Factoring & Account Receivables

All too often, small businesses that are just starting out experience cash flow issues that make it difficult for them to meet their financial obligations. Creditors are less lenient with new businesses than they are with businesses that have been established for an extended period of time.

Entrepreneurs that are just embarking into the business emporium are dependent on their account receivables for their business to thrive, it?s crucial to the life of their business. Most creditors or vendors, offer very short payment terms to new businesses, others work strictly on a C.O.D. basis. When account receivables don?t get paid in a timely manner, these small businesses suffer cash flow issues that result in their inability to meet their own financial obligations.

New business owners have few options available to assist them in fulfilling obligations to their creditors, not to mention in house obligations such as payroll, rent, and utilities.

Factoring account receivables is not the most cost effective solution for businesses to resolve their account payable issues, but often times it is the only resource they have. Many small businesses choose factoring as a temporary solution to get them through the rough spots, until they can assess the capital necessary to qualify for financing.

Factoring is a form of financing that businesses utilize. A business can sell it?s unpaid invoices to a finance company to expedite cash flow. This is how it works.....

A business may turn over unpaid invoices to a finance company.

The finance company will purchase the invoices.

The finance company will advance the business monies, (usually in the form of a wire transfer) less their percentage and collateral.

The collateral is put into a restricted account until all invoices are satisfied.

When the invoices are satisfied, the finance company releases the collateral from the restricted account to the business.

If the invoices are not paid (generally Net 90), the business loses the collateral and is required to repay the finance company their original investment in addition to any finance fees incurred.

Although factoring is a risk, many entrepreneurs are willing to take such risks in an effort to sustain the business until their business becomes financially stable. Many businesses overcome these financial obstacles, unfortunately there are many that can not recover, as a result these businesses fail.

So why would a company choose to factor it?s receivables? Businesses can quickly turn their unpaid invoices into cash. All invoices are not necessarily submitted for factoring. A business may choose to turn over only a portion of their invoices to be factored, generally those they consider slow pay accounts. The down side is that the business usually receive only 80 percent of the face value on each invoice.

Account receivable factoring has become increasingly popular for businesses that experience difficulty in securing a loan in the traditional manner from a bank. This is a vital resource for small businesses in today?s economy. Many of the larger corporations are also utilizing factoring of their account receivables as a resource to generate quick cash.

Donna Vestre is the President/CEO of South Coast Revenue, a Recovery Consultants Firm based in Anaheim California. To get more information on Credit and Collections, or to submit an article for inclusion in the "Guest Speakers Lounge" please visit http://www.SouthCoastRevenue.com

How The Factoring Industry Works

One of the biggest problems in any growing business is the long delay it typically takes to get paid. It is not uncommon for it to take 60 to 90 days from the time a company completes a job or contract to the time when the company actually gets paid. Ninety days is almost an industry standard interval from receipt of a service or goods by a large commercial customer to the time that payment is sent out.

In the meantime, the companies' employees are expecting to get paid on time; which is usually weekly, and most of the operating expenses need to be covered on a monthly basis. Some of the bills even need to be paid right up front. It can be tough for a growing or new company to make ends meet before the 90 days are up and the payments start coming in.

To help cover this financial gap an industry called factoring has emerged. Let's use an example to explain how factoring works. Let?s say company A makes and sells super computers. They make a computer, sell and ship it to company B and soon after send out the bill for the computer. Now by standard industry practice, company B usually does not have to start making payments for 90 days. This is where factoring enters in. A third company, company C, is the factoring company. The factoring company is usually a financial institution or bank of some sort. The factoring company pays company A up to 85 percent of what is owed them by company B right up front then and there. They hold out a percentage, usually 15 percent, to cover any disputes that may arise between A and B. Once company B gets around to paying for the super computer, the payment gets sent directly to the factoring company. Company A never sees the check sent out by company B. Basically company A's accounts receivable are transferred to the factoring company. The factoring company then sends the 15 percent that was held out to cover disputes to company A, minus their factoring fee for all of this. The factoring fee is usually 1.5 to 2 percent. They basically cover company A for the payments that are owed them. They act as an intermediary between A and B to help smooth everything out financially.

