it is up to you to create the plan.

As a commercial lender, I have seen businesses resort to factor financing for one or two years at the most. If the company still didn't qualify for bank financing at that point, chances are, it was already out of business.

From Entrepreneur:

Say you're a young startup–growing fast, but with little-to-zero positive cash flow–and you're straining to reach the next level or just to get through the end of the month. The bank-financing drought is showing no sign of letting up, and of course credit lines are reeled in tight.

What's the answer? For a growing number of startups, it is factoring. The practice involves a financing company, or “factor,” advancing you money based on its buying your receivables at a discount; your customers pay the factor the full value later, when the bill is due. Factoring gets you cash in hand immediately–but at a steep price. Factoring fees are much higher than interest rates charged by a commercial bank. Fees are quoted by the month, so a typical 3 percent fee is actually the equivalent of a 36 percent annual interest rate.

Dealing with a factor can also be much more difficult than with a commercial bank. Banks are highly regulated, offer competitive rates and commoditized lending services, so entrepreneurs can, with few exceptions, easily anticipate the cost and terms of their loan. But factoring is very fragmented. Most factor financing is provided by smaller, unconventional lenders. It is much less regulated and the quality, reliability and integrity of factors vary widely.

The reason more startups are turning to this more expensive, risky alternative is simple: It is often the only way to get cash. And if it is the route you decide to pursue, due diligence is the single most important step. Investigate how long the factor has been in business, where its offices and headquarters are and the background of its management team. Ask for referrals from current clients, and research complaints or lawsuits using web searches, the Better Business Bureau and the state's Attorney General's Office. Also, trust your gut: If you feel you can't build trust with the factor, don't pursue the loan.

If you go forward, review your contract with a magnifying glass, particularly these points:

What is the duration of the contract? The shorter the better–ideally, month to month. You want to switch to less expensive financing as soon as possible.Will the factor negotiate? Some factors allow contract negotiations while others offer only take-it-or-leave-it documents.Must you provide a personal guarantee? This allows the factor to go after you and your assets to be repaid. Some factors will lend without a personal guarantee or on a “non-recourse” basis.Will the factor take possession of your receivables if they are uncollected? Probably not, which means you'll need to collect on your own. Be prepared: If receivables are uncollected, you'll need to repay the factor's advance or you may lose financing altogether.How will the factor notify your customers? Ideally, the factor will create a lockbox to accept payments in care of your company. You maintain day-to-day contact with your clients so that everything appears seamless and they are not aware of your financial situation.Will you be required to factor 100 percent of your receivables? Cash flow and collections patterns fluctuate, and some weeks you may not need financing. If your factor requires you to finance all receivables, you will pay dearly for financing even when you don't need it. Single-invoice or spot factoring allows you to opt out.Is there a minimum or maximum sales requirement? Some factors require a certain sales volume. If you are not within the limits, you may lose your financing–so the fewer restrictions, the better.

Finally, always keep the end in sight. The real goal with factoring is to improve your cash flow, increase liquidity and rebuild net worth to qualify for commercial bank financing. Commercial bankers can help you figure out the financial targets that can help you re-qualify, but it is up to you to create the plan.

As a commercial lender, I have seen businesses resort to factor financing for one or two years at the most. If the company still didn't qualify for bank financing at that point, chances are, it was already out of business.

« Nice Accounts receivable Factoring AdviceAccounts receivable factoring pertains to the process by which smaller businesses sell invoices »

Accounts receivable factoring pertains to the process by which smaller businesses sell invoices

By: Admin

 

Factoring accounts receivable pertains for the practice by which smaller businesses sell invoices to become able to obtain funds these days. In this case they don't need to wait for a credit period of 30, 60, or 90 days. Thus by selling invoices smaller firms tend not to generate debt. This exercise of invoice factoring is basically employed as a finance management tool.

 

This practice of invoice factoring is typically adopted to avoid any loans or giving any collateral against availing any loan. The fee for invoice factoring is paid in terms of discount. This discount can ranger anywhere between 2.5% to 7%. Like a result of invoice factoring the smaller companies prevent exhibiting any loans on their balance sheets plus they also do not have to spend any interest for the money taken. This results in much better profit figures but slightly various with buy order funding.

 

A number of companies also help tiny companies in invoice factoring. These businesses set up the firm with the perfect factor for any distinct factoring circumstance. If a individual has an invoice or any receivable to become factored then these firms come out to assistance in the same.

 

These businesses assist the manufacturers, distributors, importers, exporters, wholesalers, contractors, suppliers etc equivocally. They also support truckers in construction invoice factoring. These organizations help to locate ideal aspect for any particular predicament within the area or can also aid to select from nationwide factoring organizations to avail the finest rates. They typically customized solution as per the clients need. To avail the services of such firms firstly a form needs to become filled out stating the type of receivables and other details required for invoice factoring. Then these companies approach the probable paying parties that avail invoice factoring. Some of these organizations assume the risk inside the deal for non-recourse factoring wherever the client is not necessary to invest back.

