October 9, 2008
April 12, 2008
April 5, 2008
Customer Perceptions About Invoice Factoring
Many companies considering using accounts receivable factoring are worried that their customers will perceive them as "going under". This is a concern with most prospects that are unfamiliar with factoring. The issue centers around notification and collection. At the inception of a factoring relationship, each account debtor is notified that a secured party (the factor) has taken title to invoices in which they owe payment. The letter also states that all present and future invoices due must be paid directly to the factoring company until otherwise notified by the factor. This is necessary to do this because if protects the factor's collateral and to be protected by the UCC.
Many business owners worry that they will be perceived in a negative light when the customers get these notices. There is no reason to worry. Factoring is hardly a new form of financing. Many industries (manufacturers, distributors, apparel & textile, trucking, and temporary staffing) rely on the services a factor provides. Factors only interact with customers on a random basis, mainly at the inception of the relationship.
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Need a quick infusion of cash? Click here to apply for a factoring quote.
Kent Harlan, CPA
www.ocflink.com
kenth@ocflink.com
417.849.7394
April 2, 2008
Should the Government Intervene in the Housing Crisis?
Today, I'm straying from the usual topic of invoice factoring to briefly discuss a hot-button topic for me: government intervention to solve problems in the housing market. There is now pending legislation that would provide relief to home owners that are on the brink of foreclosure. Sounds compassionate doesn't it, especially when you have the perception that the homeowners are in the situation they're in because of predatory lenders. I would agree that lenders have the obligation to fully disclose all the terms and conditions of the transaction and how it might effect them in the future (especially when people opt for teaser rates, then get hammered later on). But nobody seems to bring up the personal responsibilty angle of the individuals buying properties that are outside their means.
Bailing out people who have made poor decisions in their lives seems absolutely absurd to me. Do we really want our children to grow up with the idea that they can act in an irresponsible manner without repercussions? Do we want them to view government as a saviour? I don't think so.
I made a poor decision a few years ago when I trusted what turned out to be the owner of a shady real estate company. To make a long story short, myself and many others were defrauded into buying houses that were supposedly undervalued, but actually weren't. I bought a house as an investment that I was led to believe would be sold quickly at a good gain. Two and a half years later, I'm still in a home that is twice as big as I need with a mortgage payment I can't afford. Did I ask the government to bail me out? No, I'm taking responsibility for the mortgage I signed and despite the fact that my net worth is eroding each month, I'll continue making the payments in a timely manner.
Let the free market work this mess out. Government bailouts will only magnify the problem.
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Need a free invoice factoring quote? Click here.
Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
kenth@ocflink.com
(417) 849-7394
March 30, 2008
Factoring Offers Off Balance Sheet Financing
When you factor an invoice, you have not created a loan or a liability. After you receive the advance on an invoice, the customer pays the factoring company the total amount due. The factoring company then remits the amount of the invoice less the advance and factoring fee to the client. At this point, the transaction is complete. Keeping the transaction off the balance sheet is an important benefit of factoring, as it allows the company the greater chance of being qualified for other financing since the balance sheet has been properly maintained.
Using a bank credit line in a manner that does not enable frequent pay downs will ultimately result in a transition to term loan which does not look good from the banks standpoint and clearly makes it harder to borrow more in the future.
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Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
kenth@ocflink.com
(417) 849-7394
March 26, 2008
Factoring Provides Quick Funds
Invoice factoring is one the most quick and easy means of acquiring much-needed capital. How long does it take for the factoring company to wire funds into your bank account?
The factoring application is just a few pages and most of the time tax returns aren't required. Within a day, a Letter of Intent (LOI) is sent out. Upon agreement of the factoring terms & conditions, the accounts receivable Purchase & Sale Agreement is delivered overnight. When the signed agreement is returned the funding can start. This usually can take from 5 – 10 days.
Once the factoring account is set up, then getting an advance on an invoice is a matter of verification and notification. The factor notifies the account debtor (customer) to make payment directly to the factoring company, and verifying that the work has been completed. This can usually take anywhere from a few hours to the next day. After submitting an invoice from a completed job, a bank wire goes out within 24 hrs. Can you get a bank loan that fast?
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Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
March 21, 2008
Why Your Customer's Good Credit is Essential for Factoring
You'd have to be living in total isolation to not know the economy is in very shaky territory. I've been asked how the volitility in the credit markets has effected the invoice factoring industry. In particular, will those companies that factor have a smaller pool of funds available to them?
The answer in most cases is no. But it is important now more than ever that your customers credit position remain solid.
Most factoring companies get their funds from banks in the way of large credit lines. These lines allow factors to advance funds to clients. As credit has tightened, banks are scrutinizing their portfolios much more closely. Due diligence from the bank's perpective means they review the credit standing of the factoring client's customers. If the credit has slipped for several of the customers, the bank may pull in the reigns by limiting the amount of the bank line. As you can see, this scenario indirectly effects the amount of funds that may be available to factoring clients.
If you are currently factoring your receivables and are considering taking on a new customer that wants credit, you should take advantage of the free credit-screening services that most factoring companies offer. It not only will help reduce the amount of bad debt chargeoffs. It will also help you get maximum advances on your A/R.
___________________________________________________________________
Need a quick infusion of cash? Click here to apply for a factoring quote.
Kent Harlan, CPA
www.ocflink.com
kenth@ocflink.com
417.849.7394