Of course, a big consideration for the factoring company is the financial reliability of A and B. If B is very reliable and pays its bills on time, then the factoring company will probably give company A better factoring fee rates. If A's super computer is very reliable and never causes problems for its customers, then the factoring company will probably reduce the amount it holds out to cover disputes.

So why wouldn't company A simply borrow money from the bank? Actually, factoring is a specifically targeted way of borrowing money. Because it is an ongoing relation between A, B and the factoring company the rates are generally lower and the amount that A can borrow is generally more compared to a basic bank loan. Plus, it gives A more time to spend making super computers; and less time worrying about collecting bills.

Michael Russell

Your Independent guide to Factoring

Factoring Receivables - Working Capital For Growing Businesses

If you sell goods/services to other businesses or to the government, then you know that commonly you have to wait 30 to 60 days to get paid for your services. Unless your business is well capitalized, waiting to get paid can drain your working capital and affect your business.

Lack of working capital can prevent you from making new sales, forcing you to sentd customers to your competition. What is worse, if the problem is not corrected, it can affect you ability to pay employees or suppliers. Missing payroll and supplier payments is a sure indication that a business is in serious financial troubles. The solution to this problem is, of course, simple. You just need to get business financing.

Obtaining business financing (such as a line of credit or business loan) is easier said than done. If you go to a bank, they will require that you provide them with three years audited financials and a solid business plan. That kills any chances of financing for most startups and new businesses. There is, however, an alternative form of financing that can help you get working capital. And, it almost always works better than a business loan. It is called factoring financing.

Invoice factoring provides your business with a substantial advance on your slow paying invoices ? sometimes up to 85% of what you have invoiced. You can use the advance as working capital to cover new sales orders, payroll or supplier payments. Factoring receivables provides you with relief form slow payments and provides you with the working capital you need to grow.

Factoring receivables is simple to use and works as follows:

1. You provide the product/service to your client and send an invoice to them

2. You send a copy of the invoice to the factoring company

3. The factoring company advances you up to 85%. This is your first installment

4. Once your client pays, the remaining 15% (second installment) is advanced, less a small service fee

The fee you pay will be based on the sales volume that you finance and the credit quality of your clients. Fees can generally range from 1.5% to 3.5% per month.

On of the big advantages of factoring receivables is that it is easy to obtain and can be set up in a few days. Most new and established businesses can qualify easily. The biggest requirement to qualify is that you must do business with reputable clients or government entities.

About Commercial Capital LLC
Interested in Factoring Receivables? We can provide you a competitive accounts receivable factoring and receivables factoring quote. For information, call Marco Terry at (866) 730 1922.

Receivables Factoring Companies are Your Tool to Improve Cash Flow Management and Grow Today

Invoice factoring advantages: imagine how you could grow your business with excellent cash flow management.

When you partner with invoice factoring companies, you can receive payment on your customer invoices within 24 hours of billing, freeing up your company's cash flow. So, by not investigating factoring companies, you may be limiting your options. Read on for some of the benefits of working with a receivables factoring company and then contact a quality firm today.

Immediate benefit of receivables factoring: solve payroll and other staffing issues with your improved cash flow management.

You can stop robbing Peter to pay Paul and meet payroll and payroll taxes without scrambling to collect on overdue accounts. This reduces your stress, makes your employees happy and allows you attract and retain the best staff possible.

Enhance your credit rating, simplify collections and receive better pricing deals: other benefits of working with a factoring company.

Partnering with a factoring company improves your cash flow. This allows your business to:

• pay bills on time,
• which boosts your credit rating;
• buy in bulk, often at a lower cost per item,
• take advantage of early pay price discounts,
• upgrade equipment to more cost efficient models and
• offer longer payment plans to your customers, which can expand your client base.

Now, let's go beyond the basics and discover how factoring companies allow you to expand services, increase service areas and fund product research and development.

Factoring companies give you the freedom to expand services into potentially lucrative areas.

Now that you're confidently managing cash flow, experiment with new service areas. If, for example, you deliver lunches to businesses, begin offering breakfast. If you're printing shop forms, working with a receivables factoring company can free up cash for you to expand and improve your equipment and your services.

Expand your service area and reap the profits: another benefit of partnering with an invoice factoring company.

