CHOOSING A FACTORING COMPANY

Leverage, Liquidity, Cash Flow and Payroll; these are terms that cause many to cringe in today’s economic turmoil.  Given the complete absence of business lending and zero access for capital growth, even the most credit worthy companies are being hampered. The real question is how can a company truly overcome the hurdle of cash flow constraints to meet their full potential?

The answer is simple; Accounts Receivable Financing also known as Factoring.

While Factoring may seem like the new fad to some, in fact it has been helping companies succeed since the dawn of civilization. Factoring hasn’t changed too much, but it has gotten better. Today’s Factoring companies not only improve cash flow by providing advances of 80% or more against current receivables, giving you access to cash that would typically be locked up for 30-60 days, they also provide expert credit advice and monitoring. Expert credit monitoring coupled with a non-recourse service (credit insurance for your customers) means you can eliminate all future bad debt. Let your Factoring company worry about the credit stability of your customers while you focus on the business of doing business.

Where would your company be today if you could operate unhampered by cash flow constraints brought on by delayed customer payments or lack of access to ‘traditional’ funds?

“But wait”, you say.  “This all sounds great, but where’s the catch.”

You’re wise to be cautiously optimistic. As with any other industry, there are the good, the bad and the others. Know what you’re getting into; read your agreement thoroughly and ask questions. Don’t be afraid to ask for references.  A good Factoring company, with the experience to back their promises, will be able to provide you with names of other clients who can help you understand the process.

“I heard it’s too expensive.” – Not true, factoring increases revenue and cash flow while loans can do just the opposite. Factoring is about selling your receivables, not borrowing money or going into debt. With factoring there is no debt because there is no loan.

The biggest drawback to a loan is the bank owns the management process of your business and will probably never increase your credit to accommodate sales growth. Therefor with a loan you can never expand your business to accommodate growth and higher revenue. You become stagnant financially.

In fact most banks are cutting credit lines with no explanations or warnings. Even worse, most banks are now limiting the access to credit lines to 75%. Plus to add insult to injury, the bank will then punish you with a fine for not borrowing the whole amount.

This doesn’t seem like a healthy financial situation for any business. With a loan you can never run your business as you would like, you can never grow your business, you can never give yourself or employees a raise and you’re almost guaranteed to experience flat sales.

Factoring accounts receivable provides an immediate source of cash flow for your company. You can use the cash to provide working capital, meet payroll, pay taxes, replenish inventory, increase advertising, purchase equipment, improve your credit rating, and cover any business expense.

Remember to, your factoring firm should be assuming your daily accounts receivable management activities, thus freeing up your time (or that of your office staff).  How much is your time worth to you?  Could you increase sales if you had more time to focus on marketing?  Don’t worry if you grow too fast, there’s a product for that- FACTORING.

“What will my customers think?”

Your customers will respect and think you’re smart. You’ll be demonstrating that you can operate the company without going into debt and that you’re making a choice not to go into debt.

“Do you talk to my customers?”

The factoring company will want to communicate with your customer on your behalf.  Often this is to confirm balances owed to you or to follow up on outstanding invoices.  It is important that you contact your customers and let them know to expect a call.  This will ease any confusion they may have.  In addition bear in mind, your factoring firm does this for a living. As such, they are very good at making the transition a smooth process for you and your customers. You should ask for references who will give you a true idea of how the process works and what you can expect from your customers’ response.

“How can I be certain that my customers will be treated well?

The last thing a factoring firm wants is for you to lose a customer. Factoring firms are not collection agencies and will never harass your customers for money. Maintaining your customers’ goodwill and confidence are of the utmost importance.

“What information will a Factoring company need from my company to begin the accounts receivable funding process?”

Along with a simple application, the Factoring company will require your company’s most recent accounts receivable and accounts payable aging reports, Articles of Incorporation or DBA filing, a master customer list, copy of your ID (i.e. driving license or passport) and a sample invoice with sample supporting documentation (i.e. Proof of Delivery, Order, Contract etc.).

To increase your cash flow and start factoring your accounts receivable please call AmeriFactors today at 1-800-884-FUND (3863). AmeriFactors – Funding Business is our Business!