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Invoice factoring is a form of financing where a business will essentially “sell” an invoice to a financing company for a slightly discounted rate, usually between 75 and 90 percent of the overall value of the account. The financing company than assumes full responsibility for the collection of the accounts payable, while the selling company receives a cash payment for the sale of the account. For many businesses, this is an ideal short-term solution to several issues.

Account Collection.

In the event of a delinquent or soon to be delinquent account, most businesses are not equipped to handle account collection through in-house channels. This necessitates the use of agencies and services designed to assist in the collection process. In the case of small businesses or start-up businesses, the loss of liquidity and time costs associated with the use of these services can be devastating. Invoice factoring allows troublesome accounts to be handled quickly and efficiently.

Growth Support.

Many new businesses are constrained, at least during the early stages of development, by the availability of capital to fund new projects. Invoice factoring ensures that growth and development is limited only by the overall volume and relative size of the projects being completed. Essentially, invoice factoring allows new business to grow at a rate directly proportional to production levels.

Time Sensitivity.

Financial investments are often defined significantly by the time sensitive nature of the specific investment. Invoice factoring allows business to take advantage of sudden and potentially profitable investment opportunities as they present themselves, regardless of current levels of liquidity.

Financial Records.

Unlike alternative forms of financing, invoice financing does not take into account the credit history or current financial status of the borrowing institution or business. When determining the terms and conditions of a specific account the finance company evaluates the value of the invoice account itself. This allows companies that may not have an extensive credit history, or even some amount of negative factors on their credit account, to obtain lines of credit. Additionally, the accounts can be evaluated much more quickly than a company wide evaluation can be conducted, speeding-up the overall process.

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Factoring, also referred to as accounts receivable financing, is the process by which a company sells its outstanding invoices or accounts at a discount to a finance company which then assumes the risk associated with the accounts in exchange for immediate cash. In this instance, companies are essentially trading future earnings potential for the ability to immediately obtain cash to finance separate projects or cover different expenses.

The particulars of the financial agreement vary depending on the nature of the account and on the nature of the financing institutions personal policies and guidelines. In most instances, the financing company will charge a 5% fee associated with the proceedings, which, may or may not be less then other comparable financing options. Additionally, every account has a value assigned to it on an individual basis. Basically, the lending institution will assign a higher base value to an account relative to how recently the account has been opened. For many small businesses, financing of this form offers several benefits.

Manage Collections.

Many small businesses lack the resources necessary to properly pursue and manage collections. This form of financing allows companies to continue normal business operations while only suffering a minor loss on specific accounts. Though factoring companies are often uninterested in purchasing accounts greater than 90 days past due, most accounts will qualify for financing.

Free Up Capital.

For companies involved in the production process, a majority of their working capital is connected directly to their inventory levels. In the event that a customer wishes a delayed payment schedule, smaller operations are often left facing extended downtime between the completion of an order and payment collection. Factoring allows companies to minimize downtime while maximizing capital liquidity levels.

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I know it’s surprising, but invoice factoring is actually a very old activity; some experts date it as early as the 13th century. It all started with trade financing, which was financed by factors, but the entire process was refined during the following centuries. In the early stages of factoring, the factor would simply buy (and often resell) goods, giving the producer a cash advance in exchange for them.

Factoring has grown fast in the U.S.A. during the last century, mostly due to the fact that the textile industry has developed extremely fast and the American banks were reluctant to lend their money to the business owners (not that this has changed since then). In fact, the textile industry continues to play a very important role when it comes to invoice factoring, but other industries such as trucking, manufacturing, etc have become more and more important during the last decades.

Today’s ideal candidates for factoring are the small companies who need quick funds because they are growing fast and / or have contracts with big corporations or the government, but lack the needed working capital.

The invoice factoring companies act as an interface between the small business owners and their customers most of the time. The factor will offer financing only if the customers have a good credit history; this will ensure the factor that it will be able to get its money back. On the other hand, the small business owner doesn’t need to have perfect credit records; the factor doesn’t take that into account.

In addition to its intrinsic value, invoice factoring helps the small business owners minimize the overall risk, because the factor will check the creditworthiness of their customers, and thus will practically eliminate the small business owners’ risk. And as an added bonus, many factoring companies will offer their clients free advice on how to repair their credit, cut their losses and maximize their profits.

