Example: A new customer may choose to do business with your company because you can offer NET 60 or NET 90 terms even though your competitor (who isn't factoring) can only offer NET 30 terms but has a 5% better price. If you factor the subsequent invoice at a discount of 5%, you have leveraged factoring services to win the business at no extra cost and improved your cash flow at the same time. With advanced funding you can pay your suppliers early to receive a discount on your next order and improve your overall margins.

Immediate access to unlimited working capital, No new debt

Focus on growing your business

• The Factor assumes the responsibility and risk of collecting payment.
• The Factor does most of the work processing invoices, saving you time.

Take advantage of supplier discounts, Build your credit rating

Flexibility

Other benefits of factoring?

• It stimulates cash flow.
• There are no stipulations about how to use the money.
• It does not create debt on your balance sheet.
• It increases your purchasing power, enabling you to do more business.
• Eliminates the need for bank loans or SBA Loans.
• Improves your credit rating, and gives you cash to meet your obligations.
• Eliminates using equipment, real estate or inventory for collateral.
• Saves on your in-house staff costs.
• Presents a professional image to your clients.
• Eliminates the need for venture capitalists or partners that share in decision-making and profits.
• Receive credit reports at reasonable rates.
• Can enable you to meet payroll, pay your taxes on time, and eliminate the need to file bankruptcy.

Factoring: Frequently Asked Questions

Q. How does accounts receivable funding work?

Simply put, accounts receivable funding is the purchase of accounts receivable from a business at a discount. It is designed for businesses that need money immediately, and can't afford to wait 30, 60, or 90 days for a customer to pay. In most cases, either the business owner can't meet his cash demand (because, for example, his customers are slow to pay or income is low due to a seasonal slowdown), or his business is growing so rapidly that its cash flow can't keep up with its growth.

Example:

When you factor your invoices, you will receive most of the invoice value (70-85%) immediately.  When a customer finally pays their invoice, you get the remainder of the invoice amount, minus a small factor fee  that is based on the time it took for the invoice to be paid. The factor fee schedule is established up front in an agreement between you and the factor, then your monthly factoring process is as simple as sending a copy of each invoice to the factor as well as your customer.

Q. What type of business can take advantage of this alternative funding source?

Any business that generates an invoice and delivers a verifiable product or service qualifies.

Q. Can a business with a history of bad credit (or a new business with no credit) qualify?

Yes! Another benefit of accounts receivable funding is that it depends on your customers' creditworthiness, not yours. (And, as part of our service, we do the research to assess your customer's creditworthiness for you.)

Q. Can my business qualify if we already have existing credit lines, SBA loans or are a debtor in possession (Chapter 11)?

Yes! Our credit line complements any loan you may have or are seeking. We work with your existing lenders to enable you to access additional funding.

Q. How much will it cost me?

Business Funding Solutions can work with multiple funding sources to find you the best deal. The fees will depend on the answers to the following questions:

• What terms do you give your customers?
• How long does it actually take your customers to pay?
• What is the size range of your invoices?
• Where do most of them fall in that range?
• Who are your customers?
• What are your monthly or annual sales?
• What is your gross profit margin?
• What are your accounts receivable right now?
• How much is current, i.e. under 30 days?
• How much is over 90 days old?
• How much bad debt did you write off last year?
• Are there any liens or judgments against your firm?

• Are there (SBA) loans, credit lines, or bankruptcy?

Q. Must I agree to finance a minimum volume of future receivables?

No. Finance one invoice or as many as you need to meet your cash flow needs. Stop or continue as needed. You decide all the time.

Q. Many of my customers pay in 60 days or longer. Can I afford it?

Business Funding Solutions has many solutions for you to make it affordable:

• First, you could factor just the quick paying customers since they would be your least expensive source of cash. The fees would be less and the reserves would be paid sooner.
• Secondly, you could delay the funding of invoices for 30 days so that you would only pay 30 day fees on your 60 day payers. In the process you’ve converted all your customers into the equivalent of 30 day payers!
• Third, use this service as a factoring credit line. Submit your invoices as you generate them, but draw advances only when and in the amounts needed. The fees will be pro-rated, i.e. you’ll pay fees in proportion to the funds and the time that are used. If you take half of the normal advance, the fees will be half and you’ll always be in complete control of your cash flow.

Q. How much of the invoice value do you advance? 

Typically, in the 75-85% range. However, this question is relevant only to the first month. In the second month you receive the current advance and the reserves from last months’ paid invoices. After the first month you are virtually COD, so the percent of advance isn’t really an issue.

Q. When I use factoring services, where does my customer send the payment and who is the payment written to?

A. The payment is mailed to the Factor, and the check is written to the Factor. The Factor is the collector of the payment.

