Loan Factoring

Factoring of receivables is an arrangement whereby a company sells its accounts receivables to another company (banks and other institutions) that specializes in buying them and obtains the necessary financial accommodation. It is the most popular method of short-term financing in the US. Factoring offers the following advantages: relief to manufacturers and sellers from the bother of collection of book debts, saving in time and man-power required for debt collection, and last but not the least, adequate and better source of financing.

The factoring institutions render the following functions: Credit recording- that involves maintenance of debtor?s ledgers, collection schedules etc. Secondly, there is Credit administration that includes the collection of debts. Thirdly, there is credit financing, whereby the factor advances money against receivables. Finally, there is finance and business information wherein advices are given to customers on current trends and challenges.

Commercial paper is an important money market instrument, which is in the form of unsecured promissory notes issued by firms to raise short-term funds. Certain conditions are to be satisfied before the issue of commercial paper. Permission should also be obtained from the credit rating agencies. Commercial papers are issued for a period ranging from 3 months to 6 months. Commercial paper offers alternative source of raising short-term finance, helpful in times of tight bank credit and is a cheaper source of finance.

Term loans are those loans that are extended for a specific period ranging from 1 to 15 years. Medium term loans are extended for a period of 5 years and long-term loans are granted for a period of 15 years. Term loans are granted for establishment, renovation, expansion and modernization of industrial units as well as meeting the requirements of core working capital and for repayment of bonds and preference shares. Term loans are usually secured. They have either a fixed or a floating charge against the assets of the company. They are granted on the basis of a formal agreement, which contains the terms, and a condition of providing loans.

Factoring provides detailed information on factoring, credit card factoring, loan factoring, invoice factoring and more. Factoring is affliated with Invoice Factoring Discounting.

Invoice Factoring: Cash Now, No Waiting, NO Debt? Your competitor is doing it, Are you?

What are Your costs for NOT Factoring?

Consider the time value of money and the benefits of improved cash flow to your business. By having, cash for your invoices within 24 hours are you able to pay your suppliers faster and receive better discounts. Are you able to fulfill your next order to XYZ Company and make payroll without tapping your line of credit at the bank? Can you offer longer terms to larger customers and attract more business? Can improved cash flow help your business grow or survive without incurring more debt at the bank? Can the financial benefits of improved cash flow to your business offset the fees of Factoring, and then some? Sure it can, the savings alone in taking discounts from your vendors can equal the cost of Factoring. All the other savings are in your pocket! Factoring is a smart business decision. Why are you doing it?

Is Cash needed immediately for growth or survival?

Is long billing cycles putting a strain on your business cash flow? Despite increasing sales, does the management of receivables and payables seem like a juggling act? Could your business increase sales by offering better terms to your new and larger customers? Are you spending too much time collecting from slow paying customers and not enough time building your business? Is your bank turning you down for traditional financing due to years in business, profitability, lack of assets, personal guarantees or financial strength?

Have you considered turning away new business due to slow cash flow?

These are challenges many businesses face that can be solved with Factoring.

Benefits of Factoring Receivables

Simplicity

The advanced funding you receive for your receivables and the discount fees you will pay are based solely on the financial strength and credit worthiness of your customers, not your business!

You receive Cash for your unpaid accounts receivable invoices. Usually the factoring company buys the invoice from you for an amount less than its actual face value (70-90%). When the Factor later collects the full amount of the invoice from your client, you will receive the remainder of the advance less the factoring fee (discount rate). Fees will vary depending on the total dollar amount you intend to factor on a monthly basis.

Flexibility

Need a flexible financial solution that can help your business be more competitive while improving your cash flow, credit rating, and supplier discounts? Factor as much as your want or as little as you want. You decide. No obligations. There are No minimums and No maximums in the amount you can factor. No binding contracts, if that is what you want.

Unlike traditional bank financing, factoring relies on the financial strength and credit worthiness of your customers, not you. Here?s why you should use Factoring services:

Offer Better Terms - Win More Business

With Factoring, you can attract more business by offering better terms on your invoices. Most companies negotiate on price to win business in a competitive market, but with Factoring, you can negotiate with terms instead of price.

To your customers, better terms can be more attractive than better prices.

When using attractive terms to win business, you can build the cost of factoring into your costs of good and services.

Example: A new customer may choose to do business with your company because you can offer NET 30 or NET 45 terms while your competitor (who isn't factoring) requires payment up front but has a 3% better price. If you factor the subsequent invoice at a discount of 3%, you have leveraged factoring services to win the business at no extra cost and improved your cash flow at the same time.

Improve Cash Flow * NO Additional Debt *WIN over customers

Your Business Receives:
* Get cash in 24 hours or less from your outstanding invoices! Eliminate long billing cycles.
* No new debt is created. Factoring is not a loan. This allows you to preserve your financial leverage to take on new debt. Improved credit rating.
* Purchase capital equipment to expand your business.
* Increase inventory for quicker shipments or handle seasonal inventory needs.
* Market for additional business.
* Take trade discounts. This alone can offset Factoring fees and all the other savings are gravy!
* Pay off nagging, expensive delinquent obligations.
* End payroll worries.
* Meet tax requirements on time. No more exhaustive penalty fees.
* Negotiate discount purchasing.
* Unlimited sales and profit potential.