So how do you prepare for the future? Make sure to choose an invoice factoring company that really cares about its customers, doesn’t make use of hidden fees and has highly trained personnel that is familiar with your industry. Compound Profit has a great team of Profit Advisors who offer customized factoring solutions for each customer. Contact us today for your complimentary consultation and you will discover why we set the standards when it comes to invoice factoring.

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If you have tried to apply for a bank loan but your application was rejected, you aren’t alone: a study that was conducted a few months ago shows that only half of the loan requests are accepted – and these are collateral-based loans, where the companies use real estate, expensive equipment, etc to guarantee the loan! I can only imagine the acceptance rate for small business owners, who can’t afford to use any collateral most of the time, or they’ve just started up their activity, so they don’t have a long standing, positive business credit history.

There’s some good news at the horizon, though: through invoice factoring, your company can get access to a viable source of funding, even if your loan request was rejected by the bank. In fact, almost any company can use invoice factoring services, regardless of their credit history, number of years in business, current profit, inventory, and so on.

But how does invoice factoring work? The factor will buy out your invoices at a discount, paying you a big, upfront advance from the value of your accounts receivable. It’s a win-win situation: you get the needed cash right away, without having to wait for 1... 3 months in order to see it in your account, and the invoice factoring company gets a small service fee that’s usually in the 1... 3% range, depending on the receivables’ value, your clients’ credit-worthiness (the amount of risk taken by the factoring company), and so on.

Once you set up the system, the money for your invoices can hit your bank account in a single day (and sometimes even faster!) thus allowing you to have access to the cash you’ve already earned when you actually need it, and not when the clients finally decide to pay you. Most factoring companies will advance you about 80... 90% from the invoice value as an upfront payment, and then send you the rest of the money (minus their service fee) as soon as they are paid by your customers.

If you need to increase your company’s working capital, need payroll money, tax money, want to increase your inventory, get better prices from your suppliers, etc, invoice factoring is a business financing solution you’re going to love for sure. Contact us to discover how invoice factoring can help your company grow.

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A client (let’s call him John B.) had a small, and yet successful business; however, even though he was making a decent amount of profit each year, he was thinking to shut down his company for good. If you are asking why he wanted to do that, the answer is quite simple: John didn’t have enough working capital.

John’s business was profitable indeed; he only had a few employees, but since the quality of his products were very high and his prices were very good, his customer list included many high profile companies and even a few government agencies. And I’m sure that you know it: those agencies were buying stuff in large quantities from John.

It all sounded good in theory, but he soon realized that something wrong was happening: at some point, he didn’t have enough money in the bank, so he had to delay a payment to one of his suppliers. A few months later, he had to bring some of his own money from home, in order to take care of the payroll. Finally, he chose not to bid for a major government contract because he wasn’t sure that he will be able to fulfill it. He was still making a lot of sales, but something was preventing him from having enough money in his bank account.

John was a “real” entrepreneur, so it didn’t take him too much time to figure out what the problem was: his clients were paying the invoices in 30 days or more, while his suppliers were asking for their money in 5 to 10 days. In addition to that, John had to pay his employees twice a month, and this was denting his bank account quite a bit, preventing him from getting more business.

Fortunately, the solution to John’s problems was very simple: invoice factoring. Through factoring, John is now able to cash his invoices in less than 24 hours, so he is able to pay all his suppliers and meet the payroll in time. The process is very simple: whenever John sends out an invoice to one of his clients, he faxes a copy of it to the factoring company, which gives him up to 90% from the invoice value right away. The invoice factoring company then waits until John’s client pays the invoice and then sends him the remainder, keeping a small fee for its services.

This story has a happy end: John’s company is now thriving. He was able to confidently bid and win a huge government contract, knowing that through factoring, he will always have quick access to the needed cash. If you are facing similar problems, Compound Profit’s Advisors have created customized solutions for each business owner, so make sure to contact us for your free consultation.

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If you need to finance your business but the bank has turned you down, learn how you can use accounts receivable factoring to finance your company.

I’m sure you know what I’m talking about: you’ve got several important, and yet slow paying customers. You would definitely want to make them pay your invoices faster, but at the same time you are afraid that you might lose them by putting pressure on them. Sadly, these slow paying customers aren’t a recent invention; in fact, because of the poor economy, most clients will pay their bills after a month (and sometimes even after 3 months!). And at the same time, the payroll can’t wait. The rent can’t wait. And your suppliers don’t even want to hear about waiting that much in order to get their money.

