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Just what is Receivables Financing

In a nutshell, you, as the provider of goods or services to other businesses or governmental divisions or agencies, may be able to sell your verifiable invoices to a purchaser, or factor.  Since an invoice is essentially a debt instrument, once it is verified as being owed to you, you can sell it.  The factor will then wire to you, typically in 24-48 hours, the advance on your sale.  The advance is usually between 70 and 95 percent of the face value of the invoice sold, depending on your contract with your factor.

When your customer or client satisfies the invoice by paying the factor, the factor will retain his fee and remit the balance of the payment, minus the advance and his fee, to you.

Benefits of factoring:

• Factoring allows cash to come in when you make sales, almost as if you worked COD, greatly reducing your DSO's.
• Factoring stimulates cash flow.
• Factoring relies on the strength of a business' customers.
• Factoring is accessible to even small and moderate sized businesses.
• Factoring gets quick results.
• Factoring is NOT a loan.
• Factoring is flexible - you decide which invoices to sell, and when. 
• Gives you the cash to negotiate better terms with your vendors!
  

• In many situations, factoring is more appropriate than bank financing, because factoring:

• Is based on your accounts receivable. Our clients' ability to raise cash by factoring is based on the their accounts receivable, rather than on traditional (banking lending based) measures of financial strength and stability.

• Provides continuing cash flow without the requirement of periodic payments or interim payoffs. New sales continuously create new power to obtain cash, and the business does not have to deal with renewal of loans or worry about loan maturity dates.

• Gives a business increased access to cash as sales and receivables increase. There is no ceiling beyond which the factor must stop providing cash. The more sales a business makes, the more cash it can draw. The factor does not concentrate on the business debt/equity ratio to provide funds, as banks do.

• Offers a dependable, continuing source of cash without the necessity of making separate loan applications.

• Saves the business owner precious time waiting for a loan board to grant or deny his or her loan. Loan boards' decisions are influenced by many considerations, and the outcome is often unpredictable. With factoring, repeated delays and negotiations are eliminated, allowing the business owner time to do what he or she does best ...run the business.

• Some businesses have even turned their A/R management into a profit center.

Oh, yes, let's not forget the array of back-office services that a factor can provide.  Imagine what it costs you to support all of this in house or to purchase these services a-la-carte?

Customer/client payment practices

Regular on-line accounting reports

Up to date billing and payment status

Customer credit monitoring

New client credit risk assessment (beyond D+B)

Conflict Resolution

Billing capability

Collections capability

Full A/R management

Cash-flow management for taxes

•     How Capital Conversion Group can help You and your business
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