Being prepared to hear and address objections or questions is the most professional approach to these encounters.

Fortunately, the issues discussed herein are the most common concerns expressed by prospects and from my experience in both commercial and healthcare factoring will arise in almost all presentations or conference calls.

“Will The Factoring Company Control Payments?”

As a starting point let’s first understand that the factoring process takes significant (if not full) control over the client’s incoming cash flow stream. Since the factor usually has very little other collateral securing these transactions, the payment stream is the factor’s security blanket. This aspect of the transaction must be dealt with carefully, precisely and directly!

Our first example of a prospect’s fears therefore is the factor’s full control and domain over the incoming payments from the account debtors. There is almost a claustrophobic feeling on the part of the prospect at the anticipation of all cash movement being controlled by this potential finance company.

In my calls, I ALWAYS address the fact that this process will be put in place along with notification of the account debtors to pay my bank account. However I also include the fact that the prospect’s posting clerk will have daily visual access to the bank account showing deposits and even the checks. This way there is no posting delays and the A/R aging can still be managed by the prospect’s collections process.

By dealing with the realities of how the process works, we will uncover the concerns of the applicant regarding this particularly inflexible aspect of factoring, and we’ll immediately know if there is a future for this transaction.

“What Will My Customers Say About Selling Invoices?”

The next most common issue is the prospects perception that his customers (the account debtors) will think less of him because he is selling his invoices. “What will my customers say about my selling my invoices?”

I ease the concerns of prospects by explaining that Fortune 500 companies use this strategy to finance their businesses because it is not debt and strengthens their balance sheet. To follow I also explain that the customers whose invoices are being sold, have other vendors doing the same thing so it will not be a surprise. Finally the customer will realize that his vendor (the prospect) will be able to offer better payment terms based on this finance facility.

“What Are the Fees and Commitments for Factoring Invoices?”

Finallly, another issue is up-front application or underwriting fees. We offer our prospects a “no up-front fee” program however we do require a one year commitment. This commitment allows us to recoup underwriting expenses such as filing and searches, audits (in our healthcare finance program) and other similar expenses associated with new transactions.

If you as the consultant work with funders who have due diligence fees, they must be addressed honestly. It has to be made clear to the applicant that these costs are not always recouped by the factor especially if the transaction never closes, so therefore they are fair and reasonable. In the course of doing business the applicant himself/herself will certainly pass on similar expenses to his/her customers as well.

Prior to doing a call or visit with a potential client, anticipate the issues, face them honestly and don’t sugar coat them. If you can, have your funding source do the call if they provide that service.

Our procedure at Xynergy is to do all calls with the prospect and the referral source on the line. It serves both as a learning process for the consultant and it provides credibility for the consultant who actually brought the funder to the call. Best of all, the funder has the answers to all questions and concerns, and is the only one who can give advance rates and pricing thoughts if the call goes well enough.

About the Author: Fred Leder has been actively involved in the specialized healthcare financing niche for over a decade.

Xynergy Healthcare Capital LLC is a factoring organization focused on small to mid-sized healthcare providers nationwide. For more information contact Fred at (954) 489-6460 or by email at fleder@xynergyhealth.com.

According to data from the Department of Veterans Affairs, the number of veterans with post-traumatic stress disorder is currently increasing by about 10,000 every three months, what experts call the cumulative effect of a decade of war. As the need for mental health increases, so too does the need for psychiatric professionals. Hence, now is the perfect time for a nurse staffing agency to break into temporary psychiatric nurse staffing. And when they do, they will look to factoring brokers to help them avoid cash flow issues during the transition.

Even though they have a specialized niche within the staffing industry, mental health nurse staffing agencies experience the same kind of cash flow problems that general nurse staffing companies do. For example, a mental health nurse staffing business owner staffs Advanced Practice Registered Nurses (APRNs) and/or Psychiatric mental health nurse practitioners (PMHNPs) at a medical facility and sends an invoice promptly after the nurses have completed their shifts. Unfortunately, it’s typical for large hospitals to take 30-60 days to pay those invoices, so the business owner is faced with meeting up to eight weeks of payroll before getting paid.

