Turn Your Receivables Into Cash
This method of financing working capital involves liens against accounts receivables. Your receivables or invoices are assigned for the funds advanced to you. In the true sense, you sell the accounts or invoices outright to our investors. The investors purchase your accounts or make an outright purchase of the financial rights to the invoices and assume the credit risk.
In such an arrangement even though the investors do not act as lenders, they do create immediate cash flow for your operating capital. When an investor purchases only current invoices at the time of billing, the transaction is known as Current Spot Factoring. When old or delinquent accounts are purchased it is known as Past Spot Factoring. We have access to different investors that will provide working capital funds using the two methods.
Let's assume that you've satisfactorily completed and delivered work to your customer and are ready to invoice the customer in the amount of $50,000. The invoice calls for payment in 30 days. Even though there is this payment requirement, your customer may or may not make the payment depending upon his financial standing when the bill comes due (30 days). In other words you will have to wait at least 30 days before receiving the $50,000 payment. And even after all that wait, payment may be uncertain.
If you want to turn the invoice into immediate cash to improve your working capital position, this plan becomes crucial. With it you get an immediate advance of 60% of the invoice. The remaining 40% less the investor's fee is paid to you as soon as the investors receive payment from your customer. All transactions are conducted quickly (usually within 24 hours or less). Your part is simply to turn over the invoice to the investors through us who will in turn send it directly to your customer.
With all the investors that we have access to, only these two simple requirements must be met:
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Your customer, the one you invoice, must by all standards be credit worthy, and |
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The goods or services rendered to the customer must be satisfactorily completed, delivered and accepted by the customer. |
The fees differ among investors. However, prior to your involvement with any investor for the current spot factoring plan, you will be provided with a published schedule of the investor's fees. The typical rate ranges from between 4% to a maximum of 14%. The specific rate will depend on the terms of the invoice and the credit worthiness of the account. The quoted fees will include broker's fee and is earned only when your customer pays the invoice.
All commercial (as opposed to consumer) receivables are accepted under this financing plan. These are the invoices generated by small businesses that sell goods or services to other businesses. Also, our investors deal extensively with governments and related receivables. Thus if your business provides certain services and you want immediate payout as soon as the job is completed, you can use this plan to accomplish your objectives. Remember, government payouts can take as long as 90 days or more.
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Investors assume the credit risk inherent in your receivables. |
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You get cash for your invoice in 24 hours or less. |
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Financial statements or other loan documents are never required. |
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No long term contracts to force you into a continuing relationship with an investor. |
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No additional debt or loss of equity. |
As you will see in the Purchase & Sale Agreement, if your customer goes bankrupt, the investors take the loss. Other conditions by which the investors will take the loss have been set forth in the Purchase & Sale Agreement which you will review before making up your mind.
Past receivable spot factoring is similar in many respects to current spot factoring as is described above. The main difference is that with past spot factoring, many of the investors will purchase both current and overdue receivables, whereas with current spot factoring the investors will purchase only those invoices at the time of billing and never overdue receivables. Here are some important points you should note about Past Receivable Spot Factoring:
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The investors purchase accounts that you consider past due, e.g. 30, 90, or 120 days past the due date of the invoice. Occasionally an account 180 days delinquent may be considered. |
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Investors generally pay up to 90% of the face value of each account, depending on the size, age and credit worthiness of the account or debtor. For example, if an account had $100,000 face value, the investors will pay up to $90,000 for that account. However, on the average between $.70 and $.85 are paid on the dollar for each account. |
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Investors will buy only credit worthy accounts. Bankruptcies, insolvencies, skips (unknown whereabouts), and disputed claims are ineligible. Also as was mentioned above, consumer accounts --where the debtor is an individual are ineligible. |
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You are not bound by a long-term contract. You can pick and choose the accounts you wish to sell. You may sell as many or as little as you wish. |
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As soon as the agreement to purchase your receivables has been finalized, you should expect to receive a check within 90 hours. |
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In the event an account becomes insolvent or bankrupt after purchase, the investor assumes full credit responsibility. There is not recourse for the account's or debtor's financial inability to pay. |
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We have access to investors that offer flexibility in past spot factoring. Applicants are allowed to sell their accounts when convenient, usually when there is need to raise cash flow quickly for working capital. |
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The most qualified clients eligible to use this plan include: manufacturing companies, hospitals, universities, bankers, wholesalers, publishing companies, jobbers, distributors, builders, janitorial and other services directly to other businesses --those with average annual sales ranges of $500,000 to $5 million. |
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Like current spot factoring, no personal or corporate financial statement is evaluated to determine eligibility. Credit decision is based solely on the account or receivable being offered for sale. |
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The investors that offer past due factoring will provide funds for both current and past due receivables. This will help you to raise funds using both your current and problematic receivables. |
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In both current and past spot factoring, applicants with credit-worthy accounts throughout the continental U.S.A. are accepted on a nationwide basis. |
If you do not wish to sell your receivables outright you may consider pledging them as collateral for a loan. In such a transaction you assume a status as a borrower, and the investor who provides the loan funds assumes a role as a lender. For more information on using this plan to finance working capital, please see Borrowing On Accounts Receivable. 
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