Purchase Order Funding (PO Funding) is not a factoring transactions. Some business owners have a misunderstanding thinking that they can receive an advance on their PO's and use the funds as they please.
Purchase order financing is short term funding used by a borrower to finance the fulfillment of a sales contract (order) with a credit worthy end customer. The terms of the purchase order financing agreement are very specific, requiring the borrower to use loan funds for the purchase of certain materials and/or services needed to deliver goods to the end-customer. The PO funder handles the flow of these funds. Once the order is fulfilled it is then turned into an invoice which is then factored.
Remember this simple rule. Factoring is for business to business products or services, the product must be delivered or the service rendered, no pre-bills. The invoice must be to a credit worthy company. You will find many factoring blogs in the archives to your right on this topic
Have Questions 888-603-0055
Want a free factoring quote Click this Link
Thanks for reading!
Friday, July 28, 2006
Tuesday, July 18, 2006
Another Factoring Article
It is a challenge for me to think of fresh topics to write about factoring when I have covered so many issues in the factoring articles written throughout this blog.
So instead of forcing a topic I think you may find it beneficial to go through the archives, you possibly will find the answer to your questions.
Here are a few suggested factoring articles:
Tips on Choosing a Factor
Do you Qualify for Factoring
Factoring Warning
What kind of Companies Use Factoring
The Factoring Process
Get a free factoring quote by Clicking this Link
Questions 888-603-0055
Thanks for reading!
So instead of forcing a topic I think you may find it beneficial to go through the archives, you possibly will find the answer to your questions.
Here are a few suggested factoring articles:
Tips on Choosing a Factor
Do you Qualify for Factoring
Factoring Warning
What kind of Companies Use Factoring
The Factoring Process
Get a free factoring quote by Clicking this Link
Questions 888-603-0055
Thanks for reading!
Thursday, July 13, 2006
Factoring and Retail Businesses!
Many people are not aware that a financial product is available for retail businesses that accept Visa / Mastercard.
These companies can actually get a loan based on future credit card sales. The funding source will look at your past Visa / Mastercard sales to determine the loan amount you can borrow.
The loan is paid back by deducting a fixed percentage on future credit card sales. This is a retail factoring product. Once the loan is paid down, you can then borrow again.
For more information call 888-603-0055!
Want a free factoring quote Click this Link
Thanks for reading!
These companies can actually get a loan based on future credit card sales. The funding source will look at your past Visa / Mastercard sales to determine the loan amount you can borrow.
The loan is paid back by deducting a fixed percentage on future credit card sales. This is a retail factoring product. Once the loan is paid down, you can then borrow again.
For more information call 888-603-0055!
Want a free factoring quote Click this Link
Thanks for reading!
Monday, July 10, 2006
Atlanta Journal Constitution
I just wanted to share an article about my company and the Factoring Industry in yesterday's Sunday Paper.
Cash consultant
Broker helps firms turn slowly paid invoices into fuel that turns the wheels of commerce
By PÉRALTE C. PAUL
The Atlanta Journal-Constitution
Published on: 07/09/06
When companies find themselves in a bit of a corporate cash crunch, Mark Little and others like him are called on to give them temporary infusions of money.
Little, president of Jonesboro-based Diversified Funding Services Inc., is a factoring broker and consultant who helps companies willing to sell their accounts receivable to firms willing to buy them.
Typically, these are companies in service industries that need money to fund things like payroll and other expenditures, since the receivables they're waiting on could take months.
Little, a former private investigator who grew up working in a family-owned auto repair business, said he knew firsthand how tight cash flow could be for small businesses.
Often, they can't get traditional bank financing or can't get enough because their biggest assets are their receivables, he said.
And that's what got him interested in the factoring business.
"It really intrigued me because I knew the need that it could fill," said Little, 42. "If a bank has to tell a customer no, a lot of times, we're able to grow that company to be bankable."
He said he brokers financing for companies that have between $10,000 and $5 million a month in receivables.
There's a lot of money to be made in cash.
The industry financed more than $120.1 billion in receivables last year in the United States, up 15 percent from the $104.4 billion in 2004, according to Factors Chain International, a trade group.
Worldwide, the business grew 18 percent to $1.29 trillion last year, up from $1.09 trillion in 2004.
Even traditional banks, including Branch Banking & Trust Co., Wells Fargo and HSBC, have units that provide factoring for businesses.
Q: Explain how factoring works. What exactly is it?
A: Any business-to-business or service and the company invoices for that product or service. The product must be delivered, the service must be rendered, and they invoice and they wait for payment. The terms can be 15, 30, 60, even 90 days. As long as they're invoicing a creditworthy company, then they can qualify for factoring. There are some things that need to be taken into consideration, whether they have any existing loans or lines of credit. It's basically selling accounts receivables at a discount.
Q: So, if I had $100,000 in receivables coming in each month and I needed cash flow, I would go to you?