Talk about a cash flow crunch.

Luckily, there’s a solution.

Mental health nurse staffing factoring can easily fill in the cash flow gaps, and here are some invoice funding selling points for you to share with your potential mental health nurse staffing clients:

• When a business owner chooses to factor their receivables, he/she can get cash the same day he/she issues an invoice.

• Invoice factoring provides unlimited capital, as it is the only type of business financing that grows with a business owner’s sales.

•  A mental health nurse staffing factoring company assumes the risk of bad debt, which eliminates any expense from the business owner’s income statement.

•  Most psychiatric nurse staffing factoring firms handle all invoice processing (i.e. posting payments) and provides professional collections services, so the business owner can dedicate his/her time and resources to marketing and securing new accounts.

•  Unlike the bank loan application process, mental health staffing factoring is quick and easy. It’s rare that a factoring company will ask for a history of profitability, business plans or personal financials.

•  Moreover, mental health nurse staffing agencies don’t need good credit or a long-term operating history to qualify for AR factoring services—all they need are creditworthy customers.

Once you have the mental health staffing business owner convinced that accounts receivable factoring is the best financing option for his/her business, the next step is to pair them with a funding source that has experience funding various kinds of nurse staffing agencies. Doing so creates a win-win scenario for all parties involved—The business owner has access to immediate funds, the factor has the ability to work with a new company, and the broker receives a steady income of commissions.

Nikki Flores is a Consultant Liaison for PRN Funding, LLC, which is an extraordinarily focused niche player in healthcare factoring.

PRN Funding exclusively factors the accounts receivable of companies that sell goods or provide services to healthcare providers.

You may also enjoy these Factoring Training Articles by Nikki Flores:

How to Qualify a Factoring Prospect by Asking Three Simple Questions

Invoice Factoring: An Alternative Financing Option for Outsourced Medical Billing Companies

How Factoring Benefits Private Duty Care Agencies

People new to the industry, both brokers and companies thinking about using factoring services, have an uncanny ability of making things more difficult than need be.

Terms like “hold back,” “reserves,” “advance rate,” and “points” can put people on edge.

Add to the fact that just about everyone tries to compare “factoring vs. bank loans” and it is no wonder many people leave the table confused.

The reason I bring this up is that many times a factoring broker will talk about items or “terms” that the prospective client has yet to bring up. Why over complicate the issue?

In the end, you have one focus as a factoring broker… help the client get money!

This should be the primary focus during any conversations.

One of the client’s best options to get money is by selling existing invoices. This comes with numerous advantages. Here are just a couple:

1. Factoring is not a loan. Therefor the prospective client is not incurring debt (or paying interest on that debt).

2. The client also has the flexibility to sell as many (or as few) invoices as they want.

3. The client is typically free to spend the money however they see fit (not managed by a bank administrator looking for more assets to leverage).

There is no doubt that many other variables come in to play – especially when it comes to due diligence. But much of that will be handled by the Factoring Company (investor, factor, or funder) – so stick to what you need most – signing up new clients.

So, in the end (or should I say the “beginning”) don’t over complicate discussions. Keep your focus on helping the client (i.e.: getting them money to help fund and grow their business) and the rest of the details will fall in place.

Typical vendors who benefit from invoice factoring include: temporary medical staffing agencies, medical transcription services, janitorial companies, and even medical supply companies.

All of these businesses routinely provide services and/or sell goods to medical providers and then have to wait weeks or months to be paid. However, there is another type of vendor that can benefit from invoice factoring that you may not know about—Outsourced Medical Billing Services.

