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  • Factoring is the selling of invoices at a discount and is governed by state law
  • Based on business to business or business to government invoices (not business to consumer)
  • Used as a short to medium term financing solution to get more cash flow to profitably grow business

Why Use Invoice Factoring?

  • Bank lines of credit either not available, are not enough, or not available quickly enough
  • To prevent the loss of profitable opportunities due to lack of funds

Accounts Receivable factoring can be utilized by many different types of companies for various reasons. Many of those that use accounts receivable factoring or accounts receivable financing are those in the service industries and have a staffing element involved. These include, but are not limited to security guard, IT staffing, janitorial, administrative staffing, architects, engineers, landscapers, pest control, nursing and medical home health. These companies usually experience periods when cash flow becomes an issue because invoicing is taking 60 days or more for payment, yet payroll and other expenses occur on a weekly, bi weekly or monthly basis. Other companies that benefit from accounts receivable factoring include manufacturing, distributing, suppliers, transportation companies, medical suppliers, and companies in the garment industry.

There are several ways accounts receivable financing can be used to finance growth. By employing factoring, a company can take on larger contracts than it has in the past. Cash is advanced when an invoice is issued and verified in order to meet payroll, expenses, etc. so it is not necessary to wait until the invoice is paid. This access to cash allows a company to operate efficiently through the length of the contract. Another method is to factor the invoices on one contract to provide cash flow to start up work on another contract.  This provides the opportunity to take on new contracts that would otherwise be passed on.

Accounts receivable factoring is a very creative form of financing for business owners since it can be structured many different ways and is limited only by the amount of creditworthy invoices. It is a unique tool for new and established businesses to effectively manage current contracts as well as finance new opportunities.

For more information please see invoice factoring on infusionfunding.com plus see articles on this blog on self funded contracts, contract startup financing, and other invoice factoring articles.

Or give Infusion Funding, LLC  a call at: 201-540-9210

by Frank Erwin January 15, 2013 ·

More than 4,000 years ago, King Hammurabi established what is known as the first metropolis, Babylon.  This metropolis was credited as the first of establishing and creating many things including the first to use the wheel and the first to use a writing language.  They were also the first noted culture to use clay tablets to track business transactions between two parties.  These early agreements were used to indicate that future payments would be made on the trading or selling of a good.  This concept vastly expanded the potential for trade and commerce around the globe.

It also laid a foundation for many future civilizations, including the Romans and even early American colonists.   The European banks at the time would give the colonists an advance in order to purchase materials.  In exchange, the bankers would receive raw materials like timber, fur, cotton, and tobacco as exchange for the advance.  This proved very beneficial to the colonists at the time as they did not have the means to purchase supplies.  Shortly after the American Revolution,  this realm of alternative finance being to expand to other industries where an advance was needed, such as the garment and textile industries.

Although this practice started thousands of years ago and has been crucial to the start of many powerful civilizations, it still remains in practice today following the same basic procedure.  Below you will find an inforgraphic, courtesy of CBAC Funding, illustrating the history of invoice factoring and the volume it is used today:

Invoice Factoring Infographic

Image courtesy of CBAC Funding.

 

As you can see, factoring has a long history and is still very prominent to this day.  The use of clay tablets has long passed to document transactions and has been since replaced by paper and electronic invoices.  Regardless of technological advances or means of communication, the basic principal still exists.  If you have a documented  invoice or a purchase order to a credit worthy customer, it can be financed.

by Frank Erwin April 25, 2013 ·

A factor’s main concern is making sure that there is a high likelihood that the invoices purchased will be paid in a timely fashion.  The main considerations for timely invoice payment are:  the creditworthiness of your customers in paying the amount owed, your customers having a history of paying invoices in 90 days or less, and verification that you have satisfactorily delivered what your customer bought.

accounts receivable factoring

Grow your business with accounts receivable factoring.

Qualifiers:

  • You having creditworthy business or government customers  (we run D&B or similar reports to determine this)
  • You have no open judgements or open tax issues (many times we can help resolve these issues with our funding)
  • Secured business debt…in many but not all cases we have to be in first position on your business assets, particularly the accounts receivable that we finance (but only for as long as we are financing these invoices).

Approval Process:

  • Simple application and customers to be factored list (to run D&B or other credit reports)
  • Factoring offer sheet and acceptance
  • Financing legal agreement and personal guarantee
  • Notification of clients and beginning of purchase of invoices

That’s it.  Very straightforward to put into place.  We have frequently financed companies in a week or less…we can finance as fast as our clients need funding!

For more information please see invoice factoring on infusionfunding.com plus see other invoice factoring articles articles on this blog.

Or please give Infusion Funding, LLC  a call at: 201-540-9210

by Frank Erwin January 21, 2013 ·

“The days of yesteryear when you could go to your corner bank are over.”

Accounts Receivable Factoring

The gentlemen mentioned in the article, Dennis Sick, has used $45,000 in credit card receipts as an advance during the slower winter months for his restaurant to pay the bills.

