Untangling Factoring Myths and Facts
Factoring is the purchase of a company’s receivables where the factor advances 75-90% of the face value of the invoices once the product or service is delivered to the customer. It’s like a real-time line of credit in terms of cash flow. The reserve, the 10-25% is given to the company when their customer pays the invoice.
What’s really important is to know when factoring is the best financing solution.
- Companies that are outgrowing their line of credit or who are ineligible for one because of a lack of equity can access as much financing as they have eligible receivables.
- Companies that are in a challenging financial situation can still be financed while they work out a game plan.
- Companies that need more flexibility can benefit greatly from factoring. Seasonal businesses, for instance, can have wildly fluctuating financial needs.
Now, let’s dispel some of the myths surrounding factoring.
Factoring is not last resort financing. In fact, it can be a great solution for companies facing high-growth opportunities. Knowing access to funds is available lets a company seek out and accept purchase orders with confidence.
Factoring can take several forms. For instance, with full notification factoring, the customer makes payment directly to the factor. Other methods are to have the customer pay a lockbox or into a blocked account, so the customer has no direct relationship with the company. And, there are various choices in between. The factor will determine the appropriate structure based on various criteria.
An asset-based loan against inventory or equipment can be granted in tandem with a factoring facility.
Why factor with Accord?
Accord offers the one of the most flexible programs in Canada for companies looking for $500,000 to $2,000,000.
- No fixed term
- No set up fee
- Disbursement within 10 days
- Credit approval is based on the quality of the customer, not the company’s balance sheet
- No covenants
- Spot Factoring is available
Accord has a long track record of successfully supporting small business.
We want to simplify your access to capital. For a zero cost, zero obligation discussion with one of our factoring professionals you can call or write