A: Correct, as long as you're invoicing a creditworthy company. A good example like, say, a staffing company — IT [information technology] staffing or nurse staffing for hospitals, etc. — every time they place an employee into a company they have to make payroll at the end of the week.
They invoice that company, that hospital etc. for that week's worth of labor. Well, they make payroll. However, they invoice that hospital and they have to wait 30 or 60 days for payment because that's the terms. So, they can be out two, three, four payrolls before they get paid from the previous invoices.
With factoring they can sell their receivables and get that immediate injection of capital. It works off an advance rate. The average advance is 80 percent. So using that $100,000-a-month example, they get $80,000. The factor then waits for payments. When the payment is made, the factor rebates that 20 percent minus the fees.
Q: I get the $80,000 and once I get my receivables against that $100,000 I would pay you your fee?
A: The payment — since the factor has purchased that invoice — would go to the factor and then that would activate the 20 percent. The factor would advance the $80,000, the $100,000 payment would come in and the factor would send the 20 percent minus the fees. So for example, if the fee was a total of 3 percent, they would receive $17,000.
Q: What's the range in fees?
A: It depends on the volume of the company and how much they're doing a month. The rates can be as aggressive as prime plus 2 [percent] up to what's called block funding. Instead of having a daily rate, a factor may choose to say it's going to be 2.5 percent for 30 days. The longer the invoice is outstanding, the higher the fee will be. There will be a zero-to-30-day fee and then a 31-to-40-day fee. So it depends on if it's a daily rate or a block schedule.
Q: What are the types of industries that most use factoring?
A: Any business-to-business product or service is a candidate. However, factoring is one of the oldest forms of commercial finance that exists. It used to be very popular in the manufacturing and textiles industries. It's very popular for service-based industries — trucking heavily utilizes factoring.
Construction is a niche area for factoring. Medical receivables are another niche for companies that invoice Medicare and Medicaid. But truly, any business-to-business product or service — that's why I'm able to help start-up companies.
Let's say that you're not bankable at this time, because you haven't been in business long enough or don't have the financials or the track record. As long as [you're] invoicing a creditworthy company, that invoice is the asset, so that's what's taken into consideration. So that's why start-ups are able to qualify for factoring, because the asset is a creditworthy receivable.
Q: And they can't get traditional bridge loans or business loans factored against whatever income or capital they might have from month to month?
A: A lot of times it's both sides of that coin. Some companies can't qualify for traditional financing or they don't qualify for an adequate [credit] facility. They can't get enough to meet their cash flow needs. Or, it's a company that has outgrown their [credit] facility and a lot of their growth is receivables-based and the banks are not as comfortable with it being strictly receivables-based. There's no other assets to sink their teeth into. It's just as popular for start-ups as well as rapidly growing mature companies.
Q: So why haven't banks established factoring companies separated from their main banking operations?
A: Some do. One of the primary reasons that drove me into this is, I grew up in a family-owned business. I did not know factoring existed. There's so many business owners that desperately need this that do not know it's available. If you start comparing costs, it's two totally different products. I have clients that I have watched that go from start-up — from $10,000 a month — to invoicing $1 million a month. And they grew their company with factoring. This provides not only jobs but it provides a valuable service.
Q: If you have a lot of requests for factoring, is that a sign the economy is growing?
A: Oh, definitely. It is a good indicator. We've all heard the saying that 'cash flow is the lifeblood of business.' It's true, regardless of how large or small a company is. There are companies that ... go out of business because of their growth. Because they don't have the capital to fuel that. Factoring is an unlimited access to capital that does not create debt. So they're able to take on a new customer, sell that receivable, still offer the terms and get the capital they need to keep growing and expanding.
So, it's a very good sign of strength.
Here is a Link to the article
Want a free factoring quote, get one by Clicking this Link
Questions 888-603-0055
Thanks for reading.
Cash consultant
Broker helps firms turn slowly paid invoices into fuel that turns the wheels of commerce
By PÉRALTE C. PAUL
The Atlanta Journal-Constitution
Published on: 07/09/06
When companies find themselves in a bit of a corporate cash crunch, Mark Little and others like him are called on to give them temporary infusions of money.
Little, president of Jonesboro-based Diversified Funding Services Inc., is a factoring broker and consultant who helps companies willing to sell their accounts receivable to firms willing to buy them.
Typically, these are companies in service industries that need money to fund things like payroll and other expenditures, since the receivables they're waiting on could take months.
Little, a former private investigator who grew up working in a family-owned auto repair business, said he knew firsthand how tight cash flow could be for small businesses.
Often, they can't get traditional bank financing or can't get enough because their biggest assets are their receivables, he said.
And that's what got him interested in the factoring business.
"It really intrigued me because I knew the need that it could fill," said Little, 42. "If a bank has to tell a customer no, a lot of times, we're able to grow that company to be bankable."
