WHAT IS FACTORING?
Many companies have to wait 30, 60 sometimes even 90 days to receive payment from their customers. By using factoring, your company can receive an advance on your invoice usually within 24 to 48 hours of the customer approving it. The advance amount is dependent on a number of variables, primarily on your invoiced customer’s ability to pay. Generally, 80 – 95% of the total invoice amount is advanced. In some circumstances the advance can be as high as 97%. The remaining amount, called reserve, is paid after the customer has made payment, minus a small fee. The rate of the fee varies based upon risk, but companies can expect it to be about 2 – 3% of the invoice amount. The cost of factoring increases if the financing is recourse-factoring, meaning the factoring company not only advances money on the invoice, but also assumes responsibility of collecting payment. Both recourse factoring and non-recourse factoring enable companies to unlock large amounts of cash previously tied up in their accounts receivable.
CAN MY COMPANY BENEFIT FROM FACTORING?
In these turbulent economic times companies utilize factoring for many different reasons and since there are no restrictions on how the cash must be spent, businesses have many options.
If your business is short on working capital, factoring your receivables enables you to meet payroll, cover the high costs of labor, fuel, equipment, overhead, expansion, and other expenses. Factoring can be very beneficial if other loans or lines of credit are not an option, by giving you access to capital that is not considered a liability on the balance sheet. Also, your company’s credit rating is less of a concern to factoring companies as they are more concerned with the financial strength of your customers and their ability to pay invoices in a timely manner.
When factoring is available, you do not have to dilute your ownership to raise capital. It is a great alternative in lieu of raising capital from family, friends or outside investors.
Companies not concerned with meeting operating costs use the capital obtained through factoring to finance new growth, purchase equipment, increase advertising or sales, pay off high-interest debt, and invest in research and development. Factoring can be used as a short-term option for financing. Generally there is little commitment on the company’s behalf, so many take advantage of the increased cash flow while other long-term types of financing are being secured.
Government contractors utilize factoring to finance new or growing contracts. Factors will provide a “Financial Support Letter” to the contracting officer while a contractor is bidding on government contracts to demonstrate that they have the financial resources to successfully complete the requested work. This helps prove the company can financially support the contract, especially if the contract is larger than other ones the company had been awarded previously.
No matter what the motivation for factoring is, the simple fact is that affordable access to cash positions businesses better to grow and succeed. It hasn’t ever been clearer than in this economy that the stability of a company is directly related to the amount of working capital it has access to.
WHY USE A FACTORING BROKER TO FIND FINANCING?
There are hundreds of factoring companies, each specializing in different industries and different types of factoring service. Using a factoring broker like those at NPK Funding Services will save you time and money by thoroughly analyzing your company’s needs and quickly matching your business with the financing best suited for your organization. Through strategic partnerships with many reputable factoring companies and banks, brokers are able to match clients with the best rates, service, and terms available.
NPK Funding Services can quickly match you with the best rates, terms and service. There is no fee for our services and your satisfaction is guaranteed. If at any time throughout your financing relationship you are not satisfied with the factoring service, we will immediately find a service better suited for your needs and goals.
Barret Ayres
Director of Business Development
NPK Funding Services
info@npkfunding.com
http://www.npkfunding.com
We also invite you to visit our web site at http://www.npkfunding.com for more information about the services we provide and to fill out an online application. Follow us on Twitter, Facebook, and LinkedIn.
Need Cash Immediately?
If you are in need of factoring immediately, contact us anytime and we will match you with one of our partners that can provide financing of your company’s receivables within 24 to 48 hours.