You can now increase your number of clients, in your current service area or in a new one. Consider adding a city to your advertising and service efforts. Or if you're offering a limited program of services, offer those services that you've been considering, but have lacked the capital to implement.

Final factoring company benefit: fund product research and development with your improved cash flow management.

Research and development often gets put on the back burner as you pay bills, recruit qualified staff, and attend to day-to-day business. Because of the improved business model created by your receivables factoring company, you can now begin the product development that was once only a dream.

Now put your knowledge into practice: choose a quality factoring company today and expand your business products and services.

If you're not exploring how receivables factoring can improve your cash flow and expand your business you may be missing out on lucrative business opportunities. Make a commitment to your company's growth today by selecting a quality invoice factoring firm and arranging factoring loans today.

Gage Price is President of MP Star Financial, an accounts receivable factoring company. Gage worked his way up through the ranks as an invoice factoring salesperson and underwriter and received his MBA from New York University's Stern School of Business. Find out how to grow your business at MPStarFinancial.com.

Selling Steel Reinforcing Bars (Rebar)? Lear How Factoring Can Help You Grow

Companies that sell reinforcing steel bars (or concrete bars - also known as Rebar) have seen a boom in recent years. Many cities have seen a surge in residential and commercial real estate projects, which in turn has increased the demand for Rebar.

Companies that sell, cut and bend Rebar have profited nicely from this growth ? however, they have also faced a common problem in the industry. The problem is tight cash flow. Basically, they sell the Rebar to customers (e.g. builders, contractors) at good prices. These customers usually pay their invoices in 30 to 60 days. In the meantime, the Rebar company must wait to get paid while covering all supplier, payroll and rent expenses. Many times, this is not sustainable. Either the company stops growing, or worse, it starts missing key supplier or employee payments.

Going to the bank to get business financing is not always the best solution. Why? Banks seldom finance companies in the Rebar industry. And before they finance a company, they need to see a detailed business plan, three years worth of company financials and owners with good personal credit. Also, they take months to make a decision. However, there is a better solution problem ? the solution is to factor your receivables.

Factoring receivables provides your company with an immediate advance on the slow paying invoices. This gives you the necessary cash to pay suppliers, employees and rent. And as opposed to bank financing, invoice factoring is easy to obtain.

This is how accounts receivable factoring works:

1. You sell the Reinforcing Bars to your client. You send them an invoice

2. You send a copy of the invoice to the factoring company, who advances you up to 85% of its value

3. Once the customer pays for the invoices, you get the remaining 15%, less the service fee

Factoring companies charge differently for their services, but the cost is generally anywhere between 1.5% and 3% per month. Price varies based on financing volume and on the quality of your invoices.

The biggest difference between factoring financing and bank financing is that factoring is very easy to obtain and quick to set up. Most companies can obtain a substantial line of financing in as little as 5 days. Although not widely used in the reinforced bar industry at this time, it?s an ideal source of working capital that is quickly gaining popularity.

About Commercial Capital / Invoice Factoring Group
We provide financing for Rebar manufacturers and dealers. To learn how factoring receivables, construction factoring or accounts receivable factoring can help you grow your business ? call (866) 730 1922

Invoive Factoring Company: factor receivables, account receivables

If you are new to the business arena and are wondering what factoring invoices entails, then you have come to the right place. Factoring invoices, also known as invoice discounting, receivables factoring and debtor financing, is crucial for a business. That is why experts advise that if you are going to be involved in invoice factoring, it is important to select the best invoice factoring company available. But what is factoring invoices and why is it used?

Factoring invoices is when one company purchases a debt or invoice from another company. It involves the purchasing of accounts receivables, which are further discounted in order to allow the buyer to make a profit upon collection of monies owed. In other words, factoring invoices transfers ownership of such accounts to another party that then works vigorously to collect the debt. A company involved in such activities is known as an invoice factoring company.

Invoice factoring is simple and alleviates the liable party of the debt for less than the full amount. According to several financial experts, these factoring invoices are more beneficial to the factor, or new owner, and the seller of the account than to the debtor. In invoice factoring, the seller receives working capital, while the buyer is able to make a profit by buying the account for considerably less than what it is worth and then collecting on it. It is consequently most profitable to find the best invoice factoring company.

