Factoring, in its truest form, is selling your accounts receivable to a financing company that will pay cash for them immediately.

Benefits and Unique Features of Factoring Your Accounts Receivable:

• Offering credit terms to your customers will help you increase you sales and revenue - By offering credit terms such as Net 30, Net 45 etc. you are able to provide your customers with another reason to buy your product or use your service. For a start up company or a small business, the ability to offer favorable terms are table stakes to do business with bigger business or government entities. This is a great way for a small business to be able to compete with bigger competitors.
• One time initial cash injection for an existing business - initial funding frees up the cash tied up in your accounts receivable which means there is a one time initial cash injection into your business that can be used for your immediate cash needs such as operating expenses or expansion projects.
• Rapid liquidity - Your cash no longer needs to be tied up in carrying your accounts receivable and financing your customer's business.
• Take advantage of supplier discounts - Factoring your accounts receivable allows you to pay your suppliers quicker and take advantage of or negotiate discounts. This will increase your business's credit rating and allow you to get better terms with your suppliers and make it easier for you to obtain financing in the future.
• Quicker and less restricting than bank or other asset based financing - Factoring companies can move very quickly relative to a bank or asset based lender to get you cash because they are collateralized almost exclusively on the accounts receivable which they analyze quicker and more efficiently than other lenders. Oftentimes all their due diligence can be done in a few days as opposed to a bank or ABL's two to three month time horizon. The factoring company also does not have the tedious and restricting financial covenants a bank or asset based lender has.
• Unlimited line potential and quick line increases - since the factoring company relies on your customer's credit rather than your business' financial strength a factoring line can be substantially more than a bank will approve. The factoring company is also able to make very quick approvals on line increases and "out of the box" financing arrangements to help you respond rapidly to opportunities as they arise.
• Outsourced Accounts Receivable Management - The factoring company will follow up on your invoicing in a prompt and professional manner, make sure your customers pay within terms and provide a customer service function for you. These collection programs are customized by you and you determine who calls when and how the calls and invoice collection process is handled. This can save you the cost of having an in house accounts receivable manager or department.
• Outsourced payroll - Many factoring companies have the ability to handle your payroll, tax remittance and invoicing for you as well at little or no additional costs. They are happy to do this for many reasons. Mainly, it assures them the accuracy and timeliness of these functions and allows the business owner to focus on efforts to run and grow the business.
• Outsourced Credit Department - The factoring company will help you eliminate bad debt by helping you make good credit decisions. You are able to leverage their access to professional business credit products and expert credit analysis by following their credit limits. This will help you avoid selling to customers that will not pay for your goods or services.
• Credit insurance - Some factoring companies carry a credit insurance policy that covers you in the event your customer files bankruptcy or goes out of business and cannot pay you. Since they spread the cost of this insurance over their whole accounts receivable portfolio there is usually little or no cost to you, the business owner.
• Outsourced IT functions - There are some factoring companies that have incorporated business software into their product. They set up online access for you and then you can mange your business via their software programs. This allows you to avoid the costs of having of hardware, software and maintaining complex computer systems. They also back up your data regularly which many small business owners end up overlooking until it is too late. These types of features are great for small businesses that can really benefit from leveraging the IT capabilities of their factoring company.
• No Balance sheet liability - Since factoring is a sale of your receivables (an asset sale) there is no liability that shows on your balance sheet. This will shore up financial ratios and allow you to qualify for other types of financing easier and sooner.

Reduce Overhead Expenses - When you set up a factoring facility you can take advantage of many functions and additional services the factoring company can perform for you. This will reduce you in house equipment, time and personnel needs substantially and the savings will land directly on your bottom line. To lean how factoring can help you contact us today!