Can you answer Created A Madman’s question about Factoring?:

Me and my girlfriend and her sister want to open up a bar/club in our area. We’ve taken into consideration many factors; licensing, zoning laws, location, etc. However, we want to be as prepared as possible, so can anyone help us brainstorm what else we should consider? Please be as specific and detailed in your answers as possible, and remember, this is for a bar. If there is anything specific to this type of business we should consider, please let us know. Thank you.

Invoice Factoring Company

u nervous about paying employees and paying suppliers on time? Are you waiting from 30 to 90 days after completing a job in order to get paid by the general contractor or your client? If you are a subcontractor working on a project, then you could qualify for something called construction factoring.

These are some of the biggest challenges for construction subcontractors, especially in today’s economic climate. It may be even more of a challenge if your business is new and does not yet have much operating cash. Few people can afford to wait 90 days to be paid, and even fewer can qualify for a loan due to the tightening of the credit markets.

However, suppliers and small to mid-sized subcontractors can get their invoices paid in as little as two days, using a tool called construction factoring.This means you will have predictable cash flow.Compared to bank financing, construction factoring is easy to set up and obtain.Furthermore, few of them can really qualify for a business loan. However, factoring provides with an alternative business financing option to help contractors meet their business obligations and grow. Invoice factoring accelerates slow paying invoices by financing them through a factoring company.

Here’s how it works:

- A contractor or supplier delivers the product or service, and then sends an invoice.
- invoices are then sold to the construction factoring company, who advances the funds to you.
- It’s important to do business with reputable general contractors or construction companies.
- Once the general contractor or client pays the invoices, the transaction is complete. There will be a competitively priced factoring fee associated with the service.
- Choose one of many factoring companies that is set up do handle construction factoring.
- You can begin factoring invoices very fast.

Construction factoring can bring in funds for invoices quickly and effectively, providing the necessary cash to meet your current obligations, and to also take on bigger jobs.

How does construction factoring work?

Using contractor factoring is a very simple, standard process such as:

- You deliver your products or services to your customer.
- You send the invoice to your client and a copy to your factoring company.
- Invoice verification with the general contractor takes place.
- The factoring company advances you up to 85 percent. Construction factoring is different from bank financing because it is easy to obtain and can be set up very quickly.

Benefits to factoring construction invoices include:
1. You won’t have to wait to get paid for your work.
2. Factoring is easy to obtain and can be set up very quickly.
3. You get an advance quickly after invoicing.
4. Construction factoring grows with your projects.
5. It provides predictable cash flow. Construction factoring is simple to use and can easily be integrated to your business.

Once you complete the job, you just send an invoice to your client and a copy to the factoring company. The invoice is verified with the general contractor client, and last, you get the first invoice advance. Once your client pays, you receive the remaining funds, less a fee.

Invoice factoring can apply to subcontractors in fields including: architects, asphalt, carpenters, ceiling, concrete, electrical, drywall, excavators, HVAC / mechanical contractors, paving, plumbing and roofing.

Thanks to Kristin Gabriel for contributing this article to our Factoring blog:

Business Capital Financing

If a company is either in a high-growth mode or is experiencing serious cash flow issues and is not able to establish a working line of credit with a bank, why wouldn’t they turn to invoice factoring? There are three main concerns and objections that many decision makers have that can be overcome with educating the customer about the product.

Concern #1: Cost

The reality is that the cost of factoring is expensive compared to other types of financing (typically bank loans or lines of credit). If a company has the credit standing to get a bank line of credit that offers flexible terms, they should do so. If they have overextended their line or don’t qualify altogether and need additional capital to expand the business, the CFO should at least crunch the numbers to see if factoring is a viable option.

There are some industries that experience low margins and slow payers. In general, factoring probably isn’t a good option for those types of companies. If, however, the margins are higher (over 12%), factoring may be a good way to take advantage of new sales opportunities and increase profits. Factoring fees can range anywhere from 2% to 4% per month depending upon several variables, including average dollar amount per invoice, credit standing of the debtors, and the average time it takes to collect the receivables. If a company enjoys the size of margin that can easily cover the factoring fees, it makes perfect sense to employ this type of financing, rather than forgo incremental profits and lose market share to a competitor.