He said he brokers financing for companies that have between $10,000 and $5 million a month in receivables.
There's a lot of money to be made in cash.
The industry financed more than $120.1 billion in receivables last year in the United States, up 15 percent from the $104.4 billion in 2004, according to Factors Chain International, a trade group.
Worldwide, the business grew 18 percent to $1.29 trillion last year, up from $1.09 trillion in 2004.
Even traditional banks, including Branch Banking & Trust Co., Wells Fargo and HSBC, have units that provide factoring for businesses.
Q: Explain how factoring works. What exactly is it?
A: Any business-to-business or service and the company invoices for that product or service. The product must be delivered, the service must be rendered, and they invoice and they wait for payment. The terms can be 15, 30, 60, even 90 days. As long as they're invoicing a creditworthy company, then they can qualify for factoring. There are some things that need to be taken into consideration, whether they have any existing loans or lines of credit. It's basically selling accounts receivables at a discount.
Q: So, if I had $100,000 in receivables coming in each month and I needed cash flow, I would go to you?
A: Correct, as long as you're invoicing a creditworthy company. A good example like, say, a staffing company — IT [information technology] staffing or nurse staffing for hospitals, etc. — every time they place an employee into a company they have to make payroll at the end of the week.
They invoice that company, that hospital etc. for that week's worth of labor. Well, they make payroll. However, they invoice that hospital and they have to wait 30 or 60 days for payment because that's the terms. So, they can be out two, three, four payrolls before they get paid from the previous invoices.
With factoring they can sell their receivables and get that immediate injection of capital. It works off an advance rate. The average advance is 80 percent. So using that $100,000-a-month example, they get $80,000. The factor then waits for payments. When the payment is made, the factor rebates that 20 percent minus the fees.
Q: I get the $80,000 and once I get my receivables against that $100,000 I would pay you your fee?
A: The payment — since the factor has purchased that invoice — would go to the factor and then that would activate the 20 percent. The factor would advance the $80,000, the $100,000 payment would come in and the factor would send the 20 percent minus the fees. So for example, if the fee was a total of 3 percent, they would receive $17,000.
Q: What's the range in fees?
A: It depends on the volume of the company and how much they're doing a month. The rates can be as aggressive as prime plus 2 [percent] up to what's called block funding. Instead of having a daily rate, a factor may choose to say it's going to be 2.5 percent for 30 days. The longer the invoice is outstanding, the higher the fee will be. There will be a zero-to-30-day fee and then a 31-to-40-day fee. So it depends on if it's a daily rate or a block schedule.
Q: What are the types of industries that most use factoring?
A: Any business-to-business product or service is a candidate. However, factoring is one of the oldest forms of commercial finance that exists. It used to be very popular in the manufacturing and textiles industries. It's very popular for service-based industries — trucking heavily utilizes factoring.
Construction is a niche area for factoring. Medical receivables are another niche for companies that invoice Medicare and Medicaid. But truly, any business-to-business product or service — that's why I'm able to help start-up companies.
Let's say that you're not bankable at this time, because you haven't been in business long enough or don't have the financials or the track record. As long as [you're] invoicing a creditworthy company, that invoice is the asset, so that's what's taken into consideration. So that's why start-ups are able to qualify for factoring, because the asset is a creditworthy receivable.
Q: And they can't get traditional bridge loans or business loans factored against whatever income or capital they might have from month to month?
A: A lot of times it's both sides of that coin. Some companies can't qualify for traditional financing or they don't qualify for an adequate [credit] facility. They can't get enough to meet their cash flow needs. Or, it's a company that has outgrown their [credit] facility and a lot of their growth is receivables-based and the banks are not as comfortable with it being strictly receivables-based. There's no other assets to sink their teeth into. It's just as popular for start-ups as well as rapidly growing mature companies.
Q: So why haven't banks established factoring companies separated from their main banking operations?
A: Some do. One of the primary reasons that drove me into this is, I grew up in a family-owned business. I did not know factoring existed. There's so many business owners that desperately need this that do not know it's available. If you start comparing costs, it's two totally different products. I have clients that I have watched that go from start-up — from $10,000 a month — to invoicing $1 million a month. And they grew their company with factoring. This provides not only jobs but it provides a valuable service.
Q: If you have a lot of requests for factoring, is that a sign the economy is growing?
A: Oh, definitely. It is a good indicator. We've all heard the saying that 'cash flow is the lifeblood of business.' It's true, regardless of how large or small a company is. There are companies that ... go out of business because of their growth. Because they don't have the capital to fuel that. Factoring is an unlimited access to capital that does not create debt. So they're able to take on a new customer, sell that receivable, still offer the terms and get the capital they need to keep growing and expanding.
So, it's a very good sign of strength.
Here is a Link to the article
Want a free factoring quote, get one by Clicking this Link
Questions 888-603-0055
Thanks for reading.
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