What is Accounts Receivable Financing?

Receivable financing (factoring) is a method used by businesses to convert sales on credit terms into immediate working capital. The receivable credit line is determined by the financial strength of the customer (Buyer), not the client (The seller of the receivables). Outstanding invoices or receivables are sold at a discount to a finance or factoring company that assumes the risk on the receivables and provides quick cash to your business. The amount of value assigned to the invoice depends on the age of a receivable.

Account receivable financing helps you accelerate cash flow, improve collections and control exposure to bad debts. Factoring has become the preferred method for business such as staffing, government contractors, trucking/transportation, import/export, manufacturing, distribution, wholesale and service companies to access immediate capital.

What does it cost?
Discount and advance rates are based on a combination of items such as industry, invoice size, avg. payment cycle, monthly volume, concentrations, debtor credit worthiness.

• Initial funding usually occurs in 5-10 business days
• Discounts range from 1.5% to 4%
• Advance amounts range from 70-95%
• Advance paid 12-48 hours from receipt of Invoice
• Our target Invoice range is $10,000 to $50 million per month
• Additional options - No minimum, Open-ended contract, Non-notification, Spot transactions

Sectors of Interest:

* Distributors

* Wholesalers

* Manufacturing companies

* Importers/Exporters

* Resellers

* Government contractors

* Staffing agencies

* Office supply companies

* Oil industry companies

* Technology companies

* Transportation brokers

* Trucking companies (1 rig or lg. fleet)

* Janitorial and cleaning companies

* Individual and Group Medical Practices/Walk-in Clinics

* Imaging Centers

* Security guard companies

* Medical Doctors

* Durable / Home Medical Equipment Companies

* Group Homes (Adult and Children)

* Home Health Care Companies

* Drug / Substance / Alcohol Abuse Centers

* Hospitals

* Medical supply companies

* Medical Transport

* Supplemental Educational Service Providers

* Courier services

* Call center operators

Receivable Funding Benefits:

* extend credit to customers

* Make a strategic acquisition using your targets own receivables

* Obtain volume discounts and/or early discounts for paying early

* Increase profit margins

* No worry about wholesale minimum order sizes

* Participate in supplier special offerings that require upfront payment

* Avoid lost sales from lack of inventory, especially during peak selling seasons

* Purchase more inventory than your cash flow or wholesaler credit may allow

* Maximize seasonal buying opportunities

* Take advantage of wholesaler closeouts, overstocks, liquidation, off-season deals, ect.

* access to the necessary funds for operations and growth

* Pay off high interest debt

* pay back taxes and liens and fund payroll

 

Traditional Account Receivable Financing:

A company has receivables when money is owed by a customer (individuals or corporations) to the vendor in exchange for goods or services rendered. The receivables usually come in the form of an invoice providing terms for payment and are usually due within a relatively short period of time (30, 60, 90 days).

This means a service has been provided or a sale made that the company has not collected the money from the purchaser yet. Most companies operate this way. This allows frequent customers to avoid the hassle of making cash payments for each transaction. Factoring the receivable allows the company to access the money due immediately for continued day to day operations.

Sample transaction:
• An invoice is created for services or goods delivered.
• Your Company sends an Invoice to the Factor for $ 100,000.00 billed to ABC Company on 1/4/08
• Factor verifies the invoice to ABC Company on or before 1/5/08
• Factor will wire a check to Your Company in the amount of $85,000.00, or 85% of total invoice amount on or before 1/6/08
• ABC Company pays Factor $100,00.00 on 2/3/08
• Factor will wire remaining balance to Your Company, $15,000.00, on or before 2/4/08, minus the Discount Fee


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Start-UP Program - $100,000

The “Start-Up” program is designed for small and start up businesses looking to access $100,000 or less on a trial factoring relationship. This program allows you to get your feet wet and find out if factoring is right for your company without lengthy commitments. Experience the process first hand to make an educated decision if factoring is right for your organization going forward. Start Up receivables are handled in the same manner as the traditional factoring program yet providing greater freedom.


You maintain complete flexibility and control through no contracts, no minimums and no upfront fees. This is a non-recourse program that is designed to give you access to capital without all the normal constraints.