Concern #2: Customer Perceptions

This is a concern with most prospects that are unfamiliar with factoring . The issue centers around notification, verification, and collection. At the inception of a factoring relationship, each account debtor is notified that a secured party (the factor) has taken title to invoices in which they owe payment. The letter also states that all present and future invoices due must be paid directly to the factoring company until otherwise notified by the factor. This is necessary to do this because if protects the factor’s collateral and to be protected by the UCC.

Many business owners worry that they will be perceived in a negative light when the customers get these notices. There is no reason to worry. Factoring is hardly a new form of financing. Many industries (manufacturers, distributors, apparel & textile, trucking, and temporary staffing) rely on the services a factor provides. Factors only interact with customers on a random basis, mainly at the inception of the relationship. Several large companies such as Walmart, Costco, and Target, have internal divisions within their accounts payable department to work with those vendors who factor their receivables. Should a customer who is unfamiliar with factoring question the notice and ask what is going on, the owner or manager only needs to tell them they have chosen to use a company to manage and finance their accounts receivable.

Concern #3: Losing Control over Receivables

Some people feel that allowing a factor to collect their receivables takes control away from them. A prospect should consider that a factor has provided an advance on a piece of paper and until they collect from the customers, they have nothing. However, it would be counterproductive for a factor to be overly aggressive in collecting receivables and risk alienating the customer base.

Factors typically work hand in hand with the client to collect receivables and oftentimes allow the company to make collection calls. When payment is substantially late, the factor’s staff will likely make collection calls, but normally in a professional and courteous manner. A good factoring company will provide the client with comprehensive aging and performance reports, as well as credit screening for new customers. In effect, the client will not lose control of their receivables. They will actually be more on top of things because of the enhanced services the factor offers.

If more decision makers were educated about the benefits of receivables factoring, they would likely take a look at how it could help expand their business. Traditional lenders can’t always provide the solutions, so it makes sense to keep an open mind to alternative forms of financing. A financial broker experienced in the area of invoice factoring can be invaluable to a company that has this need.



Thanks to Kent Harlan for contributing this article to our Factoring blog:

Business Capital Financing

Can you answer Derek T’s question about Factoring?:

Moneybooker says, an unactivated moneybooker account has a 1500 Euro cash flow per 3 months and an activated account has a 15000 Euro cash flow per 3 months. I want to know clearly, what is the cash flow? Is it mean that I can’t receive any more money if I have received 1500 Euro to my unactivated moneybooker account per 3 months? Is the mean that I only could receive 15000 Euro at an activated moneybooker account?

Medical Receivables Factoring

r company lacking capital? Or does your business experience seasonal fluctuations for its products and services? Are you worried about the effects a recession can have on your business, or the financial stability of your clients? Today’s troubled economic environment means that businesses are under constant pressure to maintain profitability. Invoice factoring may help.

If you are spending too much time and money on your accounts receivables and collections, invoice factoring can help.

What is invoice factoring? It is the age old practice of using your invoices or receivables as collateral so that a factoring company can give you an infusion of cash. Historically factoring has been around for more than 3,000 years. Recent trends include single invoice factoring which can also be called spot factoring. This is when you factor one invoice at a time.

Factoring is simply a way to acquire business capital without having to make any type of payments to a lender. It’s much better than a typical business loan because you don’t have to worry about monthly payments accumulating every month. Many companies simply don’t want to worry about getting paid by their clients 90 days after invoices are sent out - because it often creates a financial burden on their business to have to wait that long.

Plus these days, some businesses may suffer from a less-than-perfect credit score. Factoring firms are experts at helping you minimize your risk from bad debt while at the same time they help you improve your cash flow dramatically. Some factoring companies can even provide cash flow within two hours wired directly to your bank account. Other companies can take up to 48 hours.

a factoring company collects your receivables for you, providing business capital. This also minimizes your bad debt by making sure your clients pay on time. It can give you peace of mind in having a positive cash flow. Uncertainty regarding cash flow is removed, and your company can be more positive about the future since new orders are more easily filled, employees, utilities and vendors are paid on time and debt payments to credit card companies go out on time.

The professional fees among various factoring companies are competitive. Every client’s circumstances are unique which may have an impact on the fees charged. Not all invoce factoring companies expect to buy 100 percent of your receivables and they often advance up to 90 percent of invoices you are selling.

Ultimately, invoice factoring can take away the worry regarding your clients making their payments, and you can focus on new busniess tather than chasing down slow or no pay clients. Look for invoice factoring companies online today, and start factoring.

Thanks to Kristin Gabriel for contributing this article to our Factoring blog:

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