It’s a competitive business and some factoring companies advertise super low discount rates to lure in accounts receivable funding clients and hit them with hidden fees later.

Want to know the true factoring charges before signing on the dotted line? Use this chart for an accurate factoring fees comparison.

Factoring Company Comparison Chart

Factoring Services

• Funding Amount Available
• Advance Rate
• Discount fee (Percentage charged per number of days)
• Minimum Discount per invoice
• Recourse or Non-recourse Factoring
• Personal Guarantee
• Validity Guarantee

Setup Fees:

• Application Fee
• Origination Fee
• Due Diligence Fees
• UCC / Filing Fees
• Documentation Fees
• Attorney Fees

Ongoing Charges and Minimums:

• Minimum monthly invoice volume
• Minimum monthly funding fee
• Administrative Fees
• Facility Fee
• Monthly Lockbox Fee
• Credit Check Fee
• Monthly lien searches

Funds Transfer Charges:

• ACH fee (electronic funds transfer) – 2nd day
• Wire transfer fee – same day
• Overnight check fee

Other Charges:

• Same day funding
• Minimum factor fees (over life of account)
• Inactivity fee (if no activity for certain number of days)
• Early termination fee
• Forwarding fee to send money to a new factor
• Missing notation fee (factor notation on invoice)
• Check conversion penalty
• Processing Fee for invoices not factored
• Other Fees (What, there’s more?)

General Practices:

• Time for new account setup
• Time for new customer credit approval
• Frequency of rebate payments
• Float (number of days for customer checks to clear)
• Spot factoring availability
• Length of contract
• Automatically renewing contract

Copy this chart into a spreadsheet and use it to compare quotes for factoring services and charges. A few simple questions today could save thousands in dollars and surprises!

If you’re searching for reputable factoring services be sure to grab a copy of the 2010 Factoring Company Directory in the bookstore.

Source: Chart adapted from comment posted by Jeff Callender of Dash Point Financial sharing how his company spells out costs.

And to add insult to injury, many construction companies who obtained a business loan will probably, or already have found themselves out of covenant. This is due to falling sales. Simply put, banks won’t let them tap into their lines of credit until their sales are back on track.

What’s more, even in the factoring industry, few companies dare to offer construction factoring since the risks of default are still high. However, in many cases a factoring company will be able to help. There are quite a number of firms specializing in construction factoring.

Historically, construction factoring has been used in the construction industry for years. The latest trends indicate that the recent economic downturn and tightening of the credit markets has been especially hard on the construction industry. Contractors are experiencing cash flow problems and having to focus on the new sustainable building code standards. The availability of commercial financing has been chaotic for the past year, so the situation is especially evident when seeking construction funding for commercial property.

Invoice factoring allows businesses to obtain funds based on their current accounts receivables. Construction subcontractors have to wait as long as thirty (30) to ninety (90) days to get paid for their outstanding invoices. Construction factoring advances funds against invoices and provides enough money to pay the bills.

Following are a few things you can do for starters, to prepare better if you are in the construction business. Before calling any business finance company, be sure to have your house in order, specifically:

1. Make sure you have up current, up to date financial statements. This includes a balance sheet, income statement/Profit & Loss, A/R aging report and AP aging reports

2. Handle any unpaid taxes as best you can,

3. Try to clean up your receivables – and quickly handle any accounts that are past due for more than 70 days.

Although there are no guarantees in this economy, these three steps that should help you better position your company for funding.

Also remember that the construction industry is one of several sectors that can benefit tremendously from invoice factoring. The sub-contractor, or construction company is no longer required to wait for payment before starting on the next phase of a project, or begin construction on a new project.

Factoring enables the sub-contractor or construction firm can realize quick turnaround of 48 hours on accounts receivable due for completed stages of a construction project. With construction invoice factoring, the construction company, or sub-contractor, can be paid virtually overnight for these invoices (accounts receivable) thus speeding up cash flow and improving the company’s ability to start immediately on the next phase of construction.