Medical billing is one of the fastest-growing and most dynamic sectors of the healthcare industry. In a nutshell, providers wouldn’t be able to get paid by third-party insurance if it weren’t for medical billing. Because the medical billing preparation and submission process is an immense task, so many medical providers choose to outsource their medical billing. Therefore, outsourced medical billing services act as intermediaries between medical providers and insurance companies.
Of course, medical billing companies charge a fee for their services. Typically, a medical billing company charges a percentage of what the medical provider collects from insurance companies. Moreover, a medical billing service strives to submit claims quickly and correctly to the insurance companies to ensure a speedy reimbursement to the provider.

So if an outsourced medical billing company works hard to get the provider paid quickly, it only makes sense that the provider will pay the medical billing company quickly as well, right? Unfortunately, this is not always the case. Hence, it’s not uncommon for outsourced medical billing companies to run into cash flow problems. Enter outsourced medical billing invoice factoring.

Even though you may not be familiar with the outsourced medical billing industry, the factoring process is virtually the same:

1. The outsourced medical billing service submits an invoice to the factoring firm.

2. The factor verifies that the billing services were performed, and in some cases, verifies that the medical provider has received payment for the processed claims listed on the invoice.

3. Once the factor is comfortable with the verification, it purchases the invoice and funds are advanced electronically to the outsourced medical billing service.

4. When the factor receives payment from the medical provider, it applies the factoring fee and releases the rest back to the medical billing company.

It’s easy to see how these unique medical vendors can benefit by factoring their invoices. The most important thing to remember is that outsourced medical billing factoring is the perfect way for a new or growing business owner to maintain a healthy cash flow. Rather than wasting time and resources chasing providers for prompt payment, outsourced medical billing business owners can factor invoices to access capital immediately. Then he/she can use that incoming cash to focus on business growth efforts.

Keep in mind that as the medical billing industry continues to grow, more players will certainly enter the market. As more outsourced medical billing companies pop up, their need for financing will also increase. When reviewing potential factoring candidates, factoring brokers should definitely include medical billing companies in their portfolio.

Nikki Flores is a Consultant Liaison for PRN Funding, LLC, which is an extraordinarily focused niche player in healthcare factoring.

PRN Funding exclusively factors the accounts receivable of companies that sell goods or provide services to healthcare providers.

But if you are only concentrating on the “money” side of the business, then you are only focusing on half of the issue.

There are many reasons invoice factoring is beneficial (vs. getting some sort of traditional loan or line of credit).

So why do companies choose to go the Factoring route?

1. Cash Now

We all know that money now is better than money later. A business that is short on cash can not pay it’s own bills let alone take advantage of deals that come their way. With factoring, the business has cash in as little as 48 hours after an invoice is created.

2. No Debt

Not that most businesses can qualify for a bank loan nowadays anyways, but a loan is a debt, plain and simple. Any debt affects the business going forward (and not in a positive way). Factoring is not a debt, nor is it a loan. It is merely the sale of an invoice at a discount.

3. Flexibility

The business decides how much or how little cash it needs. When it comes to Factoring, the business does not need to sell all of its invoices. They can pick and choose which ones make sense – and when they need the money the most.

4. Screening

Instead of “hoping” that their next client pays on time, the Factoring Company can assist with “new client screening.” This can help ensure that clients don’t waste time (or money) agreeing to invoice customers that are not going to pay.

It is important for the Factoring Broker to understand that it is not just about “money.”

Matter of fact, only two of the “reasons” above are actually directly related to money (Cash Now and No Debt). The other two are more related to service (Flexibly and Screening).

If you are only concentrating on the “money” side of the business, then you are only focusing on half of the issue.

Sure, money is a big hot button for someone considering Factoring, but, like most things, money is not really the primary motivation – it is what the money gets you.

Can you make it easier for someone to make payroll? Can you help them take advantage of bulk discounts? Can you help them expand their business and take on bigger clients? Can you help them avoid extending terms to risky customers?

Having money may be the answer to many of those questions, but today’s Factoring broker services are about much more than just money. Service is back. Value is back. Your marketing and prospecting materials should reflect this!

By providing great value to your clients you will be building long lasting relationships that turn into repeat business and referrals.

