Factoring Help to Get You Started
Factoring Information: Answers to Frequently Asked QuestionsFAQs - GENERAL FACTORING INFORMATION
Q: What Is A Factoring Company?
A: A commercial finance company that specializes in the purchase of invoices or accounts receivable for cash.
Q: Is factoring a new financing option?
A: Factoring has been used for centuries. It's one of the oldest forms of financing. Until recently, factoring was primarily used in the garment and textile industries. Today, factoring is a $150 Billion/year financial product and is widely used, by all types of businesses that extend credit to credit-worthy commercial customers.
Q: How does factoring differ from bank funding?
A: Factors make funding decisions based on the credit-worthiness of your customers; a bank makes credit decisions based on your company's financial history, cash flow and collateral. Because factoring is not a loan, no liability appears on your balance sheet. Most importantly, a factor makes funding decisions in days or hours-while banks generally take weeks or even months.
Q: Why would a company sell accounts receivable?
A: Companies with recurring cash-flow problems often can't afford to wait 30, 60 or even 90 days for invoice payment. They need cash to meet immediate financial demands of their business. Factoring helps provides this cash by funding the purchase of accounts receivable, often within 24 hours after invoices are created.
Q: What companies benefit most from factoring?
A: We believe every company-and each funding situation-is unique. We view every situation as an opportunity to create a flexible, dynamic "win-win" structure. Factoring works well for startups as well as high-growth businesses, including those cyclical in nature. Factoring is also well suited for under-capitalized companies with strong customers, turnarounds or companies with cash-flow problems.
Q: How will our customers be treated by UCVC Funding®?
A: UCVC recognizes and respects the relationship and goodwill you have created with your customers. UCVC will treat your customers with the same degree of integrity and professionalism. Any serious issues that arise will be discussed with you and handled in an appropriate manner after discussions with you.
Q: What is the major benefit of factoring?
A: You receive immediate cash for accounts receivable instead of waiting 30, 60 or even 90 days for customers to pay. The process works as if your clients are on a COD (Cash on Delivery) basis. You enjoy increased cash flow, while we provide credit and collection expertise and services, freeing you to concentrate on your core business. Also, perhaps most importantly, UCVC's decision to finance your company is based on your customers' credit-worthiness instead of your balance sheet. If you can deliver the goods and services you've promised to your customers, and if your customers have good credit, UCVC Funding?can provide a financial solution, no matter how limited or problematic your company's financial history.
Q: What does factoring cost?
A: Rates are based on individual and specific circumstances. Factoring rates depend on the credit-worthiness of your customers, your average invoice size, average payment cycle, factoring volume and other elements. In general, the cost of factoring is outweighed by its significant benefits: access to immediate cash, credit analysis, collection work and accounts-receivable reporting.
Q: Is factoring a type of loan?
A: No. Factoring is not a loan. It is the purchase of an asset, your accounts receivable, at a discount by a financial institution called a Factor. A traditional bank loan uses all of your company assets as collateral. Invoice factoring, or accounts receivables factoring, relies on the credit-worthiness of your customers, not your balance sheet or history. Banks are heavily regulated, and large finance companies are driven by an assortment of pressures. When times are tough, banks and finance companies limit lending.
Small Businesses that have no track record, a weak balance sheet, a history of financial problems, are in turnaround mode or are otherwise undergoing big changes, often cannot find a lender at any price. In such cases, factoring is the ideal financial solution.
Q: What is the difference between factoring invoices "without recourse" and factoring invoices "with recourse"?
A: When an invoice is factored without recourse, it is considered factoring on a "non-recourse" basis. In this situation, the factor takes the credit risk of the client's customers, thereby protecting the client from credit loss. When an invoice is factored with recourse, it means the client is ultimately responsible for payment, regardless of whether the client's customer pays. At UCVC we offer both "non-recourse" and "recourse" factoring at rates that make sense for your business.
Q: When is factoring NOT a good fit for a business?
