39
SEPTEMBER 2013
ACT
EQUIPMENT FINANCING
INDUSTRY FOCUS
options
aging report is helpful to give insight on
any potential concentrations.
After performing their due diligence,
a factor company typically issues a
proposal or quote that details the rate
and structure they are offering to your
company. Upon your acceptance of
their proposal, a factor company will
prepare a security agreement and other
supporting documentation. Once the
documentation is signed and returned,
the factor company is ready to start
advancing against your receivables.
For a company carrying a substantial
amount of outstanding receivables,
setting up with a factor partner can be
an excellent option if you are seeking
alternative methods to finance a project
or acquire new equipment. It’s your
money, why not use it?
For start-up companies that often
don’t qualify for bank financing, having
a factoring partner can mean the
difference between being able to accept
a future job and being able to purchase
new equipment and pay for permits,
tags, licenses, fuel, repairs, payroll,
etc. An additional benefit to factoring
includes back-office support such as
invoice and payment processing and
collection efforts, thus freeing you up to
concentrate of what you do best.
Do your homework
As in most industries, some factoring
partners are more seasoned, qualified,
capable and have the resources you
can rely on over others. There are
many things to consider when electing
the right solution for your company.
Because of today’s technology,
geography doesn’t typically matter, but
you may prefer to partner with a local
factor. When interviewing possible
factoring partners, be sure to take your
time and ask the questions that are
important to you and get the answers
you deserve.
Some things you may want to consider
when interviewing a factoring partner:
■
CONTRACT TERMS AND NOTIFICATION
REQUIREMENTS TO TERMINATE
– what
happens at contract end?
■
ADVANCE RATE
– the rate which is
advanced based on the face value of
the invoice. Ninety percent is typical.
■
RESERVE REQUIREMENTS AND RELEASE
FREQUENCY
– Do they require a
minimum reserve amount?
■
ADDITIONAL COSTS ABOVE THE FACTORING
RATE
– bank fees, costs to get
paperwork to factor, etc.
■
MINIMUM MONTHLY REQUIREMENTS
–
what if you don’t meet the minimum?
■
MISCELLANEOUS FEES
– audit fees,
invoice fees, report fees, filing fees,
application fees, etc.
■
FLOAT TIME, IF ANY
– do they post
and credit your collections the day
received?
■
FUNDING TIME
– when paperwork
is received, when will you get your
money?
■
800-281-9445
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September 19
