Invoice Factoring Frequently Asked Questions
Q: IS INVOICE FACTORING A TYPE OF LOAN?
A: NO! Invoice Factoring is defined as the purchase of a company's receivables as opposed to a loan using the receivables as collateral
Q: WHAT KIND OF INVOICE CAN BE FACTORED?
A: Most any business to business invoice/receivables can be factored. The major determining factor is the credit worthiness of your clients. Part of the due diligence is to examine the payment history of your clients. If they have at least a (six) 6 month history of prompt payments, they will be eligible for factoring.
Q: MY BUSINESS IS EXPANDING WITH NEW CLIENTS COMING IN DAILY, DO I HAVE TO WAIT SIX (6) MONTHS FOR THEM TO BE FACTORED?
A: No, a benefit to invoice factoring is having the factor help you make wise credit decisions regarding your customers. New customers will be viewed on a case by case basis. Generally, if you have a solid customer who has solid references, they will be accepted for factoring immediately.
Q: WOULDN'T A BANK LOAN MAKE MORE SENSE?
A: Banks often have restrictive lending requirements relating to cash flow, profitability, equity, and years in business which prohibit them from making loans. Factoring companies are not in the lending business. The decision to purchase invoices is influenced by the quality of your customer base and their performance as opposed to years in business or financial strength.( 3 C’s = Credit-Cash Flow-Collateral )
Q: HOW FAST WILL I RECEIVE MY MONEY?
A: Fast! Once approved, most factors pay within 24 to 48 hours of receipt of the invoice.
Q: IF I HAVE A TAX PROBLEMS, WILL YOU FUND ME?
A: It depends on monthly volume in relation to the tax lien and if the government agency will work with us. After we complete our due diligence we will make every effort to satisfy your needs.
Q: DOES MY COMPANY NEED TO HAVE GOOD CREDIT?
A: No! As long as your customers are credit worthy and have shown a good payment history.
Q: DO YOU FUND COMPANIES IN BANKRUPTCY?
A: With permission of the court we will consider funding a bankrupt company.
Q: WHO COLLECTS THE PAYMENTS?
A: The invoice factoring company! When they purchase your invoice, your customer will be notified that the payment should be sent directly to a (lock box) in your name. The customer will never know the collection has been sold.
Q: DO YOU NOTIFY OUR CUSTOMER TO PAY YOU, THE FACTOR?
A: Since invoice factoring is now so common, almost all account debtors will work with you. The negative connotation of factoring is yesteryear.
Q: DO I NEED TO SELL ALL OF MY INVOICES?
A: NO! You decide which invoices you need to sell to manage your cash flow needs. However, there are monthly minimum requirements, which vary from factor to factor.
Q: WHY WOULD A COMPANY SELL THEIR INVOICES?
A: Companies that find cash flow as a recurring problem often can't afford to have cash tied up in receivables 30-45 days. They need the cash to meet immediate present financial demands of their business.
Q: WHAT IF I WANT TO STOP INVOICE FACTORING?
A: You can terminate your invoice factoring agreement with most invoice factoring companies at any time with a 45 day written notice.
Q: WHAT WILL INVOICE FACTORING COST ME ?
A: Invoice factoring generally cost about the same as if you took credit cards or offered a C.O.D. discount to you customers.
