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Factoring - Whats it All About?By Corinne Vaillancourt You\'ve heard the term "FACTORING", but what\'s it all about? Factoring is used by businesses that have invoices (usually outstanding for 30-60-90 or even 120 days) due from their customers. These businesses are waiting to get paid, sometimes hampering their growth because they can\'t afford to start a new project until they get paid. They have exhausted their working capital by buying materials or by paying payroll & general operating expenses so they can complete their customers\' jobs. They need money to start new jobs. But, they have also exhausted all the typical sources of loans: they even asked Uncle Bob & he has said "NO MORE". They have tried the local bank, even tried an SBA loan, but everyone has turned them down. The credit card companies have you on "Hold" because you missed the last payment. There is hope! They know they can pay: they even have several jobs in the wings waiting to get started. What about receivables? If only the last two projects completed would pay that $50K that is owed , and oh yeah, what about that invoice that was due 45 days ago, the one for $75K--- he\'s waiting to get paid, too, so he can pay. The money is coming but it takes time. Where does a business go??? Factoring, this is a perfect time to use Factoring. Factoring is selling invoices to a Factoring Company to get paid sooner. You are selling an asset: it\'s not a loan. But, its more than just an asset sale, it\'s like outsourcing your accounts receivable department. Factoring is based on your customer\'s credit, not yours. You can factor even if you have fallen behind in payments or losing money even bankruptcy. Factoring Companies provide valuable services. They check your customer\'s credit for you (A D&B BUSINESS REPORT NOT A TRADITIONAL CREDIT REPORT) and notify you of bad risks and they provide detailed monthly statements. Once you\'ve decided which invoices you would like to sell to the Factoring Company, you fax the invoices to the Factoring Company along with an Aging Report of receivables. The invoices are verified and the Factoring Company gives you 60-70% of your invoices within a week. You pay a small discount fee up front and once the Factoring Company collects on your invoices they return the remaining 30-40% to you minus their discount, depending on how long they hold them for. But remember, they have a professional collection company collecting for you, so they will usually get paid sooner than you would. There are no personal guarantees, no recourse even if the account does not pay. Any business can factor, it doesn\'t matter what your FICO score is or time in business. There are no arbitrary loan board decisions. As your business grows and your receivables grow, funding will increase. You maintain complete control of your business; this lessens the business costs associated with the collection process. You also gain greater control over your cash flow by deciding exactly how many invoices to sell and when. Your business will flourish because you\'re not thinking about cash flow issues and you start spending more time on your business. So what\'s it all about? It means you can win the battle of slow-paying clients, you don\'t have to bug your customers for money anymore, pay your payroll, pay payroll taxes, get discounts on your materials, by buying in bulk or taking advantage of discounts offered if you pay early. Eventually this will improve your credit rating as you continually have the cash on hand to pay bills on time. NOW... Vitality Finance Group...
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