Frequently Asked Questions
Accounts receivable factoring is a great option for businesses of all sizes. We’re pleased to share the following frequently asked questions about factoring and the mechanics of working with US Funding for your factoring and cash flow management needs.
How Do Factoring Companies Differ from Banks?
Factoring is where an advance is made immediately available to a Client against the purchase of an accounts receivable by a Factor. The Factor then collects the receivable. The balance of the receivable less any fees due to the Factor is then payable to the Client. Banks are regulated by the Federal Government and must comply with stringent guidelines. Business borrowers must provide banks with information such as minimum net worth, annual audits, monthly financial reporting, and other proof of financial stability. A factoring company does not have to comply with the same type of regulations. Therefore, it has the flexibility to offer innovative and flexible financing solutions to their clients.
Is a Factoring Company Really Just a Collections Agency?
No. The operations of a factoring company are not the same as a Collections Agency. In most cases, only current invoices can be factored; past due invoices cannot be factored. Collections agencies deal with collections of past due accounts.
Will I Have to Factor All My Invoices or Can I Choose Certain Invoices to Factor?
You may factor all of your invoices or choose certain invoices to factor; it is your decision.
If I Factor My Accounts Receivable, Would My Customers Write Out the Checks to Me or US Funding?
The customer can write the check out to you.
Where Would Customers Send the Check?
All checks will be mailed to our secure lockbox.
If My Company Credit is Good, Why Should I Utilize the Services of a Factoring Company instead of Borrowing from a Bank?
Factoring is not right for all companies and we would never advise you to use our services if a bank is your best resource. But some companies already have a heavy debt load and do not want to add more debt to their balance sheets. For various reasons, some companies cannot get a loan from a bank. Others just need quick cash to meet a temporary cash flow crunch and do not want use a bank loan as a solution to a temporary problem. Others need to purchase more inventory now and have the money, but it is tied up in accounts receivables which cannot be accessed until customers pay. With factoring, you are using your own money but have immediate access to it.
Is It True that the Fees Factoring Companies Charge are Higher than the Fees Banks Charge Businesses for Loans?
Yes, they are somewhat higher than some bank loan interest fees, but the higher rates can be justified by the fact that you can receive needed cash immediately, often within 24 hours or less, the length of the contract may be much shorter than a bank loan, and you are not incurring more debt (as with a bank loan). The higher cost may also be offset by your ability to take advantage of early payment discounts (from your suppliers) that were not available to you when your cash was encumbered by large accounts receivables and by the possibility that you can offer better credit terms or discounts to your own customers. A factor can also eliminate your need to hire someone just to handle your accounts receivable; they can function like an “outsourced” accounts receivables department.
Service Fees & Contract Terms
Do I Have to Sign a Long-Term Contract to Use Your Factoring Services?
Typically, our contract is for one year; however, it is based on the needs of our clients.
Since You Deal with Different Types and Sizes of Companies, What Criteria Do You Use to Determine Your Factoring Fee?
The fee varies and is based on several factors including the amount to be factored as well as the creditworthiness of our clients and their customers.
How Fast Can I Get Cash for My Invoices?
US Funding can advance you cash as quickly as 24 hours or less.