Freight Broker Factoring Program

More Factoring Info – How Its Different from a Bank Loan 

Different from a bank loan, a receivable factoring arrangement is a  individualized  contract which  takes into consideration the specific needs of your  firm.  This is  extremely different from the  normal banking  documentation used to  acquire a loan,  that is a  typical  contract  based upon the bank’s  requisites. See here for Freight Broker Factoring Program


In addition,  lots of  factoring companies do not have maximum  restrictions. If you have  pretty good, creditworthy  customers and there are  absolutely no legal  hurdles (like liens, lawsuits or judgments),  factoring companies will  finance all the  receivables you can  produce. This  stands out  substantially with a  regular bank  circumstance,  wherein every loan  has a maximum limit .


A new  customer  receives  preliminary approval in less than 24 hours, and  financing in seven to ten days. By  comparison, a loan application to a bank can take  up to 30 to 60 days to cycle through to the loan review committee, with  financing to  come next in yet another 30 to 45 days.


In addition to  swift response time,  invoice factoring does not  bind all of your company’s assets (just the receivables) or  acquire debt. Business ownership is not  impacted, keeping your business as liquid as  feasible,  at the same time enhancing your balance sheet and overall financial position.  On the other hand, banks will,  in many cases, not only file a lien against (or hold as collateral)  every one of your  business assets, but  additionally against your personal property (including your house, your  cat, and your lawn mower ).


With  invoice factoring, no  extra debt is  accumulated and the credit rating of your  firm  stays  safeguarded.  Usually a factoring  contract can  truly increase a company’s  odds of restructuring long-term debt.  Due to the fact that factoring  delivers an infusion of cash, the  business  is able to pay its bills  punctually and  clear other lingering credit  responsibilities.  Essentially, this  money may  make it possible for a  business to “get its act together” in a way that  motivates banks and other financing entities to look more  approvingly on either restructuring debt or  funding new property or construction. It’s  certainly not  unusual for a  pretty good client to ” move onto” to bank financing after a  period of time of “financial adjustment” while factoring.


 Even though the  benefits of  invoice discounting over borrowing money are  considerable,  a large number of businesses do not have the  privilege of  same access to both methods of financing. Banks, with their regulatory controls and inherent inflexibility, do not make it easy for most  firms to  meet them for financing.  Using a factoring company,  conversely, is the purchase of an asset and,  therefore, is not regulated by state of federal agencies.


 Our people  regularly hear  business enterprise owners complain about their banks, and the  view is always the same: the only people who can  secure a loan are those who don’t  really need one!


The  Initial Rules of the Costs of  receivable factoring


It costs money. It costs more than bank money. Does it cost  a lot more than investor money? Depends upon how much equity you  give up to your investor, and  the majority will  need the lion’s  portion.  However, let’s  stick to the  charges of  invoice factoring.


The Second Rule of the Costs of Factoring


It must be  looked at as a transactional cost  instead of interest charged for a  time frame, for a  several reasons.


 Initially, factors  need to charge more for the money we advance because the  duration of time the money is outstanding is so  brief, usually 30 to 45 days. To charge bank rates on transactions of this short  timeframe benefits only the client; the  receivable factoring company  earns no money, and in fact, would lose his shirt.


In the final analysis, you as a businessperson,  need to ask yourself these two questions:.

1. Will the cash advanced allow me to make  a lot more (one way or another) than the fees  required?

2. Will  a factoring firm  let me to  remain in  operation?


It’s the answer to these that should  inevitably make your  choice for you.


 Additionally note that, for the  invoice factoring companies that we’re familiar with, fees are negotiable. They are a  pliable (within  good reason) part of the  contract,  however  bear in mind, as  mentioned, the  offer must  make good sense for everyone.


We have been known to negotiate with clients that have  very special  requirements or situations, such as:  pretty low profit margins, high monthly sales with (shall we say) less-than-creditworthy customers, commitments of guaranteed monthly volume,  capacity for dramatic growth with the  niche, etc. For such  customers, we have been known to  settle for a high-volume discount schedule.


This is just one  illustration of how the schedules can be  adjusted to  match all concerned–  yet please  know, we  factoring companies are more than willing to  review,  go over, talk about,  consider, and consider all of the  opportunities, but they  must make sense, i.e., you’ve got to respect our right to earn a fair fee for the services rendered.


The  guideline is  uncomplicated: we  hammer out a deal a fee schedule that we  think will work for us both.  In the event that, during the course of these negotiations, you feel that you  really need (or are entitled to– whatever) a lower rate than we’re  ready to  provide, or vice versa, we’re both free to walk away from the table.


Before Proceeding, Feel  Very good About Your  Factoring Company.


Keep in mind that as your  factoring company is  checking into you and your clients, you should be  checking into your  invoice factoring company. Ask for references and  cautiously  go through any  deals they may ask you to sign.  Great  factoring companies  are present to help you  get solutions to your cash flow  predicaments while  delivering  quality service and charging  honest fees. As you  read through the  documents, ask questions! A  great,  trustworthy factor will  value the time that you are taking to understand the process and talk with you to answer any questions you have.


 Finishing the Application.


One of the most  very important  records that you will be asked to  authorize is a Purchase and Sale Agreement,  additionally  described as a P&S Agreement.  Though a factor’s due diligence process is  far more “client-friendly” than the bank loan process, it  may be very  costly for the factor. Learn about Freight Broker Factoring Program