TERMS:
The Start Up discount is a flat 1% for every 10 days with an 85% advance rate. You can be selective with your receivables and only submit one invoice from one customer while you access your true needs. That’s it!

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Macro Program:

The “Macro” program is a fantastic solution for those companies with $10,000 or less in monthly receivables looking for funding that most factors will not consider.

How It Works:

Your company provides Factor with the following information for all approved customers:
• Invoices (original or copy), can be produced online
• Proof of delivery or proof of services rendered, such as: bills of lading, tracking information, delivery confirmation, sign-offs, completion certificates or Estoppel letter
• Copy of customer P.O.
• Bill of sale (schedule) from listing invoices to be factored – use online computer

TERMS:

• Factoring less than $10,000.00 monthly
• Closing fee $100.00 deducted from first draw
• 70% advance for each schedule of invoices @ 6% discount for 30 days
• 65% advance for each schedule of invoices @ 5% discount for 30 days
• 1.75% for each additional 10 days
• $10.00 per schedule fee
• All payments are made by ACH (will be in the bank the next morning). Wire transfers are $25.00
• Credit and documentation in as little as 3 days
• Return of assignment letters to Factor before funding
• Funding IMMEDIATELY after receipt of all signed documents
• Client will input receivable schedule on the web and will be able to see all reports
• Invoices can be processed online and mailed by us for $2.50 ea

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Leasing:

EXPRESS LEASE Application only program up to $75,000

• No Financial Disclosure
• 24hr Credit Approval
• Completed Signed Lease Application required
• Application-only $250,000 for heavy collateral (Comparable Credit Req.)

FLEXIBLE LEASE financing on new or used equipment.

This covers soft costs such as installation, freight, and taxes. Also includes specially structured lease plans to accommodate our customers cash flow needs. 
• Lease plans for Start-Up companies
• FMV, 10% Purchase Option, $1 B/Out Option
• Trac-Lease for Commercial Vehicles
• Deferred payment plans
• Seasonal, Step & Skip payment plans

COMMERCIAL LEASE (Full financial disclosure)
• Fixed rates as low at the current prime interest rate
• Lines of credit available up to $5,000,000.
• 3-4 Day Credit approval with complete financial package

Operating Lease
The most classic equipment leasing option available, an operating lease (or true lease) structures the lease agreement to provide 100% tax deductibility on lease payments as a capital expense. The leased equipment is classified as a rental, allowing the lessee to transfer obligation of the equipment to the lessor at the end of the term.

Capital Lease
The optimal choice for long-term equipment plans and intended eventual ownership; a capital lease (similar to a finance lease) classifies equipment as being owned by the lessee, allowing the lessee to claim tax deductions on the equipment depreciation. A capital lease usually provides a more attractive purchase incentive at the end of the lease term.

Equipment Finance Agreement (EFA)
A method of equipment financing with fixed payments for a predetermined number of months, where the borrower owns the equipment and the lender merely retains a security interest through the transaction. Between the borrower and an equipment lessor, this sort of agreement is used as a method of refinancing equipment after the lessee has already received and paid for the equipment, but prefers to spread the expensed capital over a payment term. Both the depreciated value of the equipment and the interest on finance payments are tax deductible to the borrower. The equipment finance agreement is an equipment loan.

Most Common "End of Lease" Options

$1.00 BUYOUT
Also known as a capital lease and finance lease, $1.00 buyout is the closest option to straight bank financing. The lessee fulfills payment requirements for the duration of the lease, and once final payment is made along with $1.00, he/she becomes owner of the equipment. 
Additionally, equipment must be shown as an asset and depreciated. It is not recommended that the equipment be written off as a rental expense. This simple option requires no further obligation, but one might keep in mind the monthly payments are slightly higher than an operating lease.

FAIR MARKET VALUE
Also known as an operating lease, this option may be tax deductible under IRS guidelines and payments can be written off. The equipment can be purchased at the end of the lease for its current fair market value (an estimated 10%) or the lessee can return the equipment with no further obligations.

10% PUT or PURCHASE OPTION
Also considered a combination of the capital and operating leases, this option can be 10%, 15%, or 20%. The lessee has the option to pay a predetermined percent of the original equipment cost at the end of the lease, or walk away. By leaving a residual at the end of the lease, the monthly payments are lowered.

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