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Advantages
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Advantages of Factoring |
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Frequently Asked Questions
Articles On Factoring |
By having immediate cash,
your company can keep up with bills, payroll, taxes, and even take
advantage of early pay discounts to suppliers to help increase profit
margins.
In addition, getting paid
earlier allows your company to turn its existing capital more frequently
thus requiring a smaller capital base. |
Its as if all of your customers were on a C.O.D. basis,
without the resulting limitations. Receivable Financing or Factoring keeps
pace with your sales growth.
When using a bank LOC, once a bank line is used up, there are
no more funds available. With factoring, you present the invoice to the
factor, they verify it, they fund it. Receivable Financing or Factoring
provides business an unlimited Line of Credit. |
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Improved cash flow |
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Cash is typically available in 48 hours or
less |
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Continuing source of working capital |
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No new business debt created |
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Short approval process |
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No long term commitments |
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Free credit screening of your customers and
collection services |
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Improve your credit rating and financial
statement bottom line |
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Benifits existing businesses as well as
startups and companies with credit issues. |
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Why do business Sell
their Invoices
There are many different reasons why a business
chooses to sell their invoices. Commonly, business's participate in a
receivable financing program that can not wait the typical 30 or more days
to receive payment on their invoices because they:
 Are expanding business faster
than their cash flow permits.
Need cash to increase
production or sales.
Need cash to take on new
business, purchase equipment or inventory.
Need cash to take trade
discounts.
Need to pay vendors and
creditors.
Need cash to meet payroll or tax payments.
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An example of how Receivable Financing can
work
The following
example is how Receivable Financing or Factoring can work for your
company. For this example assume that the cost of working capital
is 5% of the increase in total sales for additional working capital
needed to cover increased costs to complete an order over and above your
present levels of sales. Remember, if working capital is provided for
less, your profits will be even greater! |
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Profit
Profile Without
a Working Capital Program |
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Sales w/out
Working Capital
$240,000
Sales being
turned away?
????
TOTAL SALES $240,000
Fixed costs
$ 54,000
Variable costs @ 69% of sales $ 165,600
Cost of working capital @
5% 0
Net Profit $ 20,400 |
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Profit Profile
without
Working Capital is 8% |
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Profit Profile With
a Working Capital Program |
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Sales w/out
Working Capital
$240,000
Added
Sales($10,000/month) 120,000
TOTAL SALES $360,000
Fixed
costs $ 54,000
Variable costs @ 69% of sales $ 248,400
Cost of working capital @
5% 6,000
Net Profit $
51,600 |
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Profit Profile
WITH
Needed Working Capital
153% INCREASE IN PROFIT |
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