 

You'll discover different sorts of organizations with distinct forms of rates for factoring. Any invoices or receivables towards amount of $100,000 might be factored instantly. The average rate payable for discount in such cases is 2-5%.

 

Some companies specialize for a specific category of invoice factoring. For instance, some businesses indulge only in invoice factoring for medical business. Some firms, which cater to little and medium companies for invoice factoring, build invoices on the net and acquire immediate funding. They generally give a 24 hours turnaround. Other kinds of companies also give funds to small firms for their day to day operations against collateral of their invoice or purchase order. These kinds of organizations also buy mortgage notes, structured settlement annuity or medical receivables.

 

« Invoice Factoring UpdatesInvoice Factoring »

Factoring receivables pertains for the practice in which smaller companies sell invoices

  no commentsPosted at 11:30 pm in Uncategorized

 

Invoice factoring pertains to the practice by which smaller companies sell invoices to become able to obtain funds these days. In this case they don't need to wait for a credit period of 30, 60, or 90 days. Thus by selling invoices smaller firms tend not to generate debt. This exercise of invoice factoring is basically employed as a finance management tool.

 

This practice of invoice factoring is usually adopted to avoid any loans or giving any collateral against availing any loan. The fee for invoice factoring is paid in terms of discount. This discount can ranger anywhere between 2.5% to 7%. Like a result of invoice factoring the smaller companies prevent exhibiting any loans on their balance sheets plus they also don’t need to spend any interest for the money taken. This results in better profit figures but slightly different with buy order funding.

 

A number of companies also assist tiny businesses in invoice factoring. These businesses set up the firm with the perfect factor for any distinct factoring circumstance. If a individual has an invoice or any receivable to become factored then these firms come out to assistance within the same.

 

These companies assist the manufacturers, distributors, importers, exporters, wholesalers, contractors, suppliers etc equivocally. They also assistance truckers in construction invoice factoring. These organizations assist to locate ideal aspect for any particular predicament within the area or can also aid to choose from nationwide factoring organizations to avail the finest rates. They typically customized solution as per the clients require. To avail the services of such firms firstly a form needs to become filled out stating the kind of receivables and other details required for invoice factoring. Then these companies approach the probable paying parties that avail invoice factoring. Some of these organizations assume the risk inside the deal for non-recourse factoring wherever the client isn't required to invest back.

 

You will discover various sorts of organizations with distinct forms of rates for factoring. Any invoices or receivables towards amount of $100,000 might be factored instantly. The average rate payable for discount in such cases is 2-5%.

 

Some companies specialize for a particular category of invoice factoring. For instance, some businesses indulge only in invoice factoring for medical business. Some firms, which cater to little and medium companies for invoice factoring, build invoices on the net and acquire immediate funding. They generally give a 24 hours turnaround. Other types of businesses also give funds to small firms for their day to day operations against collateral of their invoice or purchase order. These kinds of organizations also buy mortgage notes, structured settlement annuity or medical receivables.

 

Written by Admin on June 13th, 2010

« Invoice Factoring Updates Invoice Factoring » Leave a Reply

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Factoring is one of the best ways to help increase cashflow. If you haven't started yet, start searching for the best companies to factor your invoices now.Recent PostsInvoice Factoring Invoice Factoring Updates Good Invoice Factoring Advice See some Factoring invoices Facts CategoriesFactoringUncategorizedArchivesJune 2010May 2010 Back to top

© 2010 Small Business Factoring

View the Original article

Invoice Factoring

Most Canadian business owners and financing mangers often seek out factoring as a quick way to get out of a cash flow crunch when other more traditional methods of financing have been exhausted.

Typically clients tell us that sales or revenue generation is not the problem, with the bigger challenge simply being how to convert those sales into cash flow and working capital. Factoring comes at a higher price than traditional bank financing but most Canadian business owners recognize that other options are limited.
When you recognize that a cash flow crunch often comes as a result of your success it is often much easier to rationalize factoring as a solution.

Factoring in Canada is slowly catching on as a true financing option – many parts of the economy now view this financing method as a traditional method of financing the business – and the reality is that the big boys use it also , which many are not aware of .
When you utilize factoring you are in effect selling your receivables as you generate them (at your option of course) and receiving immediate cash for those funds. Don't let the literature fool you though – you actually receive approve 75-90% of your invoices (depending on who you deal with) and the balance is held back and then remitted to you when your customer pays. Naturally from this final holdback amount there is a financing fee or a discount fee. Many business owners view this financing or discount fee as an interest rate, when in fact the factor finance firms always refer to this as a discount fee.