Some of the business owners will go to the bank for a loan and a few of them will manage to get it, because they have a long, great, established business history record. The majority will fail to get a loan from the bank, though, and it’s clear that if you’re barely recovering from the crisis or if you’re new in business, your chances to get a loan from a banking institution are virtually zero.

Fortunately, there is a solution to this problem: accounts receivable factoring. If you can’t wait for up to 3 months in order to get paid by your clients (and who can wait that much time?) you can use factoring, which can provide the needed financing for your suppliers, rent, payroll, and so on. The process is very straightforward:

- You invoice your customers and send a copy of your invoice to the factoring company;

- The factor will give you a big upfront payment that can go up to 90% from the value written on the invoice. The money can be in your account in less than 24 hours;

- As soon as your clients pay the invoice, the factoring company gives you the rest of the money, keeping a small service fee that’s usually less than 4% for its services.

Invoice factoring allows you to have quick access to cash, giving you the funds that will permit you to sustain and grow your company. With factoring, your business credit history really doesn’t matter –your customers’ credit history is important. If you work with slow paying clients that have a good business history record or with the government, invoice factoring is definitely an option you should consider.

Compound Profit offers invoice factoring with rates that start at only 0.75%, so contact us today.

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Many business owners (no matter if they are running a small or big business) are having a hard time trying to survive these days. And it might look bizarre to you, but some of these struggling businesses are in fact profitable, but they lack the needed capital that would allow them to grow faster, meet the payroll, etc.

It’s true that the business owners have a part of the guilt; most times, the need for working capital is overlooked because buying new equipment, paying salaries, and so on, have a greater priority. On the other hand, more and more customers have started to delay the payments because they lack cash as well, or simply because they don’t care too much about others. And having your own in-house credit and collections department is definitely too costly.

What is the solution, then? Working capital factoring allows any business owner to access the cash the he or she needs right away, getting the money that are tied up in the company’s accounts receivables without any delay. As an example, if your accounts owe you (let’s say) $50,000 you could have a factoring company purchase your invoices and give you an upfront payment of 90% ($45,000) right away, the remainder of 10% being paid as soon as they get paid by your customers. The typical service fees range from 1% to 4% and can even go below 1%, depending on the amount of money and the risk that is taken by the factor.

Selling the invoices for cash eliminates the need to wait for 30, 60 or even 90 days in order to get paid; it’s an effective, inexpensive method that allows you to get the working capital you need without having to come up with additional collateral or to give away equity. In addition to that, working capital factoring can be used without any problems even by startups, small businesses that are usually turned down by the banks because they’ve just started their activity. With factoring, all you need is a credit-worthy customer; the cash can be obtained in only 1-2 days and the amounts of money can grow naturally, as your business expands.

Through working capital factoring, your business can get access to cash on a regular basis, thus improving its cash flow and growing its profit without any trouble. In addition to that, factoring improves your business credit score and allows you to get better offers from your suppliers and pass them on to your customers, thus attracting more business and increasing your company’s profitability even more. Contact us to discover even more working capital factoring benefits – we offer 100% free consultations.

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Quite a few business owners struggle to pay their suppliers and payroll these days. Sometimes, this might be good news: the company is growing and it doesn’t have too much liquidity at its disposal. Unfortunately, many times this situation has to do with the customers taking way too much time to pay their accounts. It’s true that your company can also grow by offering better terms to its customers, but this could lead to serious cash flow problems.

On top of that, the banking regulations are more and more severe, so many businesses are struggling to survive and grow, mostly because their owners aren’t aware that there are other alternatives. One of them, receivables financing, is offered by the “factoring” companies. The company sells its business to business / government receivables to the factor and gets close to 90% of the dollar value right away, receiving the remainder (minus a small service fee) about a month later, when the factor gets paid for those invoices. This financing method doesn’t depend on your personal or business score, the amount of year in business, collateral, etc – what really matters is your customers’ credit.

Why isn’t this financing method much more widespread, then? Believe it or not, many companies don’t even know that it exists! And other people think that it is a costly financing method, when it fact it is very cheap – here’s an example:

An entrepreneur has got a $1,000 invoice in January and receives 80% ($800) from the factor as an advance payment. Thirty days later, the factoring company, who has a (let’s say) 3% rate for its factoring services, pays the business owner another $200 – 3% from the invoice value, so the business owner gets a total of 970 U.S. dollars in exchange for his / her $1,000 invoice.