A recent article in the New York Times titled: “When Banks Won’t Lend, There are Alternatives…”, by Ian Mount states that “The days of yesteryear when you could go to your corner bank are over” and “Small, emerging, growing businesses have few traditional sources to turn to.  You have to get a little creative”.

One of the types of financing highlighted in this article is  Asset-Based Lending, a broad term which include accounts receivable factoring.  This type of financing is based on a company’s selling their receivables, or invoices, to a factoring company, which gives the company selling their invoices funds immediately.

Most of our clients use this type of financing as a means to finance short to medium term financial needs: finance new projects, providing funds when customers are paying slower and suppliers are demanding earlier payments, etc.  They are using this financing for interim purposes until they can move to more traditional funding.  We work with them to make sure that they are able to profitably utilize this short to medium term financing solution.

 

by Frank Erwin January 21, 2013 ·

Accounts receivable factoring is a well established process that can be used as often or as seldom as needed to bring money into your business.

Accounts receivable factoring is a well established process that can be used as often or as seldom as needed to bring money into your business.

Factoring invoices is a fast process to bring funds into your company, in fact from invoice generation to receiving funds can take place in many cases in minutes, below are the key steps to set up and carry out accounts receivable factoring.

Application & Approval, after a brief qualification period that generally takes around two weeks or less, the funding process can begin. For more information please see basic qualifiers and approval.

Notification, prior to the initial funding a letter is sent to those customers that you are going to factor alerting them that you have enlisted the services of an accounts receivable company, that payments for your invoices have been assigned to this company, and that invoice payments are to be sent to this company.  Your customers are only notified once no matter how many invoices that you factor over a period of time, for a type of factoring in which your customer are not notified please see non-notification factoring for qualifications.

Product Delivered or Service Performed, your company provides a service or product to your customer.

Invoice Generated, invoice(s) are created and you send these to your customer, copies of these invoices are sent to the accounts receivable factoring company.

Invoice Verification, a representative from  the funding company verifies that your customer satisfactorily received your product or service and will pay the invoice according to terms.   There are a number of different very professional ways that contact with your customer can be  done, this is the same information that you would want to know about customer satisfaction.

Funds Advanced to Your Bank Account, upon verification, funds are deposited to your bank account, usually within 24 hours.

Invoice is Paid by Customer to the factoring company, when the invoice is paid by your customer, the remaining balance is advanced to your bank account less the transaction fee.

Invoice is Not Paid by Customer, in a case where the invoice is not paid for whatever reason within a reasonable period of time, your company can buy back the invoice from the funder or exchange it for a current one.

Process Repeats, the process begins any time that you have an invoice that you want to be factored.

For more information please see factoring invoices category of this blog.

Or please give Infusion Funding, LLC a call at 201-540-9210.

by Frank Erwin January 21, 2013 ·

Growth Through Accounts Receivable Factoring

Remember…nothing is more costly than a lost opportunity! Have you ever seen a great growth opportunity for your business, but had to pass it up because you were unable to finance it? Have you ever looked at a large balance for your accounts receivable, but a much smaller number in your bank account? Have you [...]

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by Frank Erwin January 21, 2013 ·

10 Reasons Accounts Receivable Factoring for Contract Financing Can Help

Often a company’s quickest method to grow to the next level is by obtaining a contract larger than any previous ones it has performed or completed. This method is desirable since it causes natural, moderate growth in a manner where there is experience, history, and a proven track record. These contracts can be with government [...]

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by Frank Erwin January 20, 2013 ·

How Your Contracts Can Fund Themselves and You Can Make More Profit

Once the art of bidding on and winning government and commercial contracts has been mastered, the issue of financing the ongoing performance on a contract comes into play. This issue can cause sleepless nights, hectic balancing of incoming funds with outgoing payments, ruined supplier relationships because of late payments, delayed payrolls, even noncompliance on contracts.   [...]

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by Frank Erwin January 19, 2013 ·

Service Contract Startup Financing

A constant concern is how to finance the mobilization of a contract before the first invoice.  Accounts receivable factoring is the purchase of invoices for completed transactions, but often funds are needed prior to an invoice being issued.  Typically contracts regulate how many and how often invoices can be issued and the usual process is [...]

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by Frank Erwin January 18, 2013 ·

Purchase Order Funding for Small Transactions

Many companies could use Purchase Order Funding for smaller transactions, this has recently become available and its background and details are discussed in this post. As a background, Purchase Order Funding (also called PO Funding and Purchase Order Finance) is widely used by companies sourcing finished goods directly to their customers when they cannot get [...]

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by Frank Erwin January 16, 2013 ·

Selective vs. Comprehensive Accounts Receivable Factoring

There are different types of factoring (and factoring companies!) and the type of factoring chosen can have a greater impact on the cost of factoring than the actual factoring rates. As a result, it is very important when using accounts receivable factoring to match the need for funds with the structure of the financing vehicle [...]

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by Frank Erwin January 15, 2013 ·