What differentiates a factoring company from a bank?

First and foremost, since factoring is not a loan, there is no debt on your company’s balance sheet. Moreover, factoring firms have the ability to make a quick decision regarding your medical billing funding options, while banks may take weeks-even months-to approve a loan.

Furthermore, factors determine lines of credit based on the creditworthiness of your customers, while banks focus on your company’s financial history and cash flow. In other words, a funding agency looks to your company’s future while banks place emphasis on your company’s past.

How long does it take to be approved for factoring funding solutions?

In general, a funding agency will begin its due diligence process after receipt of a signed contract. This process can last anywhere between 1-5 business days, and money is moved at its conclusion. Thereafter, a company can receive funds in as little as 24 hours within verification. See our factoring process and learn our medical billing funding options can benefit your business.

What information does a business owner need to provide to a factor in order to begin the process of coming up with funding options?

Required paperwork varies among factors, however, there are a handful of documents that most all will expect. Most likely, the owner of a medical company will be asked to provide a copy of your company’s most recent accounts receivable and accounts payable aging reports, Articles of Incorporation or Organization filing, copy of owner’s driver’s license, voided copy of a check, a master customer list, a sample contract, and of course, invoices to factor.

What happens if my customers don’t pay an invoice?

This depends on whether your company entered into a non-recourse or recourse agreement with the factor. Within a non-recourse agreement, the funder assumes the credit-related loss. However, most medical billing solutions (factors) do not assume the risk of non-payment due to disputes regarding quality or timeliness of your company’s medical billing services. On the other hand, if you have a recourse agreement, your company will have to reimburse the factor for any unpaid invoices. This is usually accomplished by having the past due invoice deducted from the next advance or replacing it with another factored invoice.

Can a medical billing service qualify for funding if it’s a new business or has past credit problems (i.e. bankruptcy, IRS liens, and judgments)?

Yes. A reputable medical billing factoring company will still consider your application if you have credit problems or a recent bankruptcy because the credit decision is based primarily on the creditworthiness of your customers. However, tax problems are handled on a case-by-case basis, so be sure to let you funder know if you have any IRS issues.

Philip Cohen is the founder and president of PRN Funding, LLC, which is a focused player in the medical invoice funding marketplace. Through a process known as factoring, PRN Funding provides medical business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding (http://www.prnfunding.com) provides medical companies with flexible and immediate access to capital.

Article reprinted with permission by PRN Funding, LLC.

Starting a Factoring Business

Those of us that own a business know that turning this dream into a reality takes a few steps. I promise not to make this article about writing a business plan or how to acquire capital from investors. That is not to say that either of these is not important if not crucial to getting a business off the ground. As a matter of fact, there are fantastic resources for free at the U.S. Small Business Administration’s website at www.sba.gov. Besides advice on business plans and loans, you can find great information on managing a business, marketing, law and much more.

I remember when I had first come up with the idea for my factoring company. As a former Chief Financial Officer of a publicly traded company, I figured this factoring thing would be a piece of cake. Nothing was further from the truth.

Where do you start? First, there is no true set of factoring standards. Being an accountant for over twenty years, the industry adheres to a set of accounting standards called “GAAP” (Generally Accepted Accounting Principles) which are how CPA firms and corporations prepare and present their business income and expense, assets and liabilities on their financial statements. By having this set of rules, it provides consistency for individuals and businesses that review financial statements whether for informational or investment purposes.

Finding Factoring Business Training

For those new to the factoring industry there are many associations, professionals and publications that provide educational guidance and useful information about the factoring industry. To start, I would recommend reading a series of factoring training books written by Jeff Callender collectively called the “Small Factor Series”. This series is made up of six books that pretty much tell you what you need to know about factoring account receivables.

The International Factoring Association regularly schedules events on how to factor niche industries such as trucking, workshops for small factoring companies, sales training and other useful tools. For more information, go to www.factoring.org and click on the “Events” tab. While you’re at it, check out this publication for great insight from professionals giving you their perspectives and experiences on a wide range of factoring topics.