The prerequisites for factoring your receivables often revolve simply around the nature of your receivables and customers. Your final pricing or discount fee depends on several key factors. They are:
- Overall risk profile of your firm – i.e. how you are doing!
- The quality of your customer base
- The size of your receivables portfolio
- The geographical scope of your invoices – foreign, i.e. U.S. receivables can be financed also.

What do you need to know about factoring financing in Canada as it relates to the U.S. and U.K. approaches to this type of financing ? Well in Canada there are two types of invoice discounting/factoring. Under the most commonly used method the factor firm you engage works with you to invoice the customer, collect the payment, and monitor the overall credit quality of your customer.
If you view this overall business model and way of financing as somewhat intrusive and undesirable then seek out the services of a trusted, credible and experience advisor who can provide you with a factoring facility which allows you to bill and collect your own receivables.

Many business owners we meet are concerned with the perception that comes from suppliers and customers when they find out you are factoring. That comes out of the issue that in the past many firms that factoring generally was viewed as companies with financial problems. However, the new reality of financing a business in Canada in the year 2010 is that factoring is in fact a great way for healthy businesses to generate much needed cash flow and working capital.

In summary, consider the cash flow benefits of financing your receivables when you are unable to obtain the total amount of financing you need. Determine if you are eligible (most firms are) and seek out a facility that meets your business financing needs.

« Accounts receivable factoring pertains to the process by which smaller businesses sell invoices

Invoice Factoring

Accounts Receivable Factoring

There probably isn't a day when Canadian business owners and financial managers don't hear about factoring and accounts receivable financing as a method of financing their business in Canada. Despite its growing popularity and, we can say, relative importance in the Canadian business financing marketplace this financing mechanism is still somewhat understood.

What information do business owners need to know in order to assess if factoring, also known as invoice discounting, is a viable transaction? Also, are there mistakes and pitfalls to be avoided when considering this financing strategy?

Let's examine the answers to some of those questions. You can be forgiven for trying to figure out why factoring has increased in prominence from a time when no one had almost ever heard of it! The answer to that popularity is more simply and obvious than you might think, and its simply that Canadian chartered banks are finding it increasingly more difficult to fund accounts receivable ( and inventory of course ) to the extent that their customers need this financing .

When you have a situation where the actual need for financing is acute, and the benefits and flexibility seems significant it is not hard to see the rise in popularity of such a financing mechanism.

First of all, 99% of the time, factoring provides your firm with a greater level of borrowing based on your accounts receivable levels. Quite of 90-100% of you're A/R under 90 days can be financed.

So is it all good news? Not necessarily, as we are always meeting with clients that have chosen the wrong type of funding or factoring, and, even worse, find them locked into contracts they cannot get out of. That is uncomfortable for any size firm as you can imagine.

As with any newer type of financing the playing field is complex. You can be forgiven for not knowing how many factor firms are out there, how they run, what their own limitations are, and , even to a certain extent, do they in fact themselves have the funding to survive, let along finance your firm . For that reason we cannot over emphasize the need to work with a credible, experienced and trusted professional in this area.

Lets talk about some of the nuances, we can call them potential 'pitfalls 'also, of picking the wrong factoring partner. For a starter if you choose a firm who itself is not well capitalized, as we said, you might find that the financing commitments made to you cannot be honored. Canadian business has never had to think that the Canadian chartered banks could be 'out of money 'but the Canadian landscape is somewhat littered with small and medium sized factor firms that do not have the financial wherewithal to support their funding commitments in all places. That just re – enforces our idea that a trusted industry expert will guide you to the best partner for your firm.

Other issues, again, we can call them pitfalls, to look for include:

- being locked into a contract
- having the total factoring cost , or pricing, not reflected properly in your term sheet
- advance rates which don't make sense relative to the price you are paying for discounting invoices
- excessive notification and intrusion with your customers , which is very prevalent in the U.S. model of factoring ( Many Canadian factor firms are branches of U.S. firms )

So let's recap. It's simply that factoring is growing in popularity. It works because it is providing funding where banks often cannot. If you don't understand who you are dealing with and the various nuances of this type of financing it becomes a burden, not a solution. Investigate this great financing mechanism, but ensure you know what you are getting into. Talking to an expert always helps – that's just common sense

Written by Admin on June 17th, 2010

« Factoring receivables pertains for the practice in which smaller companies sell invoices Leave a Reply

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Factoring is one of the best ways to help increase cashflow. If you haven't started yet, start searching for the best companies to factor your invoices now.Recent Posts Factoring receivables pertains for the practice in which smaller companies sell invoices Updates Good Advice See some Factoring invoices Facts CategoriesFactoringUncategorizedArchivesJune 2010May 2010 Back to top

© 2010 Small Business Factoring

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