Author: Kristin DeAnn Gabriel – The Interface Financial Group (IFG) is North America’s largest alternative funding source for small business. The company provides short-term financial resources including construction factoring, serving clients in more than 30 industries in the United States, Canada, Australia and New Zealand. IFG offers expertise in factoring, accounting, finance, law, marketing and banking.

Article Source: EzineAricles.com – Construction Factoring Dips Along With the Construction Industry

Join us Tuesday, March 23rd at 2 pm or 9pm EST to discover how to profit with alternative financing.

Nearly 80% of North American companies report that the economy has had a direct negative effect on their business with a majority citing lack of funding, tightening cash flow and a slowdown in customer payments.

The Alternative Business Finance Industry is bursting wide open with opportunity and experiencing unprecedented growth in assisting small to medium sized business with their cash flow endeavors.

Yet an astounding numbers of companies are not aware of this $136 billion dollar industry and the cash flow instruments available to them when the Bank says “No!”.

The credit crisis and economic meltdown has also created an opportunity for business professionals and individuals seeking a career change to earn substantial residual income in brokering, buying and selling invoices.

Plan to attend the complimentary webinar titled The Alternative Finance Industry Exposed hosted by The Business Accelerator Inc. and Millennium Funding. You will learn how to Capitalize Your Business, Your Potential and Your Future.

We are sorry you missed this webinar. Please sign up below to be notified of our next event and the latest factoring news.

This all new webinar is scheduled Tuesday, March 23rd – Two Times to Choose From!

2 p.m. EST – https://www2.gotomeeting.com/register/539521594

9 p.m. EST – https://www2.gotomeeting.com/register/502269690

]]> http://factoringinvestor.com/new-factoring-webinar-the-alternative-finance-industry-exposed/feed 1 http://factoringinvestor.com/why-use-spot-factoring http://factoringinvestor.com/why-use-spot-factoring#comments Fri, 19 Feb 2010 22:03:48 +0000 Steve Ontiveros http://factoringinvestor.com/?p=1503 Spot factoring lets a business raise working capital by receiving an advance on just a single outstanding invoice. Here are 3 reasons it is effective to offer spot factoring to clients, as shared by Steve Ontiveros of Resource Business Partners, Inc.

Here’s why we do spot factoring:

1. Control: We prefer to give our clients the control over their own AR. They know week by week what their working capital needs are better than we ever will. If they have a 100K invoice, but only need 20K this week – then we’ll do that for them. Why pay the spot factor rate on money you don’t need? That needlessly ties my clients hands behind their backs.

2. Soft Sell: It’s easier to tell a prospect (particularly after they look at spot factoring rates) that they can factor as much or as little as they like. Hire us and fire us in the same day if you feel like it.

3. Higher than Average Referral Rates: For those spot deals we organize, we have seen over the years that our clients are happier in those situations compared to non-spot deals. Happier clients = more referrals = more business for us.

Steve Ontiveros of Resource Business Partners can be found online at www.wefactor.com.

Looking for more information on spot factoring?  See the FactoringInvestor.com article entitled “What is Spot Factoring?”

In some cases a company may still be eligible to work with a full-service factor and realize the benefits of factoring.

For starters, oftentimes banks may not have used the current receivables as collateral. If there is no lien on the receivables being factored than a company is free to sell them as the owner sees fit.

Secondly, depending on the situation, if the bank does have a lien oftentimes they are willing to subordinate once the bank understands the situation.

The other alternative is to pay off the existing loan. This requires enough receivables to leverage the buy out, but it may be an option.

Believe it or not, many referrals actually come from loan officers that were unable to provide additional help to their banking clients. Many lenders are very familiar with “interim factoring” and welcome the help.

Tax liens work in much the same way as working with a bank. They are handled on a case-by-case basis.  Remember the government wants to get paid as well. They have been known to subordinate their position to help improve their chances of receiving payments on back taxes.

