FAQ
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Factoring is the purchase of Commercial Accounts Receivable [AR] for cash. Accounts receivable funding is widely used and viable financing solution for all types of businesses that extend credit terms to their customers. Factoring is one of the quickest methods for companies to raise working capital. Used by almost every industry, factoring allows your company to raise the needed capital for acquisitions, expansion/growth, negotiate better terms with your suppliers/vendors, restructuring, meet payroll or survival. I thought factoring was used only by companies in financial “trouble”? Factoring gives your business the power to grow, without giving away equity or taking on debt. Contrary to what you may have heard, factoring is not a tool used only by struggling companies. Many new businesses and startups can benefit from Accounts Receivable Funding. Financially smart companies use factoring as a powerful tool to release capital tied up in AR. Is factoring a type of loan? No. It is the purchase of an asset, your accounts receivable, at a discount by a financial institution called a Factor. A traditional bank loan uses all of your company assets as collateral. Invoice factoring, or accounts receivable funding, relies on the credit-worthiness of your customers, not your balance sheet or history. Banks are heavily regulated, and large finance companies are driven by an assortment of pressures. When times are tough, banks and finance companies limit lending. Are there limits on what I can use the cash I receive for from factoring my receivables? The funds can be used as you deem necessary. You can use the additional cash to meet payroll, to take advantage of suppliers' discounts, satisfy operating overhead, purchase necessary inventory or equipment upgrades or just establish good credit for future expansion. Do I have to factor all of my Invoices? No. You remain in control by picking which client and which invoice to factor. Our factoring agreement is duration based, so you only pay for the funding you use, when you use it. Are there any minimum volume requirements? There are no monthly, quarterly or annual minimum volume requirements. This allows you maximum flexibility and ensures you only pay for the funding you actually use. Factor only when you want or need to. How long is my contract for? Is there a penalty if I decide to stop factoring? Our Agreements typically have a one year term. There are no “exit” penalties or liquidated damage clauses as part of our Agreements. Our agreement simply states that if you are going to factor invoices during the term of our agreement, that you factor those invoices with Anchor Funding Services. How long does it take to get funded? Normally, it takes about three business days to receive the first funding. Please remember that there is a verification process that we perform, so the sooner we get the application and necessary paperwork back, the quicker the funding. After the initial funding, we fund on a next business day basis. Funds are wire transferred to a bank account designated by you. How are fees calculated? As a general rule, we advance 80% of the AR that we purchase, with the balance [less our fee] paid at collection. We structure our professional fees on a 5 day pricing window, not an industry standard 30-day term. This is more equitable fee structure for you. There are no other hidden expenses. Do you verify invoices with my customers? Invoice verification is an essential, and accepted, part of funding. Because factors verify invoices with customers, they can tell clients if there is a customer service problem right away. A non-factoring client may not notice the problem until the invoice becomes past due. By that time, it may be too late to save the account. How can I be certain that Anchor Funding Services will treat my customers well? The last thing we want is for you to lose a customer. We are not a collection agency. We will never harass your customers for money. Maintaining your customers’ goodwill and confidence are as important to us as they are to you. If my customers know that their invoices are factored, won't they take longer to pay? Often, just the opposite is true. If your customer is a large corporation with its own invoice-payment policy, it will make no difference who the creditor is. They will adhere to their credit policy and pay accordingly. If your customer is a smaller or closely managed company, they will be inclined to pay faster knowing that Anchor Funding Services, as a Factor, are a prime reporter of credit information to credit bureaus and an influential credit-reference resource. What size business will Anchor Funding Services finance? We can factor your business if you have between $100,000 and $10,000,000 in outstanding accounts receivable from credit-worthy customers. Some of our clients began factoring with their first sale; others were well-established businesses. We work with companies in all stages of development, including small-to mid-size companies with limited histories. Even pure start-ups are usually viable customers. If your company has invoices from credit-worthy customers, we'll be happy to speak with you about how we can help. Call 866-950-6669 to speak with an Account Executive. What if my company has a bankruptcy, bad credit, poor financials or other derogatory information or history? Factoring decisions are based on the credit-worthiness of your customers and their willingness to pay their accounts receivable-not on your credit. Does my business need to meet net worth, profitability, debt coverage, years in business or other financial ratio requirements? No. We are primarily concerned with the credit-worthiness of your customers, not your business, in making funding decisions. Do I need to be an established business, operating a minimum number of years, to be approved? No. Anchor Funding Services prides itself on catering to the financing needs of small-to-medium size businesses, regardless of their operational stage. Even pure start-ups are welcome in most cases, as long as the accounts receivable are straightforward (i.e., not guaranteed sales, progress payments, etc). We routinely finance start-ups, companies that are recently unprofitable, and those with wild swings in their business cycle. Businesses that do not qualify for bank financing are our most successful customers. If I factor with Anchor Funding Services, can my business still borrow money from other sources? Yes. Traditionally, that is one of the advantages of factoring your accounts receivable. Your equipment, inventory and property generally remain unencumbered and available as collateral for other lenders. If a commercial bank provides you with credit, they almost always take a security interest in all your assets. This means you generally cannot borrow from any other source, since you have no collateral to offer another lender. Can I still factor if my business has already borrowed from a bank? It Depends. You can still factor if your bank has not taken a security interest in your accounts receivable. This is rare, but it does happen. Otherwise, we must work with your bank to arrange for them to subordinate their interest to us-or work out some other acceptable arrangement. Please call us at 866-950-6669 to speak with an Account Executive. |
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