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Factoring
Without question, factoring is the most powerful financial tool that can be brought to bear on problems of cash flow.  This is especially true in the case of young, first stage companies with little or no credit history. In today's credit impaired economy with bank financing at a standstill, factoring is fast becoming the financing method of choice for business-to-business transactions.

How It Works
In addition to its ease of access, factoring is also one of the simplest forms of financing to obtain and utilize.  In a typical factoring transaction....

  • Each week a business owner will invoice customers often granting 30 days or longer to pay.  While such "terms of payment" is an important accommodation to customers and leads to more business, it can cause serious cash flow problems when payroll is due or suppliers want payment.

  • Factoring basically puts your company on a C.O.D. basis.  Instead of waiting for your customers to pay their invoices, those invoices are sold each week and delivered to your factor for immediate cash. You now have cash for weekly operations, payroll, taxes, etc.  Cash is usually wired directly into your business checking account within hours of invoice submission.

  • Factors typically advance 80-85% of the invoice face value.  When your customer's payment eventually comes in, the factor releases the other 15-20% not initially advanced after subtracting his fee for services. Typical factoring fees for 30 days are in the 2-3% range...about the same as accepting a credit card!

  • Factors provide significant additional services as opposed to credit card processors however.  As a factor's client, you will receive expert collections service, daily reports of collection and aging, tax reports, and many other accounting services.  Factors are also experts in credit and can assist you when attempting to determine the creditworthiness of a new prospective customer.

  • Factors will typically only require your accounts receivable as collateral.  That means you are free to use other assets such as inventory and equipment for separate financings. 

Available to the Newest of Companies
Another important feature of factoring is its availability to even the newest of businesses.  Factors are like the "mirror-image" of banks and look at the credit quality of the customers of a business rather than the business itself.  This makes factoring the perfect form of financing for young entrepreneurs bidding on large contracts with state and local governments and large corporations that traditionally take 45 days or longer to pay invoices.  With a factoring arrangement in place, lack of adequate cash flow and payroll worries are a thing of the past for most entrepreneurs. 

Find Out More / Apply Now
For additional information on factoring and to explore whether its right for your small or mid-size business, complete the request form below and receive our complimentary booklet "When Banks Say NO!...the Small Business Guide to Factoring.  It's FREE!....from East Bay Factors.  You can also complete our Company Profile and fax it to our offices.  One of our underwriters will contact you within 24 hours.

   

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International Association of Commercial Finance Brokers

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