Having a bank loan, line of credit, or tax lien may not exclude you from the benefits, and financial freedom, of utilizing a full service factor. Just be sure to mention the situation upfront when making application to factor accounts receivable.  This will help set the stage for good working relationships and avoid delays or confusion during the due diligence process.

FactoringInvestor (FI) caught up with Howard Chernin (HC) to fill us in on the accounts receivable funding business. Howard is the Sr. Vice President of Quantum Corporate Funding, LTD in Fort Lee, New Jersey and heads up the New Business Development division.

FI: What transactions will your company consider funding?

HC: Since 1991 Quantum has been factoring all types of receivables, except medical. We continue to target transactions ranging from $25,000 to $5 million plus.  We will still buy a single invoice rather than requiring a company to sign up for a long-term contract.

We are well known for factoring construction receivables, however we will consider all types of invoices.  Right now we are seeing quite a bit of manufacturing, staffing, and construction.

We are considering deals all across the country. In fact Tobi in our office moved to Arizona and is developing business in that part of the country.  The first step is to send us some basics on the transaction, including debtor information and aging reports, to gauge our interest level.

FI: How did you get your start in the factoring business?

HC: I worked in the corporate world for several Fortune 500 companies. I wanted to do something completely different and started a fire sprinkler company in the construction field. That led to my involvement in the factoring business with Quantum in 1993.

FI: What unique benefits does your company provide?

HC: ME! I’m the biggest benefit in helping consultants work with our company to factor receivables for their clients.

FI: How do you handle commissions to brokers or consultants?

HC: Our standard commission is to pay 10% of whatever Quantum makes for the lifetime of the account.

FI: What do you consider the best methods for finding deals?

HC: In today’s market it is all about referrals.  Talk to people and tell them what you do.  Think about your sphere of influence.  Everyone knows 250 people and they in turn know at least one person.  So now you have at least 500 people you are connected to on some level. You must constantly use your own referral base to build your business.

FI: What advice would you give to new professionals just starting out in the industry?

HC: The first and most important thing is to get on that phone and be able to take rejection.  If you can overcome rejection you can succeed.

Initially a consultant needs to be able to make 250 calls per day and learn from each call. Out of those 250 calls you might get 15 leads to follow up on.  Then follow the lead from the starting point to the ending point.  Understand what the factor likes and their requirements then participate in the funder/client conference calls and just follow the whole process.

FI: What is the most common business mistake you see people make?

HC: Consultants often get hung up on that one deal and just won’t let loose of it.  It is the old adage that you have to throw enough deals against the wall and have enough leads working in order to make something happen.

FI: Given the current economy, have you made any changes in the way you transact business?

HC: One of the most challenging aspects of being in the factoring business now is evaluating credit.  A company’s credit can change on a daily basis.

For example someone called me up this morning on a $500,000 receivable owed by a well-known company.  Now I need to double check on how that company is fairing in the current market. It is a very challenging economy and nothing is a given anymore. We must double-check everything.

Where can people contact you to obtain more information? Our website is a great place to start for factoring information and transaction guidelines.  You can also contact me at hchernin@Quantumfunding.com or by phone at 201-799-4342. Tobi Wilkins, VP of Sales and Marketing, is also available at tobi.wilkins@quantumfunding.com or 201-799-4348.

FI: Is there anything else you would like to share with our readers?

HC: We encourage the consultant to participate in our conference call with the client.  This is such an important part of the process. The factor and client can both understand what is needed from each other.  It also keeps the consultant in the loop and they know first hand what it takes to get the deal done.

There are two key words in our business; partnering and collaborating. You must be able to partner and collaborate with other people to succeed.

FI Summary: Helping businesses raise cash through factoring account receivables is one of many cash flow categories where consultants can earn commissions by referring transactions to funding sources.

This business financing solution enables a company to receive an advance on a single outstanding invoice.

While traditional factoring arrangements are often structured on the expectation of monthly reoccurring business, spot factoring can be a one-time transaction. Also known as single invoice factoring, the business can obtain the working capital they need without lengthy contracts or ongoing commitments.