Q. How will my customer know to send the invoice payment to the Factor?

A. When you open a factoring account, your company will send a letter to your customer identifying the factoring company and ask to accept their requests for payment on your behalf. Afterwards, the Factor will subsequently send letters to your customer asking them to redirect payment for each invoice you choose to factor.

Q. What will be the impact on my customer, and how might it change our existing relationship?

A. The only difference to your customer is where to send the payment and who the payment is made out to. In fact, your customer relationship will most likely improve with factoring services. You no longer have the uncomfortable task of collecting payment from your customers, the Factor will now assume that role as an independent third party. Now you can keep your conversations with your customers strictly about business and leave the topic of collecting payments to the Factor.

Q. How does the Factor treat my customer? How do they present themselves and communicate?

The Factor treats your customer with the utmost business professionalism and presents themselves as an accounts receivables management service that has just given your business an unlimited credit line. After all, the Factor has a vested interest in your customers satisfaction and would never want to do anything to upset them and loose their business (and yours). The Factor communicates to your customer through letters and telephone calls. The letters ask your customer to redirect invoice payments and the phone calls are only to verify the existence of an invoice. Should your customer begin to default on payments the Factor will raise the issue with you first before speaking to your customer.

Q. What happens if my customer refuses or is unable to pay an invoice that I have sold to my Factor?

It depends on what type of factoring agreement you have in place with your Factor. Our funding sources offer a hybrid agreement called Modified Recourse factoring, which protects you when your cusmtomers file bankruptcy.

Q. What is Modified Recourse Factoring

With modified recourse factoring the Factor carries receivables/credit insurance and offers protection to the seller if the customer is unable to pay the invoice due to financial failure or bankruptcy. However, if the customer refuses to pay the invoice from a dispute over quality, delivery, or specifications, the factor has recourse back to the seller's other receivables.

Q. What is Non Recourse Factoring

With Non Recourse factoring the risk of insolvency and non-payment is completely transferred to the Factoring company. If the customer goes bankrupt or refuses to pay the invoice (for whatever reason), the Factor cannot come back to the Seller for payment. This method of factoring carries more risk for the factoring company and therefore factoring fees are higher.

Factoring Versus Bank Loans

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

Is based only on the strength of your invoice(customers).  A client’s ability to raise cash by factoring is based on the total accounts receivable, rather than on traditional measures of financial strength and stability of your company.

Provides continuing cash flow with no 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 maturity dates. No debts!!!

Gives a business unlimited 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.  There is only one setup process, then you control how much and how often.  It's like a cash machine you can utilize whenever the need arises.  If you need more cash, send us another invoice.  You control the relationship, always!.

Avoids the necessity of obtaining funds from venture capitalists, who receive an interest (ownership) in the business and generally have a say in how the business is run.  You retain management control.

Saves time and allows you to focus on running the business.  The business owner isn't 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, periodic delays and negotiations are eliminated, allowing the business owner time to do what he or she does best – run the business.

Government Vendors

 We specializes in Government Vendors "Assignment of Claims Act of 1986"

What does this mean for you?

Any government contractor, under the the Assignment of Claims Act of 1986, may assign it's rights to be paid amounts due or to become due as a result of the performance of a contract to a bank, trust company or other financing institution.

Larger vendors have been doing this for years.

Simply put, the U.S Government encourages their vendors to seek accounts receivable factoring of their invoices in order to help them grow, improve cashflow, increase performance, and level the playing field.

Access Unlimited Capital using the creditworthiness of the U.S. Government !!!

Why Work With Us?

• Our staff consists of qualified professionals who are devoted to helping you.

• We will keep you informed at each stage throughout the transaction, and will work diligently to get the most money for your notes and receivables.

• The requirements for converting your receivables to cash are more flexible than they are for conventional banks (banks are highly regulated and have to operate within limited parameters)

• We work with hundreds of funding sources and investors, which gives us the ability to customize packages to meet your specific needs.

• Our rates are competitive.

• We can be reached by phone, fax or email.

Simple Application Process

Business Funding Solutions will make the application process simple and smooth for you.

The Steps involved in processing your application include:

• Submit a simple application along with a copy of your accounts receivable aging (view sample) report
• Within 24 hrs, we have a conference call with the funding source to see if your business can qualify
• If yes, the funding source will do their due diligence and submit the final proposal for your review
• After you review the proposal, agreements are finalized

Once your account is open:

• Fax copies of the invoices you wish to factor to the funding source
• The funding source will verify the invoice and advance funds
• When your customer pays the invoice in full, the funding source will remit the net funds owed to you

Note: When you open an account with a funding source for the first time, Step 3 could take 7-10 business days. After that, the funds are advanced to you within 24-48 hours for future invoices.