A vendor guarantee is a tool that can help some companies cover their supplier expenses. Companies that manufacture products but cannot obtain conventional financing commonly use vendor guarantees. This article explains how vendor guarantees work, who can use them, and the product’s limitations. We cover: 1. How to finance supplier costs Paying for supplier expenses […]
Frequently Asked Questions
Is Invoice Factoring Right for Your Business?
Invoice factoring is a business financing solution popular with small and midsize companies. This article helps you determine if factoring is the right solution for your business. We guide you through eight questions to ask before considering a factoring facility. 1. Can my cash flow problem be fixed using factoring? The first question to ask […]
Are Factoring Rates That Important?
Most prospective clients consider the factoring rate the most important feature of a plan. In fact, pricing is usually the first question clients ask prospective finance companies. Seeking the best rate is a good strategy, but it should not be the only detail you look for. Other parts of a plan are just as important. […]
Why Do Factoring Companies Hold a Reserve?
Most factoring transactions don’t use a full advance. Instead, they advance less than 90% of the invoice and hold the rest as a reserve. This reserve is rebated once the transaction settles. The reserve is an essential component of a factoring transaction. It reduces the chances of having settlement problems. This article explains how the […]
Why Are Net-90 Invoices Not Factorable?
Some companies ask their vendors to provide net-90 days or longer to pay invoices. This request often strains the vendor’s cash flow. Few companies can wait three months to get paid. Vendors often address this challenge by trying to finance these invoices. Unfortunately, most net-90 invoices cannot be financed with factoring. This article explains why […]
What is Non-Recourse Factoring?
Non-recourse factoring is a type factoring financing in which the factoring company assumes the loss if invoices are not paid due to end customer insolvency. It is one of the two common types of invoice factoring offered by finance companies. However, it is also widely misunderstood by clients. In this article, we discuss: 1. How […]
IRS Tax Liens and Factoring
Every so often, we encounter a prospective client with a tax lien against their company. Usually, the lien is related to delinquent payroll, state, or federal taxes. Having a tax lien is a serious matter that affects your ability to get factoring. This article explains how tax liens work and provides a strategy to secure […]
How Do Factoring Companies Verify Invoices?
Factoring companies verify customer invoices as part of the financing process. This article explains why factoring companies verify invoices, how they do it, and how they manage potential issues. We cover: 1. Factoring basics Factoring is a form of financing that allows companies to sell their accounts receivable to a finance company. In exchange, the […]
Why Can’t I Combine Factoring with a Business Loan?
Getting a factoring line if you already have financing in place is difficult. Factoring companies can finance your invoices only after they secure a first UCC position on your accounts receivables. This requirement often conflicts with your current lender’s collateral position. This article explains how loans and factoring lines are secured and provides the criteria […]
Understanding the Factoring Rebate
Most factoring transactions are structured as the purchase of an invoice in two installments. The first installment, usually 70% to 90% of the invoice, is the factoring advance. The second installment, the remaining 15% to 30% (less fees), is the rebate and is usually paid once the customer pays the invoice in full. At least, that […]