Learning the Ropes as a Factoring Broker

My experience has been to start slow and learn the ropes as you go along. Before factoring my first invoice directly, I worked as a factoring broker. I didn’t fund many deals but the experience of working with different factoring companies allowed me to gain valuable information.

If you do get the opportunity to work as a factoring broker, ask the factoring company what they require to fund an invoice. You will be surprised how cooperative the funder can be since your success equates to more business for them.

Also, if you have experience working in a specific industry that could use your factoring services, that may be a good place to start. I have a colleague who only factors small airline commercial receivables. Having worked in this industry for over thirty years, he is familiar with both the clients and customers giving him a tremendous edge over competing factors.

Becoming a Factoring Company

We are all aware of the risks involved with factoring receivables for a living. Talk to anyone who has been in this industry for a substantial period of time and most will usually give you at least one tale of a deal that may have gone just a bit differently than originally intended.

I like to look at my business from the other side of the coin. Obviously there are the rewards in terms of fees and profits — there is no denying that fact. I like to focus on the client. Maybe it’s just a small local manufacturer that needed cash flow to meet payroll or a startup business that has a winning formula but no capital to fuel their growth. You funded them giving them an opportunity to grow and potentially get their company to the next level.

It is basically up to you to chart your own course if you plan on starting a factoring business. Utilize the resources that are available to you, ask lots of questions because at the end of the day it’s your business and your call.

About the Author: Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California. For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his company’s website at www.oxygenfunding.com

Comparing Factoring Companies

1. Application Fee

Some companies charge a “fee” to see if they will work with you. Although we are on the fence on this one, you shouldn’t have to pay more than $100-$150. Avoid companies charging big fees to “evaluate” what you have.

2. Due Diligence Fee

Basically the same fee as #1, but just by another name in our opinion. That doesn’t mean you pay for both. One flat fee (or no fee) is ok. Any reputable company is in it to do business with you over the long haul, not make money on upfront fees.

3. Minimum Number of Invoices

Factoring companies might require a minimum number of invoices to be factored – some will even require ALL your invoices be factored. We believe you should have the flexibility to pick and choose when you need to factor. Try to find a company that does not have a minimum.

4. Reserve Amount

All factors are going to have a reserve amount. They fund a certain amount upfront (say 80%) and the difference (20%) is the reseve. A reserve is typically 20-30% of the invoice amount, depending on the transaction. Anything greater and you may want to shop around. While you get a portion of the reserve back, you don’t want too much tied up on the back end.

5. Renewal Fee

This is a junk fee that some factoring agents charge annually. Either they want your business or they don’t. If they have this, make them waive it.

6. Invoice Copy Fee

Some funding companies will try and charge you to copy your own invoice. Really? Skip this funder altogether – it is a good indication there are a lot more hidden fees.

7. Long-Term Contract

Factoring companies would love to have you sign you to a long-term contract. Although it would not be fair for them to get you going and then have you jump ship right away, it is cost of doing business. If you are going for a contract, don’t go for anything longer than 6-12 months.

8. Help Screening New Accounts

Before taking on a new account, some factors will help you screen their credit worthiness. This can be a big plus and you should look for this when choosing factoring programs.

9. Discount Fee

Of course you want a low factoring or discount fee!  Just be sure to consider the overall picture and realize some factoring companies will advertise low factoring fees to lure in business only to hit you with some of these hidden fees or contract clauses before funding.

Although there are many things to consider when choosing a Factor, the above items should get you on the right track.

It is also helpful to make sure you are dealing with a professional funding company or factoring broker. Check out our updated Directory of Factoring Companies and Services Providers for more details.

Cash flow especially becomes a problem in industries where it’s typical for completed work to go unpaid for 30, 60, or even 90 days after issuing the invoice. Thus, when growing companies start experiencing growth pains, they first try to apply for small business loans.

