Financing FAQ

What is Factoring?

Factoring is a form of alternative financing where a company turns over its accounts receivables, for goods and services provided to customer, to another company for early payment.

Who uses Factoring?

Generally, new businesses, growing business or recovering businesses utilize factoring or accounts receivable financing. As long as a business generates an invoice for products or services to businesses or government agencies, it can qualify for this type of financing.

Is there a minimum of accounts receivables which a business must agree to finance?

No. A business can choose to factor as many invoices it needs to meet its cash flow requirements. Also, a business can choose to stop or continue factoring its invoices as needed.

What if a company has a history of bad credit, or a new business has no credit?

These businesses can still qualify for accounts receivable financing because this financing is based on your customers creditworthiness.

Must a business account for how it utilizes proceeds received through accounts receivable financing?

No. Unlike traditional SBA loans, a business is not restricted as to how it uses the proceeds it receives through factoring or accounts receivable financing.

What types of businesses generally utilize accounts receivable funding for the growth or maintenance of their business?

Some common industries that turn to this type of alternative funding include; Physicians, Security companies, Personnel and temporary agencies, Communication companies, Hospitals, Caterers, Medical Groups, Technology industries and Commercial construction companies to name a few.

How much is advanced in this type of financing?

Generally, up to 70%, or 60% in the construction industry, of the face value of the invoice(s) is advanced. The remainder is then adjusted and paid, less the discount fee, once payment of the invoice is received.

How do I know if my business should factor some or all of its invoices?

If you would like to receive cash NOW, instead of waiting 30, 60 or 90 days for invoices to be paid, so that your business can grow or survive, you should consider factoring.

Will my company be placed in debt, or further in debt, if I proceed with this type of financing?

No. Since you are not borrowing money, but merely receiving money upfront for an asset of the company's, there will by no monthly payments or balloon payments in the future. Remember, this type of financing is based on your customer's creditworthiness, not yours.

What if I do not wish to factor any accounts receivable at this time, but my company still needs cash?

Your company may wish to inquire into other forms of asset based lending such as equipment leasing.