Unfortunately it’s still a best kept secret of business financing; invoice factoring. With all the financing available the concept of factoring accounts receivables for operational cash flow is still not widely considered. The transaction is very easy to understand, simple to set up, flexible to use, and becomes critical to the many companies who stumble [...]

Many business owners wonder why the cost of invoice factoring is higher than a typical conventional line of credit. Usually the first thing the uninitiated will do is calculate the monthly discount fee multiplied by 12. Unfortunately this is a bad assumption. When utilizing accounts receivable financing the borrower does not get funded for a [...]

It is significant to realize you may encounter a contract period commitment in a Factoring Purchase and Sale agreement. Some factoring companies require this condition in order to lock in a low rate that they are offering you for making advances on your invoices. This guarantees that a minimum amount of fees will be generated [...]

Often setting up a new factoring relationship for your accounts receivable financing may be a very delicate series of negotiations, diplomacy, and tact. There could be many parties involved, including old past liens that are still in filed, previous or current lenders who are not privy to your transition plans, partners who do not agree [...]

If you are considering using invoice factoring for your ongoing operational capital needs remember it should only be used as a temporary bridge towards securing conventional (bank) financing. By factoring your accounts receivable to get through a intense growth period you can effectively maneuver through the tough cash squeeze stage as the business gains traction. [...]

In the prior post we talked about direct payments to the factoring company. When a client purposefully or otherwise tells the customer to pay them instead of following the instructions to pay the factor, this is called ‘mis-direction’ of funds. This will cause a default of the factoring agreement. Mis-direction is the severest no-no in [...]

When a factoring company makes an advance on your invoices, it is important to understand that the repayment of the advance comes directly from the payer of the outstanding obligation. In other words, we pay you and your customer pays us back. This is the simplicity of using receivables factoring to grow your company. Critical [...]

It is common for small businesses to go directly to a bank for outside capital without fully considering the big picture strategy of growth and the future. Yes, ultimately in the long run securing a conventional loan from a bank will be your goal, but let’s consider some of the downsides of going too early. [...]

In the previous post we discussed the essence of invoice factoring. The factoring company buys outstanding business loans in the form of invoices. The critical part of this transaction is determining that the loans are actually worth buying. • Is the company who is directly paying the invoice creditworthy? • Has the work been completed [...]

The easiest way to understand the basic logic of invoice factoring is as follows; whenever you provide a service to your customer or sell them a product and offer them sale terms you are making a loan. If you make the sale and then offer your customer 30 days to make payment, you are loaning [...]

Within the receivable factoring industry there are many methods and wrinkles that you should be aware of so you may plan accordingly. One of these pertains to the length of the relationship, meaning, a contract that forces you to stay when you want to go. Usually this is in the form of a condition in [...]

In order to consider invoice factoring as a financing method to grow your business, you must have a handle on the cost structure that goes into operating the company. It’s best to get together with your comptroller or accountant to really figure out if your pricing is what it should be. There may be services [...]