However, conventional borrowing increases business expenses and normally requires additional collateral. Some companies, especially smaller ones, are turned down by banks because of loan underwriting criteria. Some companies will also explore the option of equity financing, but this form of funding is generally harder to find than debt financing. And once found, it takes longer to arrange.

The Accounts Receivable Factoring Solution…

Accounts receivable factoring, on the other hand, is a viable funding option for companies experiencing cash flow challenges. In a nutshell, factoring is the process of converting the accounts receivable of a business into cash by selling outstanding invoices to a ‘factor’ for a discount.

With factoring, instead of depending on the applicant’s financial statements, the factoring company focuses on the strength of the client’s accounts receivable. In other words, because factoring companies are paid by the applicant’s customers (account debtors), factors are most concerned with the creditworthiness of the applicant’s customers. If the applicant’s company has a product or service that it provides to a creditworthy customer, then the business is a good candidate for invoice factoring.

It’s important to note that invoice funding does not create debt or require additional collateral. It is very simple to use. What could take weeks or months to be approved for funding from a more traditional lender, takes 3-5 business days in the world of factoring. Cash advances from 80% of the invoiced amount, depending on the customers and the business volume, can normally be obtained in 24 hours or less on an ongoing basis. In addition, funding occurs as long as a business has outstanding invoices and needs more cash, and as long as the business is selling to credit-worthy account debtors.

Maintaining a healthy cash flow via accounts receivable factoring provides a growing business with the working capital it needs to pay salaries, reduce debt, improve vendor relations and focus on critical success factors-operations, sales and growth.

PRN Funding, LLC, is an extraordinarily focused niche player in the accounts receivable factoring marketplace. Through a process known as factoring, PRN Funding provides business owners with the financial resources needed to grow and effectively compete in the industry. With no minimums or fixed terms, PRN Funding provides healthcare companies with flexible and immediate access to capital. We give you the freedom to factor what you want, when you want, whom you want, for as long as you want. Prior to founding PRN Funding, Mr. Cohen was an executive officer of The MRC Group, a national provider of Medical Transcription Services. Contact Philip Cohen at toll-free 866.776.5407 or visit http://www.prnfunding.com online.

Article reprinted with permission by PRN Funding, LLC.

Are we getting too impersonal when it comes to making offers or negotiation?

Despite the technological advances over the years the rules of negotiation have not changed. They have a set of “best practices” that the conveniences of technology can derail.

So, can you negotiate Factoring deals online?

To answer, let’s look at three basic negotiation techniques (that apply to factoring and business in general):

1. It must be personal.

Well, despite your ongoing political debates with friends and the numerous jokes being passed around by co-workers, email is anything but personal. Here’s a hint, when the proposal is being sent to BullDOG345@wherever.com, you are already losing the deal.

2. It must allow for interaction.

Don’t mistake emails going back and forth as meaningful interaction. Although the English language is powerful in the hands of a gifted writer, all bets are off when it comes to sending emails back and forth. There is no room for error when it comes to interpretation. Sarcasm, humor, and a host of other real-life emotions not only get lost, they get abused.

3. Sharing becomes easy.

This one is relatively new, but if you are up against someone else, expect your offer to be immediately forwarded to several of your competitors. I am going to guess you didn’t want them in on your best offer letter if you could help it. It also gives the competition to “one-up” your deal out of context. That is not to suggest that you don’t put an offer in writing but a potential client is far less apt to fax on your offer versus just hit “forward” on the email.

Email is a great “foot in the door” vehicle – at most. People want to do business with people, not computers. I receive numerous business proposals on an almost daily basis. Although I like them from a screening process, I would never continue ongoing communication from someone online. Sometimes you just need to get on the phone or meet face to face.

Modern technology can help us cut numerous corners, but the subtlety and importance of the negotiation process is just not one of them.

So, what do you think?  Should a factoring broker or factoring company use email to make and negotiate offers?  Tell us what you think in the comments below!