You Receive:
*Cash stability
*Simple to start and use
*You keep control
* Reduce stress, improve planning, focus on what is critical to make money.
Customer Credit Services:
*Reduce bad debt expense, work with experts at collecting.
* Streamline credit approvals for new customers.
* Improve decision-making on new business.
* Reduce administration costs: long distance calls for collection and credit investigation, postage, staff, monthly statements and more.
* Larger customer credit lines and better terms, which increase sales.
* As you grow, your payroll budget for credit and collection department is minimal.
Accounts Receivable Management:
* Reduce administrative costs. Factor will post invoices and apply cash applications.
* Improve customer relationships. You are no longer the bad guy looking for payment.
* Improve receivable turns. Fact: Customers pay Factors before independent businesses.
* Improve accounting performance; timely reports, online access and more.
* Redirect your critical resources to marketing and production

If you are looking to receive an increase in cash flow and increase your bottom line profits, you need to factor your invoices now!


Please feel free to reprint this article as long as it is left intact and all links are hyperlinked.

www.brtfinancial.com/arecfac.htm

BRT Financial specializes in Invoice Factoring; it gets you the cash you need now! Factor as many invoices as you need! Invoice Factoring will provide the cash flow you need to increase your bottom line profits! www.brtfinancial.com/arecfac.htm www.brtfinancial.com

Factoring Your Way To Liquidity

There are various types of factoring available. These factoring can be in any industry viz. account receivable factoring, asset based lending, business loans, construction factoring, credit card receivables factoring, distributors factoring, equipment, hard money loans, invoice factoring, manufacturing, medical factoring, purchase order financing, real estate lending, staffing, systems, technology, trucking, verdict funding, wholesalers, etc.

Various agencies provide all these types of factoring. Usually their turnaround time is 24 hours. They provide exclusive online and paperless factoring solutions to the small and medium sized businesses. These agencies either provide stated rates for factoring of invoices of a particular amount or they offer a free invoice-factoring quote. Thereafter these agencies approach the factoring companies that purchase the creditworthy accounts receivable at a small discount and convert the invoices in to cash.

With the help of these factoring agencies cash is received in mere 24 hours and no debt is created. Since there is no debt created it increases your credit worthiness which can be used to avail a loan. This also represents a healthy balance sheet and strong financial position. These agencies also offer higher advance rates which ultimately results in factoring lesser invoices but generating all the required money.

Moreover the factors handle the collection in professional manner thus reduces the collection costs. They also help in processing of invoices by generating invoices online. This further means increased paperless work. As a result the turnaround time is much shorter than any other means.

Invoice factoring is also known as accounts receivable financing. This practice helps in solving the immediate cash flow problems for small businesses with immediate infusion of money. They also provide a credit facility to small business owners with complete flexibility. This also provides the working capital to the small or medium business owners. This factoring helps in generating working capital without the need of constant renegotiations. Since there is a considerable increase in the working capital it leads to more sales and expansion of business.

A practice of factoring helps small business owners not only to solve their cash problems but also help in increasing sales. Small business owners can also concentrate on their businesses rather than chasing their customers for payments and cash. Factoring practice helps all kinds of small to medium business owners whether they are a small trucking company or any manufacturers.

As a result of invoice factoring, it not only reduces accounting costs but also helps business owners and manufacturers in increased productivity. This practice if factoring the invoices keeps the businessmen from other time consuming jobs like collection, administration, book-keeping, looking up additional capital or warding off creditors.

Finally the best part of factoring is that the business ownership remains unchanged as in case of loan, etc. Since there is no loss of business equity, the ownership percentages remain unchanged.

Henry Byers, Factoring Financial Services advisor - focusing on Factoring Company and Business Factoring

Factoring - A Brief Overview

A factoring company or factor purchases the invoices or accounts receivable from another business. The purchases are made at a price less than the face value of the invoices so that the factoring company can make a profit once it collects the payments that are owed. They generally purchase invoices for services already rendered or goods already shipped to customers with good credit ratings. Typically, these types of companies do not care about any financial troubles that you may have had in the past. It does not matter if your business has bad credit or just went through a bankruptcy. They primarily care about the credit ratings of your customers. You also have to pay the factor a fee for their services. The fee charged depends on the number of customers you have, credit rating of your customers, your average payment cycle, size and age of the average invoice and other variables. Banks have a different set of standards when it comes to funding decisions. Banks make lending decisions based on the financial history, collateral and cash flow of your business. This means that most small to mid-sized businesses with no track record, a weak balance sheet, or a history of financial problems will be refused for loans. These businesses may find factoring to be the solution to their problems. Another difference between factors and banks is the amount of time spent deciding on the funding decisions. Factors may take hours or days to make funding decisions. For banks, it may take weeks or months.

Factoring is not a new financing option. It is a centuries old form of financing. In the past, primarily people who work in the garment or textile industries have used it. All types of businesses that extend credit to their customers use factoring today. Factoring is a $150 billion a year business in the United States.

A factor is a viable option for any business that has cash flow problems. These businesses cannot wait 30 or 60 days for people to pay off their invoices and have immediate financial demands that need to be met. A factor can provide the cash that they need within 24 hours. These businesses can typically get 80 to 90 percent of the agreed upon payment immediately. The balance is held in reserve until the invoices are paid off.

There are two forms of financing offered by factoring companies: recourse and non-recourse. Recourse financing makes the company that sells the invoices responsible for payment if the invoices are not paid off. Non-recourse financing forces the factoring company to take on the risk of non-payment of any invoices. If you go with non-recourse financing, you will get a lower purchase price for your invoices and pay higher service fees.

Factoring companies are more effective in collecting debts than other businesses are because they have more resources that they can allocate to the debt collection process. Factors are only responsible for collecting money that the client is owed. They are not responsible for any situations that involve faulty merchandise or vendor disputes. You should also make sure that the factor is not overly aggressive when it comes to collecting debts. An overly aggressive factor can alienate legitimate customers. In general, factors collect debts in a professional manner. One option that factors offer to debtors is to make one lump sum payment that is slightly less than the total amount of the debt owed.

Michael Russell
Your Independent guide to Factoring