A Factor will review the invoice, confirm the goods or services have been delivered, and underwrite the credit worthiness of the debtor. Once the factor is satisfied they will advance a percentage of the invoice to the business, generally 70 to 90 percent of the amount billed. The balance is kept as a reserve to be released upon payment of the invoice less the factoring fee.

Since the transaction is based on a single occurrence a company offering spot factoring is likely to set a minimum invoice amount to make the accounts receivable purchase worth their time, effort, and investment.

While a factor might hope for future business, there is no obligation for the client to use these services in the future. This makes single invoice factoring a viable business financing strategy for companies that do not use or expect to use factoring in their normal course of business.

In addition, Bibby Financial Services extended a $1 million credit facility to a transportation and logistics company with many fleets and locations throughout the western United States. The company plans to use the funds to meet payroll for independent contractors hired to execute deliveries and service local accounts.

Nick Hart, CEO, Bibby Financial Services (CA), states, As we see traditional funding facilities continuing to tighten up on credit, it is important that businesses have the finance available to grow their business. At Bibby Financial Services, our receivables based funding lines are able to give these businesses the working capital they need to expand. Hart continues, We have a proven, 200-year old successful record of assisting companies through all types of economic conditions, by providing the necessary cash flow to help them expand and prosper.

Bibby Financial Services doubled its clients and volumes in 2007 and exceeded expected growth levels in 2008.

For more information including the full press release visit Bibby Financial Services or (BUSINESS WIRE) online.

Many factoring companies offer Credit Risk analysis when you are considering taking on a new client. Why should you take advantage of this?

For starters, Factors are very good at determining the likelihood of payments coming in on time. They have been doing it, for a variety of clients, for a long time. They can assist in determining the credit worthiness of a potential client – often at no charge to you!

Many businesses skip this crucial step. They seldom run credit checks on potential clients and pay the price later when the client is either far behind on payments or ends up not being able to pay at all.

A Factor can provide a comprehensive report about the potential client before you take on the account. They can analyze credit worthiness, payment records, and even aging reports. In addition, the information provided by the Factor may help you determine what credit terms, if any, to extend your new client.

As an added bonus, you will have a pre-qualified customer in the event you ever desire to factor an invoice with their name on it as debtor. If the Factor tells you up front they would not be able to purchase an invoice with the client, that might be a good reason to either steer clear or work with the customer on a limited or cash basis until they establish a better track record.

In summary, many Factors have a variety of services available to clients going well beyond simply purchasing invoices. They can pre-qualify clients, provide accounting help; even take over your day-to-day billing process. The value of a strong factoring relationship using credit risk analysis continues to increase in the face of a weakening economy.

Every business has cash flow needs but options are dwindling in the face of a recession.  Fortunately savvy business owners know they can still raise cash when banks say no to business financing.

It is helpful to understand why more businesses are benefiting from factoring their invoices and account receivables in 2009.

The key to many of the benefits that accompany factoring is the distinction between selling an asset and obtaining credit.

Rather than a bank loan, the business sells the right to receive payment on outstanding invoices to a factoring company (See How Accounts Receivable Funding Works for more information). 

Here are the top 10 benefits to factoring invoices:

1. Obtain Cash Without Debt
2. No Credit Limits
3. No Long Term Contracts
4. Use of Funds is Not Restricted
5. Pick and Choose What Invoices to Factor
6. Strong Financials not Required on Business
7. Available to new and non-bankable businesses
8. Avoid Extending Invoice Terms to Questionable Customers (Most Factoring Companies will Underwrite the customers ability to pay)
9. Low Factoring Fees
10. Receive Cash Fast (usually within 24 hours on established accounts) 

By not increasing debt and freeing up much needed cash, it’s easy to see why so many businesses are using factoring to pay bills, fund growth, increase sales, meet payroll, maintain a good credit rating, or take advantage of early payment discounts.