Thursday, May 8, 2014

Recourse Vs. Non Recourse Factoring

How Recourse and Non Recourse Factoring Compare

If you plan on selling invoices it is important to know whether the funding proposal is for “recourse” or “non-recourse” factoring.  Here is an overview of both methods.http://theme6.factoringwebsites.com/wp-includes/js/tinymce/plugins/wordpress/img/trans.gif

A Look at Non-Recourse Factoring

Just like it sounds, there is no recourse for unpaid receivables against the client. The client selling invoices is not financially obligated to the factoring company in the event an approved and funded invoice is not paid by the customer.
To protect their investment, the factoring company will check the credit strength of account debtors. They will also want to handle the payment collection and accounts receivable management.
This does not remove the client from all possibility of needing to repay the invoice. The client is still responsible for resolving any disputes regarding the product or service itself. For example, if  the client delivers a product and that product is found faulty causing the customer to not pay, the client is still responsible to make good on the invoice.
Although non-recourse may be the more attractive method to the client, the factoring company will look closely at the credit worthiness of the paying customer or debtor and charge fees accordingly.

Now A Look At Recourse Factoring

With recourse factoring the company selling the invoices is guaranteeing the invoice will be paid in full.
If the customer or debtor does not pay the invoice, the selling company must make up the payment. This is usually accomplished by either lowering future funding by replacing the “bad” invoice with another “good” one. Any delinquent invoices are generally charged back to the business client after 120 days, depending on the terms of the agreement.
In addition to who “makes good” on any “bad” invoices, the client may receive better pricing if they are open to a recourse situation. Since  the factoring company isn't taking all the risk, they can offer more attractive advance rates and lower fees.

Your final choice will be for the method that best fits your situation.  There is no right or wrong, but if comparing factoring options side-by-side and you have the option of non-recourse for the same or similar terms – then non-recourse will likely be your preferred choice!

Friday, September 20, 2013

As the economy continues to recover...

As the economy continues to recover, American businesses have a unique opportunity to grow their businesses as a way of preparing for the future. One of the simplest ways of doing that is through accounts receivable factoring.
Accounts receivable factoring services, often called “invoice factoring services” are a useful method of small business financing that enables business owners to budget and plan better by creating consistent cash flow. The small business sells its invoices to the factoring company at a small discount. The factoring company, in return, pays the small business, usually within a couple of days. This means that instead of waiting 30 to 90 days for customers’ payments, the small business has its funds almost immediately.
Additionally, accounts receivable factoring enables small businesses to save money on their in-house accounts receivable work. Factoring companies provide not only funds, but also help collect on invoices and manage accounts receivable. The factoring company handles mailing out statements, which reduces printing, mailing, and personnel costs. As well, the factoring company provides access to advanced credit-screening tools to help small businesses decide how much credit to extend and to whom. This minimizes credit risk, again saving companies money.

The time and money small businesses save by using invoice factoring services are resources that can be put into growth opportunities. New equipment, staff training, marketing campaigns and other growth-oriented costs are easier to plan for and pay for when a company knows what its monthly budget will be, as it does with invoice factoring. The economy is improving. Will your small business be ready to meet the demand?

Wednesday, March 27, 2013

PO Financing


Besides factoring specific invoices (accounts receivable), there might be a need for some advance funding.  This is sometimes called Purchase Order financing.  For example your company might be working very hard to land a large order from a customer.  Let’s say your hard work pays off and you finally procure the order.  But now you have a problem.  You need to produce this large order and you need to purchase the goods to fulfill the order.  Your suppliers may not be willing to extend terms to your company for the purchase of the merchandise that you need to acquire in order to fulfill the order.  That’s when DSA Factors can come to the rescue.  Upon presentation of the purchase order, DSA Factors can lend your company enough money to cover either the full cost of the entire order or at least the portion of the cost of the merchandise that the supplier is demanding payment for.    Then once the merchandise is received and invoiced to the customer, DSA Factors will fund the value of the invoice to your customer and deduct the ‘advance’ that was already paid, and remit the balance of the funds to your company.   

Thursday, December 13, 2012

Alternative Sources of Cash


Alternative sources of cash
Finding alternative sources of cash is part of building a successful business. Cash is often the best way to pay for operations without incurring heavy debt loads. Many times, businesses make sales to consumers on account. These accounts allow consumers to pay off their debts over a set period of time. Rather than wait for consumers to pay balances in full, companies can factor the receivables to another company. Factoring receivables allows a business to receive money upfront--albeit at a discount--for accounts in good standing.

