Factoring is probably one of the oldest forms of financing - dating back to ancient Rome. In the early 1900's the first independent factoring companies were formed. In the beginning it was used for smaller companies and was a fairly expensive method of financing. By the 1960's many Fortune 500 companies were using factoring as a method to stabilize cash flow. Today's factoring companies are large and have significant dollars available. Additionally, their fees have been reduced significantly making factoring a viable option for companies that might have considered it too expensive in the past. … [Read more...]
A Quick Factoring Example…
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Looking for a quick example of the factoring process? Let's say that XYZ Enterprises makes table clothes. They receive an order for 10,000 from ABC Linens at the cost of $1.00 each. … [Read more...]
What is a UCC-1?
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UCC stands for "Uniform Commercial Code." It is a federal code that is recognized in over 40 states. The UCC took the place of various state statues covering conditional sales, chattel mortgages, and other forms of personal property. Think about how a mortgage or deed of trust tie the home loan to the collateral - enabling a lender to foreclose on the property due to nonpayment of the note. A UCC is a way to tie collateral (other than real estate) to the debt owed. A UCC-1 is on record with Secretary of State and/or the County Recording Office. … [Read more...]
What is Factoring?
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Factoring is the purchase of accounts receivables from a business at a discount. The factoring process enables companies to sell yet-to-be-paid invoices and immediately receive cash. … [Read more...]
Is Factoring a “Loan” Like a Bank?
Factoring is not a loan and there are many differences between getting a bank loan and utilizing factoring. Banks lend money. Most of the time they require some form of collateral which can be challenging for small or new companies. Additionally, banks are limited (by regulation) to how much money they can advance a business owner (oftentimes between 30% - 50%). Lastly, bank "loans" show as a debt on the business owners books. Factoring is not lending. It is the purchase of a receivable at a discount. There are no collateral requirements, no "debt" and Factors are not limited in the amount of money they can advance (usually up to 90% depending on the payer). … [Read more...]