Every business must have cash on hand to survive. Many times, the only valuable asset businesses can leverage are receivables. Factoring becomes a valuable resource for businesses when selling receivables is their best option for obtaining cash. When a factoring company is able to assist a business, the following positive things occur:
- The business gets the cash today to meet payroll, pay bills, pay taxes, and take care of other obligations.
- The business is not paying more than they would with 2-net-10 terms, which they are usually willing to give anyway to customers.
- The business doesn’t run the risk of customers taking the 2% discount and still taking 30 or more days to pay, which happens.
- The business is not paying more than if they accepted credit cards instead of extending credit.
- Startup process can take as little as 1 day
- No financial covenants
- Focus is the creditworthiness of your customers
- Factoring agreement are flexible and easy
- No financial statement required
- Advance 70-100% of collateral
- Startups and new companies welcome
- No cap on receivables funded
- Startup process can weeks or months
- Bank will require financial covenants
- Focus is on your creditworthiness
- Bank loan documents take time to prepare
- Bank will require financial statement, most likely audited
- Advance 50-80% of collateral
- Require a minimum length of time in business
- Cap on receivables funded