This is a plain 3% service fee, and it is clear that the business owner will pay the same small amount of 3% if he / she decides to sell the invoices each month of the year; the total service fee for 12 invoices of $1,000 each = $12,000 will only be $360 (3% from the 12,000 U.S. dollars). Quite a few business owners believe that the percentages add up and thus believe that the service fee is 3% x 12 month = 36% -> nothing could be more wrong!

Other alternative financing companies offer rapid credit card payments and similar services, but the service fees add up quickly and easily reach 5%, being bigger than the ones used by the factoring companies. In addition to that, factoring doesn’t add any debt to your balance sheet and offers you a free customer credit check.

Working capital factoring and purchase order factoring are just a few of the business financing services offered by Compound Profit; its highly trained Profit Advisors are looking forward to offering you a complimentary business analysis, in order to find ways that will help you grow your business. Christy Giroux is a Regional Director of Compound Profit of Arizona and can be reached at 1-877-386-3716, ext. 249. Visit http://www.cprofit.com for more information.

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The financial crisis has determined the traditional lenders to raise their credit standards, as well as their commissions, making it harder and harder for many business owners to get bank loans. This happens because the banks aren’t willing to risk their precious finances by handing them over to a company that has less than perfect business credit records. What surprises me, though, is the fact that very few business owners, especially small business owners, have heard about working capital factoring; this article will hopefully be a good introduction.

The first myth that has to be debunked is the information that factoring is a financing option used only by the struggling small businesses. Nothing could be farther from truth: huge companies use factoring on a monthly basis because they can access financing instantly, without affecting their cash flow, and get to benefit from tax advantages as well.

On the other hand, it is true that small businesses can get the maximum benefit out of this financing instrument because they can’t grow properly (or even survive!) when their money is tied up in their accounts receivable, since they don’t usually have a lot of cash at their disposal. It’s depressing, but many clients, be them huge corporations or tiny businesses, prefer to pay using checks or simply decide that your company has to wait for 1, 2 or even 3 months before receiving the payment for the delivered products and / or services. Now that’s sad news!

Working capital factoring is the process through which an alternative financing company, also known as a factor, provides the needed financing to these companies by purchasing their creditworthy invoices at a discount. This gives the small business owner quick access (in only 1-2 days) to the needed money and has a 100% success rate, provided that the invoices are issued by a trustworthy company. Your company’s credit score, the number of years in business, and so on aren’t important; it’s not a surprise then that more and more company owners prefer to use factoring instead of trying to get loans from their banks.

Compound Profit’s factoring rates start at only 0.75%, so feel free to contact us for your free consultation.

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We all know that a medical drama is a TV program that centers its activity on a hospital or another medical environment. As we watch the episodes from a new series, we start to grow attached to some of the characters and we start hating the others. Most of the time, there’s a lot of drama in there, and for a good reason: the doctors, the nurses and the auxiliary personnel are fighting to save as many patient lives as possible.

While most medical dramas last for about 60 minutes, some of the medically-related business owners live in a drama that can last for many months or even years: poor cash flow. It’s not a secret that the insurance companies only pay them after many weeks of waiting, and sometimes the owners have to wait for their invoices to be paid for over 3 months!

Fortunately, the alternative financing companies have invented medical factoring, which is the process of selling your accounts receivable to a factoring company, a business entity that buys your invoices and gives you a big advance payment of up to 90% right away. The factor then waits until your invoices are paid, and then it gives you the rest of the money, keeping a small percentage for its services.

I know, you can’t find too much romance in there, but the words can barely describe the happy look on a business owner’s face when he or she realizes that the cash flow problems are solved for good. Think about it: as your business grows, your receivables grow; sadly, the lack of capital has put many owners out of business or has forced them to give away equity. This is definitely not the case with medical factoring: as your medically-related business grows, you get instant access to larger and larger funds.

And this, my friend, is the end of a modern medical drama. The medical business owner can now pay his / her suppliers on time and the employees are happy knowing that they will always get their salaries without any delay. If you know a business that might need medical factoring services or any other business that could benefit from selling its accounts receivable, getting the cash for them in less than 48 hours, you have come to the right place, so contact us to get a 100% free consultation. To your success!

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