| . | Did you know one of your greatest Cash Assets is hidden in your Accounts Receivable ? It's surprisingly simple to receive the working capital you need. How ? Just turn your business invoices ( accounts receivable) into ready cash. Companies sell their invoices (called factoring) because they need money now. Factoring , that started many years ago in Europe, has now become a convenient, affordable, acceptable solution here in the US to improve your cash flow without incurring new debt. Sell your business receivables for cash now Business owners sell their receivables when: - Customers slow pay in 30-60-90 days, tying up needed cashflow
- Payroll, rent, taxes or other operating expenses are due but the cash flow is in gridlock
- They need an advance to buy supplies to fill incoming orders or to be in a position to bid on bigger contracts
- Their suppliers offer cash, early payment and volume
When would your business benefit from factoring ? Factoring is the perfect solution for a cash flow bottleneck. But Factoring has other benefits too: - Reduce potential bad debts
Factoring is often a non-recourse transaction, which means the company (the Factor) buying your invoices assumes the risk of collections and potential bad debt. - Offer Credit terms to your customers
With factoring, you can offer credit terms ( or extended credit terms ) to your customers without negatively impacting your cash flow. Make it easy for customers to buy from you and watch your business grow. As sales increase , you're able to turn each new invoice into immediate cash. You gain consistent working capital to meet increased demands without the hassle of re-applying for traditional financing or another line of credit. - Take advantage of early payment and volume discounts
Many suppliers offer discounts on purchases paid for within two to ten days. By turning your invoices into immediate cash, you can take advantage of your supplier's offers, plus have the flexibility and cash to make volume purchases. - Stop offering early payment discounts to customers
Why offer early payment discounts to your customers , when you're guaranteed a cash advance within 24 to 48 hours ? Factoring saves every dollar in discounts that customers were taking. Don't give up equity or take on debt just to get cash ! Be aware of these additional benefits : Selling your receivables does not require you to surrender any equity in your company or take on partners as in venture capitalism. Plus, selling your receivables is NOT a loan so you don't incur any additional debt and it does NOT negatively impact your financial statements. Receivables funding relies on the strength and credit worthiness of your customers. So often even if you don't have the highest FICO scores that the banks are looking for our funding sources will advance you the funds you need. As long as you provide a quality product or service, you qualify. You don't have to have been in business for three years or more either. Recent start-ups can qualify.Selling your receivables allows you to expand, for increased business reach and profits. Selling your receivables does not obligate you, like a traditional bank loan or line of credit would. So how does it work ? Easily : - Contact Nick and his team at FRFS to clarify what type of accounts receivable you have to sell and your immediate cash needs and time frame
- FRFS reviews and finds the optimum funding sources that meet your need
- FRFS liases with you and the preferred funding source and gets you the application forms and identifies the 'due dilligence' information the funding source requires
- The 'due dilligence' process will involve checking you and your customner's credit worthiness, your UCC filings, a review of your aging reports , a copy of your recent tax returns, your articles of incorporation plus Federal tax I.D. and a faxed copy of the billing(s) you are selling.
- You review, understand and sign off on the full details of the terms and conditions of the contract you're entering into with the funding source, including the discount cost structure.
- When all parties are ready to procede and your customer is aware he will now be eventually sending his payment to the funding source, you get an advance of up to 80% of the net value of the accounts receivable(s) less sometimes a one-off fee of approx. $200 for initial administrative credit checks etc.This set-up process may take about a week, then you get your advance.
- Once your customer pays the funding source , he pays you the remaining 20% less his discount rebate you've already agreed upon.
- Now the relationship is established , you can choose to forward more accounts receivables and can expect a cash advance within 24 to 48hours .
- Remember nobody earns a cent until you fully understand the process and sign off on selling your bills.
