I have created this article to give you straight forward content hoping to provide information into some of the things that factors are looking for when qualifying a prospect before entering into a financial relationship with them.

Lets face it, your time is very valuable and you do not need to waste it filling out applications or talking on the phone when you may be able to identify issues in this article that would prohibit you from being able to enter into a factoring relationship.

I also created this article because we want your business; however we want to earn it.

So if you find out that this information is helpful in your process of seeking out a financial solution for your company, we would love the chance to set you up with one of our highly recommended factoring companies. Even if you find out you do not qualify for factoring right now, you may be able to clear up the issues and qualify at a later time. We would love to be your choice then as well to help resolve your working capital issues.

Some of this information will be basic and you may already be familiar with it, however some may not. Just read through the article and I am sure you will find some helpful information.

We want to thank you up front for giving us a chance to serve your company. Lets get started.

Lets take a look at what factoring is:

Factoring is a form of financing where a business sells its creditworthy commercial accounts receivable to a financier known as a factor.

This is a good starting point; you need to be invoicing creditworthy businesses for your product or service. Your product must be delivered and your services rendered (no pre-bills). If they are not creditworthy and you are already having collection problems, a factoring company will not be interested in purchasing those receivables. You may need a collections service.

How much do you invoice each month:

If you are invoicing under $10,000 a month this will limit the number of factoring companies that will enter into a relationship with you. If you are speaking with a factor, let them know up front what your monthly volume is and find out if they are willing to work with companies of your size. This could save you from filling out an application and wasting your time with that particular factor.

How many customers do you invoice:

Factoring companies prefer to fund companies with more than one customer; this helps them lower their risk. If you have just one customer, the factoring will have a concentration issue, meaning if something happens to your customer they do not have any other receivables from other customers to recoup their money. Let the factoring company know this up front as well. Some factors will not work with you if you only have one customer. (If your one customer is large and stable this will help).

Do you have any financing currently in place:

If you have an existing loan or line of credit you need to find out up front if the bank has a UCC-1 against your receivables. The factoring company must have 1st position on your receivables to be able to enter into a financing relationship with your company.

I would suggest if you have a current loan or line of credit to double check and make sure of this.

I have had many businesses tell me that the bank did not have their receivables as collateral and then proceed through the application process and return the contract.

The factoring company would begin due diligence and the lien search would return a current UCC-1 on the receivables. Many times the customer does not realize the bank placed a blanket lien on their company covering all assets, including the accounts receivable.

If this is the case, you still may qualify for factoring. If your loan or line of credit is small enough, the factor may be able to pay off your loan or line of credit out of your 1st advance and the bank has no choice but to subordinate (release) the receivables. If not, they may have enough collateral that they will allow the factoring company to have 1st position on the receivables and allow you to get the needed capital for your company.

So if you have current financing, check on this issue. You may find out the bank will step up to the plate and allow you access to more funds when they realize you are about to leave.

This has happened many times.

Also be aware that our factoring companies can help negotiate a subordination, so discuss this with us if you need more clarification on this topic.

Your aging report:

Your aging report is very important to a factoring company; this is the pulse on your cash flow. An accurate detailed accounts receivable aging report should be aged from invoice date and not due date. Some companies accounting software is set up to age the receivables from due date, this will reflect an inaccurate report to the factoring company.

If you have an unhealthy aging report you will have a hard time qualifying for factoring. Plus the fees you pay to a factor increase as the days outstanding increase.

Make sure you have a cash flow issue and not a collections issue.

Remember, creditworthy customers are the key.

Outstanding taxes, liens, judgments, litigations, felony convictions or bankruptcy:

If you have any of these issues, it does not mean you cant qualify for factoring, you just need to be forthcoming at the beginning and find out if the issues are too complex for the factoring company to work through. This may save you some time.

Are you incorporated:

Some factors will not work with Sole Proprietors, others will, we have some that do. Find out at the beginning of the conversation.

Financial Statements:

Some factors will require financial statements and others will not.

Providing financial is usually where you will find the most aggressive rates available.

If you do not want to deal with providing financial statements, ask up front if they are required. We have programs available that requires no financials.

Personal Credit

Even though your customers are the primary focus, your personal credit is taken into consideration. If your personal credit has taken some severe hits recently, discuss this up front with the factor to find out how much it will be taken into consideration.

This covers some of the basic, I hope it helps!

Thanks for reading.



Thanks to Mark Little for contributing this article to our Factoring blog:

Cash Flow Funding

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

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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