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

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

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.
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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

Credit Crunch

Many companies are discovering that lending parameters have tightened up considerably in the past few months. Even banks that they've dealt with for years have pulled in the reigns and are not granting the credit lines they have in the past. The reason? Nearly everyone in the financial community is jittery about the state of the economy. The housing crisis, the threat of inflation, and the looming recession have all created an environment of instability.

Despite these fears, the invoice factoring industry is strong. If you are having trouble getting the working capital you need to either survive or grow, factoring could be the tool you need. As stated before, factoring isn't for everyone. But if you've got a service, manufacturing, or distribution firm that sells to other businesses on credit, you've got a decent profit margin (over 10%), and you collect payments from your customers in a reasonably timely manner, you should consider getting a factoring quote (free and no obligation).
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Need a quick factoring quote? Click here.

Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
kenth@ocflink.com
417.849.7394

Factoring Invoices Less Than 90 Days Old

Some firms have a business model in which they don't get paid by their customers until 90 days or more after invoicing occurs. For those businesses, factoring is not a viable financing option. Accounts receivable financing is only for businesses that issue thirty day net term invoices and have a history of getting paid on time. That doesn't mean each invoice every single invoice must be paid within 30 days. But it is important that the accounts receivable turnover occur at a reasonable level. That is critical for both the client and the factoring company. For the client, excessively late payments (over 60 days) can be very costly in terms of fees. For the factoring company, their line of credit may be hampered.

Most factoring companies get their funds from a bank credit line. They then use those funds to advance cash to factoring clients. The bank considers invoices over 90 days to be a non-performing asset and deducts those amounts from their credit line. That's why factoring clients must replace those invoices over 90 days with ones that are current.

Invoice factoring is an excellent means of achieving capital infusions. Making sure your customers pay in a timely manner helps maximize cash flow and keep factoring fees under control.
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Need factoring? Click here for an easy application.

Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
kenth@ocflink.com
417.849.7394

Factoring Commercial Accounts Receivable

When we talk about providing advances on your accounts receivable, we're referring to debts owed by other businesses. There are very few invoice factoring companies that give advances on consumer invoices. The main reason is due to the legal differences of consumer and commercial transactions. Since accounts receivable financing is based upon the credit-worthiness of your commercial customers, invoice factoring companies just aren't set up to work with consumer issues.

The few factoring companies that do work with consumer invoices have very steep minimums. In fact, you'll need anywhere from $500,000 to $1 million of consumer receivables to work with them.

Need a free quote for invoice factoring? Click here.

Kent Harlan, CPA

Ozarks Capital Funding, LLC

www.ocflink.com

417.849.7394