Read how Business Owners tapped into the Working Capital they needed , when they needed it. Case Study # 1 shows How to Meet Payroll while Waiting for Contracted Payments. The Challenge : Home Health Staffing is a business which operates by obtaining contracts with various pharmaceutical companies. These companies sold chemotherapy and other invasive drugs prescribed by a doctor. HHS hired nurses to administer these drugs in patients' homes. Having little competition, this business was successful and, with business doubling every six months, the need for working capital was apparent. HHS's challenge was the paying of the nursing staff before they were paid by the pharmaceutical companies. The Solution : HHS used factoring to receive payments when they were needed, rather than when available from the pharmaceutical companies. This allowed them to guarantee the payment of the staff and undertake a controlled expansion of the staffing needed to service the new business that was being generated. The Benefit : After factoring in May, by December HHS stated that they had been able to grow their business 130% through using these services. After a while HHS became financially independent and were able to slow their factoring to a crawl, which is just what factoring is all about. However, when another growth spurt started, factoring was available again to ensure that the financial growth was agian smooth and controlled. Case Study # 2 shows how to use Accounts Receivable to Secure better Control of Cash Flow. The Challenge : A carpet cleaning company FRCC had been in business for over 20 years, but their bookkeeping was terrible. The owner was sure that the company was losing money on invoices they couldn't track. The business was barely surviving in spite of the fact that they catered to some large property management companies. The Solution : Upon engaging the services of a factor, FRCC's invoices were incorporated into and tracked by the factor's accounting system. This simplified FRCC's bookkeeping processes and provided detailed reporting on the invoices and their status. In addition, since the factor also runs credit checks prior to funding their new customers, FRCC has also avoided some of the non-pays. The Benefit : FRCC's business has flourished. With the accounting system in place they are more efficient, and with the improved cash flow FRCC is able to take advantage of large volume discounts from their vendors. Here again the business is now reaching a point where they no longer need factoring services any more. How are we paid ? With Front Range Funding Solutions you get expert advice without paying any consulting fees. We don't earn a dime unless you receive the working capital you need. Even then, our fee is paid by the funding source, not you. Why work with Front Range Funding Solutions ? We focus on one goal : getting you the cash you need to grow your business. Each situation is unique , and requires careful attention and listening. Our job is to find the right funding source that matches your needs, business requirements and objectives. We have accesss to private funding sources that specialize in turning your business receivables and other assets that banks do not recognize into ready working capital.Once you get the funds, you choose how to use them. You can get on doing what you do best, running your business. Also you decide to use us when you need us. We're there as an accessible, flexible, responsive resource; just another tool in your financial tool-box. Get straight, no-nonsense answers today from Front Range Funding Solutions ! An example of how factoring can grow your business Is the following an example of your current business ? Profit Profile Without a Working Capital Program Sales without Working Capital $240,000 Sales being turned away ?????? TOTAL ANNUAL SALES $240,000 Fixed Costs ($ 54,000 ) Variable Costs @ 69% of Sales ($166,000 ) Net Profit $ 20,000 Profit Profile Without Working Capital is 8% with unknown Lost Profits, Lost Customers and MORE...... ! OR could this be your company ? Profit Profile With a Working Capital Program Sales without Working Capital $240,000 Added Sales ($10,000 / month) $120,000 TOTAL ANNUAL SALES $360,000 Fixed Costs ($ 54,000 ) Variable Costs @ 69% of Sales ($248,400 ) Cost of Working Capital @ 5% ($ 6,000 ) Net Profit $51,600 Profit Profile with Working Capital is 14% a 175% INCREASE in Profits and BENEFITS of more growth ! Put a proven track record to work for you today Call Nick at Front Range Funding Solutions now !
