Commonly Asked Questions About Factoring
							Q: How does factoring accounts receivables work? A: Simply put, factoring is the purchase of accounts receivable from a business at a discount. It is designed for businesses that need money immediately, and can’t afford to wait 30, 60, or 90 days for a customer to pay. In most cases, either the business owner can’t meet his cash demand (because, for example, his customers are slow to pay or income is low due to a seasonal slowdown), or his business is growing so rapidly that its cash flow can’t keep up with its growth. Q: What type of business can take advantage of this alternative funding source? A: Any business that generates an invoice and delivers a verifiable product or service qualifies. Q: Must I agree to finance a minimum volume of future receivables? A: No. Finance one invoice or as many as you need to meet your cash flow needs. Stop or continue as needed. Q: Can a business with a history of bad credit (or a new business with no credit) qualify? A: Yes! Another benefit of accounts receivable funding is that it depends on your customers’ creditworthiness, not yours. (And, as part of the service, the research to assess your customer’s creditworthiness is performed by the factor for you). Q: Can my business qualify if we already have existing credit lines, SBA loans or are a debtor in possession (Chapter 11)? A: Yes! This credit line complements any loan you may have or are seeking. The funding source will work with your existing lenders to enable you to access additional funding. Q: What will it cost? A: Costs can vary depending on a variety of factors including the average size of the receivable, average turnaround time, etc.. The only reliable approach is to provide the funding source specifics of your business and have them determine your cost based on those figures; in other words, complete an application. Q: How does this credit line differ from the bank’s credit line? A: Operationally, the banks credit line has a limit and is secured with almost all of the assets of your business. In addition the bank holds the personal guarantee of all the partners who own the professional corporation and the obligation to repay which affects their personal credit. Accounts receivable funding is not a loan and your credit line increases as your business grows. Q: How long does it take to get funding? A: The speed of the funding process will depend on the availability of data required for evaluation but generally as little as three weeks after the letter of intent documents are approved. Thereafter, the funds are usually available two business days after submission of the invoice or batch of receivables for funding.