Factoring: Converting Accounts Receivables
Into Capital
Keeping the cash flowing is a challenge for all
businesses. Does your company face cash flow challenges because
of slow paying customers? Have you been forced to decline new
opportunities because of cash flow issues?
As every business owner knows, sales alone do not
measure the profitability of a company. For example, sales may
be increasing but a company may have to wait weeks or even months
for payment. During that time, your company cannot purchase materials
for more orders, meet payroll, or basic operating expenses. The
solutions may be Accounts Receivable Funding (also known as "Factoring")
provided through Diversified Funding Services, Inc. Accounts Receivable
Factoring is quickly becoming a popular choice for its flexibility
and rapid injection of needed capital.
Why Accounts Receivable Factoring is a Popular
Choice in Today's Business World
Accounts Receivable Factoring has been in existence
for several decades. Today, virutally any-size business that extends
credit to other businesses for goods or services can enjoy the
many benefits of Accounts Receivable Factoring.
Simply stated, Accounts Receivable Factoring is
the exchange of creditworthy commercial accounts receivable for
an immediate injection of working capital. When an invoice is
generated, it may be purchased with an advance of anywhere between
75% - 90% of the net invoice amount. When your customer pays the
invoice, you will receive the reserve portion minus a nominal
servicing fee.
Why Accounts Receivable Factoring Makes Financial
Sense
Accounts Receivable Factoring offers many Advantages:
-
Initial Funding is typically
available between 5 - 7 business days upon receipt of completed
formal agreements,
and then all future advances are funded within 24 hours.
-
Accounts
Receivable Factoring does not create a financial liability
on your company's balance sheet and generally no other collateral
(outside of the receivables) is required.
-
The amount of funding available
to you is only limited by the credit worthiness of your
customers instead of your financial history.
-
Accounts
Receivable Factoring allows quick access to working capital,
instead of waiting 30, 60 or 90 days to receive payment
from your customers, money is immediately available on demand.
Here
is our "Top 10 List" of reasons you should consider
alternative funding solutions:
Unlimited capital. The only financing source
that grows with your sales, that we know of, is factoring. Factoring
your accounts receivables allows you to constantly have the ability
to meet increasing demand, therefore, as sales increase, more
money becomes immediately available to you.
No debt incurred. Factoring is not a loan, therefore
you are not incurring any debt. This can make a very attractive
balance sheet, which makes it easier to obtain other financing
or to ultimately sell the company.
Elimination of bad debt. The risk of bad debt
is fully assumed by any non-recourse factor, thus eliminating
this expense from your income statement.
No loss of business equity. Ownership percentages are unchanged
with a factoring arrangement (unlike most venture capital arrangements).
Offer credit terms to your customers. Factoring
your accounts receivables allows your business to be more competitive
by offering credit terms to potential and current customers without
the risk of a negative cash flow impact.
Leverage off your customers' credit. A company
doesn't need to be credit worthy to factor its invoices. In fact,
it's not necessary to be in business for three years, or to be
profitable, or to meet any other conventional lender qualifications
in order to factor accounts receivables. Simply have a credit-worthy
customer, and you can qualify for a factoring arrangement.
Establish
good credit for your business. Paying your company's
bills in a timely manner is no challenge with improved cash flow.
Factoring accounts receivables makes cash immediately available
to keep cash flow steady.
Invoice processing service. You can greatly reduce
your cost of processing invoices. Our factoring services handle
most of the work. Mailing invoices (addressing envelopes, stuffing
them, paying for postage), posting invoices to a computer system,
depositing checks, entering payments on the computer and producing
regular reports can be delegated to the factor.
Professional collections. A good factoring company
can handle collections more professionally and more productively
than you can internally. This could translate into further cost
savings for your business.
Factoring is fast and easy. Generally, no tax
returns, personal financial statements, business plan, projections,
etc. are necessary to process a factoring application. Usually,
within about one week of receipt of signed contracts, your factoring
account is established. Thereafter, accepted invoices are converted
to cash within 24 hours. Bureaucracy prohibits banks from processing
that fast.
Take a look
at the Profit Comparison Chart at the bottom of this page to see
how factoring accounts receivables can improve your bottom line!
- More
Benefits of Factoring:
- Meet
seasonal demands
- Improve
creditworthiness
- Regulate
cash flow
- Take
early pay discounts
- Meet
payroll
- Cash available "On Demand"
- Your
"credit line" grows with your business
- No
tax returns, audits or financials needed
- No
restrictions on use of funds
- No
other collateral needed
- No
debt created
- Quick
& easy qualification process
- Minimal
paperwork
- Supplier
discount advantages
- Volume
discount advantages
- Eliminate
early payment discounts to customers
- Detailed
management reports
- Invoices
are paid faster
- Focus
business growth efforts
- No
geographical limits
- Credit
screening
- Credit
monitoring
- Early-warning
detection of customer service problems
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