Frequently Asked Questions Who Uses Factoring ? Factoring works for any business that generates invoices for goods or services to other busineses, institutions or government agencies. This includes all types of manufacturing, distribution, and service industries, as well as the construction industry, and medical providers. If you are a business owner, accounts receivable funding frees you from the lengthy and burdensome process of invoice collection and gives you the opportunity to receive the money owed to you by your customers immediately. What's Wrong with my Current Arrangement ? Absoultely nothing, if your customers pay their invoices as soon they receive them. But time is money and the longer it takes you to receive payment for your goods or services, the less that invoice is worth, which places you in the unfortunate role of loan officer to your customers at 0% interest ! And because your working capital is tied up in unpaid invoices, your own expenses may go unpaid, placing your own credit standing at risk ! How would I Benefit from Factoring ? Factoring provides you several distinct advantages. First of all, by receiving your money for the invoices submit within 24 to 48 hours, you would be able to pay your day-to-day expenses :payroll, rent, utilities, supplies, taxes. Also you could lower your supply costs by taking advantage of cash, volume or term discounts. What other Benefits are there ? With additional working capital, you could purchase new equipment to increase production; or you might choose to launch new marketing campaigns or products to increase sales and grow your business. With improved cash flow, you have the freedom to utilize your working capital where it can work for you best. How much is it going to Cost my Business ? The rate will vary based upon several factors including :parameters of the funding source including how long before he receives payment for the accounts receivable from your customer, services offered and the type and risk of the invoices being transacted. However, you will not be charged a cent until you fully understand the terms and conditions in your contract with the factor. Also, initial consultation is free and without obligation. How can I Profit if I have to Sell my Invoicies at a Discount ? If you were to analyze the cost of waiting for your invoice payements today, chances are it is costing you at least that much AND you still have to wait for your money. But with cash in hand to negotiate better terms with your suppliers, increase production and take your business to the next level, those savings often far outweigh the funding source's discount. Another significant benefit is that the funding source will assume responsibilty for the collection process, communicate on a regular basis and provide you with a monthly aging report of the factored receivables. Who exactly are these Funding Sources ? They are professional investment firms who, rather than risk their capital in unpredictable returns on investment, seek more secure investments in the private sector for a pre-established yield. These firms conduct their business with you in a fair, ethical and confidential manner. But they also compete for your business in an electronic marketplace, allowing you, the business owner, to receive the best rates possible. How does this all differ from a Bank Loan ? Banks undoubtedly play a critical role as a financial backbone for many businesses. However, in today's entrepreneurial marketplace, there is an increasingly growing number of businesses finding it difficult to obtain bank financing: if only because their receivables are outpacing their growing sales ! Here is where Banks and Funding Sources take divergent paths : - Banks provide loans at established interest rates whereas Funding Sources purchase invoices at an established discount.
- Bank loans create additional debt for your business; Funding Sources pay you cash for your invoices creating revenue !
- Unlike Banks, factoring attaches No liens on your assets; so it does not impact your existing credit line with your bank.
- While Banks focus primarily on your debt/equity ratio and your FICO scores, Funding Sources focus primarily on the credit worthiness of your customers.
- While Bank loans can often take weeks to be approved and acquired, Funding Sources pay you within 24 to 48 hours
- Banks determine your loan potential based on your fiancial assets; whereas Funding Sources base the funding amount on your invoices.
- Whereas Banks ( as lenders ) are strictly regulated , Funding Sources are not and can therefore offer greater flexibility to accomodate you.
What will my Customers think ? Although many businesses position this as a simple "change in billing" many others position the new billing arrangement as a business growth strategy in order to concentrate on their core business and to better serve their customers. If Factoring is so good, why aren't more Businesses doing it ? Actually, more and more businesses are doing it and are realizing that the benefits of accounts receivable funding far outweigh the more conventional methods in helping them manage their cash flow. When you hear about your competition bidding on a job at a price that exceeded your cost of production, chances are your competition is utilizing factoring: giving them a competitive edge. How long will it take to get started ? Once you have completed an application describing your business and customers and providing an accounts receivable aging report, the funding source must perform " due diligence " on the accounts you have listed. Once that is complete , in approximately five to ten days, the funding source will submit a contract for your approval, outlining the entireterms of agreement. Once signed and returned , funding is available immediately. Subsequently, all further additional transactions can be turned around in 24 to 48 hours. Who pays for the "due diligence" performed by the Funding Source ? There is usually a one-time fee incurred by you to cover credit checks, UCC filings etc. The fee will vary, on the number and complexity of accounts provided, but is always established and approved by you prior to any signed agreement. Once I sign the agreement, how long am I committed ? Most funding sources are sensitive to the fact that we all conduct our business in an ever changing business climate and are very flexible. Often they say " just use us when you need us ! " What if I don't like the Funding Source's service ? Funding sources will generally go to great lengths to build the relationship by earning your trust, satisfaction and long term business. However, if a situation develops that cannot be promptly resolved to your satisfaction, Front Range Funding Solutions is committed to seeking an alternative funding source for you. Call Nick at Front Range Funding Solutions now ! |