Cash Flow
Factoring receivables allows companies to improve their cash flow. While selling goods or services on account can improve sales, it has the possibility of delaying cash flows. Companies must rely on their vendors and suppliers to sell economic resources on account. Purchasing resources on account is often why business owners sell consumer goods on account. However, companies with too many sales on account can limit their cash flow. Factoring receivables can provide a quick jumpstart to the cash flow process and allow companies to pay business expenses on time and not incur penalties.

Wednesday, October 31, 2012

Discover how factoring is a key to growing your business


To keep your business great and growing may mean preventing cash flow problems that can interfere with your business operations.

You can with the help of DSA Factors, the friendliest, most reliable factoring company in the United States.

You can get fast and painless cash by allowing DSA Factors to speed up payments of your accounts receivable.

The financial strength of your customers, not your personal FICO and/or business credit score, qualifies you for factoring your accounts receivable with DSA Factors

Instead of waiting as much as 90 days or more to get your money (whether you are awaiting your customers to pay, or awaiting a loan from a bank); DSA Factors can get you your cash in as little as 24 hours with no hassles.

No other factoring company can provide the value you get from DSA Factors.

·         Get cash for your invoices in as little as 24 hours.
·         Get an advance of up to 96% of the face amount of your invoices or accounts receivable.
·         Experience a fast and easy set-up process.
·         Enjoy low, money-saving fees.
·         Eliminate the worry or time involved in collecting on factored invoices

Tuesday, October 16, 2012

Why Invoice Factoring Is Better Than A Business Loan


Are you looking for a business loan? Many business owners who need financing start their financing search by looking for a business loan or a business line of credit. Although business loans and lines of credit are well known products, they are very hard to get. And in reality, few business owners actually manage to get them.
In certain instances, invoice factoring may be a better and easier to obtain alternative. There are three conditions that can determine whether factoring is a better alternative than a business loan:
Are your clients’ slow payments hurting you? Do they take up to 60 days to pay?
Are you turning away bigger sales because you lack working capital?
With the right financing, does your business have significant growth potential?
If you answered yes to these questions, then chances are that factoring your invoices will be better for you than more traditional business financing products. Invoice factoring provides you with financing based on your invoices, eliminating slow payment cycles and providing you with money to pay rent, meet payroll and expand your business.
Since factoring is tied to your sales potential, it does not have the arbitrary use limits that business loans have. The more your business grows, the more financing you qualify for. Period. This makes it an ideal product for businesses that have significant growth potential.
Factoring (or receivable factoring as it is also known) is easy to use. Once you have invoiced your customers you send a copy of the invoice to the factoring company. The factoring company, in turn, advances you up to 96% of your invoice and waits to be paid by your client. The factoring fee is much less than you may pay your sales representative. 
In effect, by financing your invoices you eliminate the slow payment problem. You accelerate your cash flow, enabling you to pay your obligations, take new opportunities and grow your company.
If you own a business that is growing and you need financing, be sure to consider invoice factoring. Call DSA Factors today to see how factoring can help your business. 

Wednesday, September 19, 2012

Factoring Facts


Factoring is basically invoice discounting for the purpose of speeding up cash flow.  It has become a legitimate way for growing businesses to obtain loan funding without the need to provide security over physical assets of the business or personal assets such as the home.
Financial institutions are recognizing the importance of offering small to mediums size enterprises an alternative means of funding that does not include security over fixed assets. However, even though they recognize this need, it still may not be something they can handle.   Factoring has become a major source of funding for businesses, since banks have been restructuring their service offerings to companies with limited access to funds based on accounts receivable.   

How factoring works

Factoring provides a fast prepayment for your invoices billed to your customers. It allows you, at a cost, to flexibly increase your working capital and improve cash flow by effectively selling your newly billed invoices to a factoring company.
Factoring is offered to companies selling to other businesses on credit terms. It is not normally available to retailers or to cash traders.
You need to receive credit approvals for your customers in advance of the funding.  Once you have shipped the merchandise, you bill the customer with a notification instructing them to pay the invoice directly to the factor.  The Factoring company does all the collection work and alleviates your need to make phone calls or send out past due notices.  This will allow your company to spend your efforts on growing your business instead of making collection calls.