This is when Magnolia comes into frame. Magnolia is the leading invoice factoring company , offering invoice factoring and also the latest information on it. In short, we are the one stop shop for all your factoring invoice needs. It has also been shown that in factoring invoices the seller receives working capital, whereas the buyer is able to make a profit by buying the account for significantly less than what it is worth and then collecting on it.

In other words, factoring invoices allows a buyer to acquire such accounts for about 25% less than their real value. The factor is fully responsible for collecting the debt. A factoring invoice company helps you in this process as it provides tips for companies and people involved in factoring invoices. Magnolia is a company that has excelled in this field and emerged as a leading factoring invoice company.

If you are looking for a factoring invoice company and don't know which to choose, then Magnolia is there for you. For more information on invoice factoring companies, receivables factoring, factoring invoices and account receivable please visit www.magfinancial.com.

Mr. Scott Stevens is well known author who writes about financial services such as cash flow programs, account recievables, factor recievable etc. Find more information about magnolia financial service at www.magfinancial.com

Factoring

A factor is basically a financial institution that purchases accounts receivable from businesses. The factor normally bears the credit risks associated with the accounts receivable purchased by it. There are about twenty firms in the United States engaged solely in factoring. These firms raise their operating funds by issue of equity and debt capital.

The factoring agreement governs the relationship between the factor and the business whose accounts receivable the factor purchases. The following conditions are typically found in factoring agreements. The factor will select only those accounts receivable which appear to be acceptable to it. The sales of accounts receivable will be done to the factor on a non-recourse basis. This implies that the factor has to absorb the losses arising from uncollectible accounts.

The factor would set up an account, similar to a bank deposit account, for the firm. Monies will be deposited in this account as payments are received or as due dates arrive. The firm can freely withdraw amounts from this account. Surplus balances in the account earn a certain rate of interest. The factor is liable to pay the firm on the last day of the credit period or when the account is collected, whichever occurs first.

The factor will advance money to the firm against not-yet-collected and not-yet-due accounts receivable. These advances, representing a negative balance in the firm's account, carry a certain rate of interest. Factoring costs consist of three elements: factoring commission, interest levied on advances, and interest paid on surplus balances. Factoring commission is payment to the factor for administering the tasks of receivables management and bearing the risk of bad debt. Factoring commission is usually 1 to 3 per cent of the face value of the accounts receivable factored. The interest period on advances may be 2 to 4 per cent higher than the prime rate.

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

Invoice Factoring Basics

 

Can’t afford to wait 30 to 60 days to get paid by your clients? If you are like most business owners, waiting to be paid can be very challenging. In some cases it can mean lost opportunities. It can mean that you don’t bid for big sales because you know you won’t be able to play the waiting game. At its worst, it can spell disaster. It can mean that you need to delay payroll. It may mean that you don’t pay rent or taxes. It may force you to shut down your business.

If you are like most business owners, your first reaction will be to call your banker. Unfortunately, banks will not lend money to businesses that are new, have no hard assets or don’t have three years worth of profitable financial statements. At this point, most business owners give up, thinking that they don’t have any other options. However, they do.

If your company sells products or services to large credit worthy companies, you could qualify for invoice factoring financing. Invoice factoring reduces the time it takes for you to get your money to one day. How quickly could you grow your business if your invoices were paid in 24 hours?

As opposed to bank loans, factoring companies do not require hard collateral. The only requirement is that you have invoices form credit worthy clients. Factoring companies work differently than banks. A factoring company will provide you with financing based specifically on your invoices. This means that if your invoicing grows, your financing also grows.

Factoring is very simple:

1. You generate invoices for your products or services

2. You submit the invoices to your clients and to the factoring company

3. The factoring company advances you up to 85% of the gross value of your invoices (the remaining is kept as a reserve to offset disputes)

4. Once the invoice is paid by your client, the factoring company releases the 15% reserve and charges their fee

Factoring financing is easy to qualify for and can virtually eliminate the 30 to 60 days it takes for your customers to pay. It provides you with the necessary working capital to grow your company and take new opportunities.

Need to receivables factoring? We can provide you with a factoring, invoice factoring or accounts receivable factoring quote for free. Marco Terry, the president, can be reached at (866) 730 1922