How does factoring work?

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On your initial application, you'll tell us about your company and about your customers. Based on that information, we'll find the factor who is the best match for you. Some want small accounts; some want large accounts. Some specialize in certain industries; some avoid certain industries. Some industries, like construction, trucking, and health care providers, have their own rules and a limited group of factors. Usually, we’ll have a conference call, so you and the factor can get to know each other and be sure you are a match. You’ll explain your business and discuss your customers for the factor. The factor will want to be sure you understand what will happen and how it will work. The conference call may come before you submit the application, depending on the situation. The factor will check out your customers, and make a proposal based on your expected volume and the credit-worthiness of the customers. After you agree, you may have a small due diligence fee to pay. The factor makes sure your receivables aren't already committed and, after completing due diligence, sets up your account. Normally, within a week or two of your acceptance, you're ready to factor. You submit as many or as few invoices as you choose. Depending on your industry, the factor electronically pays you 60-90% of the invoice within a day or two of receiving it. They collect from your customer, deduct their fee, and pay you the rest and provide detailed reports. The fee is partially time-based, but it is not interest in the usual sense, since other services are being provided. The factor may hold back a small reserve, as well. The benefits of factoring that go well beyond a typical loan are explained at Using Your Receivables to Grow Your Business. Usually, you are selling the invoice non-recourse, so if the customer becomes unable to pay, you're not affected. However, if the customer refuses due to dissatisfaction with your product or service, you have to fix the problem. Back to Using Your Receivables to Grow Your Business Can you afford not to factor? Call us.  Email us.