A: Generally factoring is not a good fit in the following situations:
1. Your business operates on low margins (less than 10%).
2. Your business has significant cash reserves free of cash-flow concerns.
3. Your business serves as a sub-contactor to a less-than-established general contractor.
4. Your business involves Medicaid or Medicare-based accounts receivable.
5. Your business sells almost entirely to less than credit-worthy customers.
6. Your business has a significant amount of accounts receivable that are already overdue.
FAQs… Factoring Information - HOW FACTORING WORKS
Q: What type of invoices can I factor?
A: You can factor almost any valid invoice for a service already performed or a product already delivered to a credit-worthy business or government entity.
Q. How much money can I obtain through factoring?
A: We typically advance you 80-90% of your receivables immediately, and the balance (less our fees) when invoices are paid.
Example: if you have $100,000 in accounts receivable on your books, you could immediately receive up to $90,000 in additional working capital. The balance due to you of $10,000 (less our fees) will be paid to you when your customer pays the invoice. If your sales increase, so will your receivables-and so will the amount of capital available to you on an ongoing basis.
Factoring may be the best way of financing sales, because the amount of available capital grows in direct proportion with sales success.
Q: Does a bank loan make more sense for my small business than factoring?
A: Probably not. Banks often have restrictive lending requirements relating to cash flow, profitability, equity and years in business that limit them from making loans to many small to mid-sized businesses. Factoring companies are not in the lending business; we purchase accounts receivable form credit-worthy customers. The decision to purchase your invoices is influenced primarily by the quality of your customer base and their financial stability-not the financial fundamentals of your company.
Q. What if my company has a bankruptcy, bad credit, poor financials or other derogatory information or history?
A: In general, these are not deal-breakers, as funding decisions are based on the credit-worthiness of your customers-not on your credit.
Q: What can I do with the additional cash I receive from factoring my receivables?
A: You can use the additional cash to take advantage of suppliers' discounts, meet payroll, satisfy operating overhead, purchase needed inventory or equipment or just establish good credit for future expansion.
FAQs - HOW FACTORING HELPS YOUR CUSTOMERS
Q: How will our customers be treated by UCVC Funding®?
A: We recognize and respect the relationships and goodwill you've created with customers, and we'll treat your customers with the same degree of integrity and professionalism. Any serious issues will be discussed with you and handled appropriately.
Q: Will my customers think I'm in financial difficulty if they find out I am using a factor?
A: Absolutely not! Factoring is a viable financing option for all businesses. As long as it is handled in a professional manner, your clients will understand you're doing what's necessary to create cash flow for your business. Most of your clients are accustomed to dealing with factors, which is a $150 billion business annually in the U.S. alone. Remember, factoring has been around in various forms for several centuries. We are perceived as a professional arm of your organization. We position ourselves as your outsourced credit department. Most informed business professionals today are aware that factoring is a common financial tool used successfully by companies of all sizes.
Q: If my customers know that their invoices are factored, won't they take longer to pay?
A: No. Often, just the opposite is true. If your customer is a large corporation with its own invoice-payment policy, it will make no difference who the creditor is. They will adhere to their credit policy and pay accordingly. If your customer is a smaller or closely managed company, chances are they will be inclined to pay faster knowing that we, as a Factor, are a prime reporter of credit information to credit bureaus and an influential credit-reference resource.
Q: How will my customer know where to send payment?
A: When you factor with us, we ask you to send a letter to your customers, identifying us as your funding source and requesting that payments be sent to our secure lock-box account.
Q: What does factoring with UCVC mean to my customers?
A: The only difference to your customers is where they send payment and to whom payment is made. Payments are made to UCVC and sent to our secure lock-box account. Your customer relationships, in fact, will likely improve. By using our collection services, you'll no longer be burdened with the uncomfortable task of collecting from customers. You'll be able to concentrate on business-and not waste time or resources on collections. Periodically, your UCVC Account Executive will contact your customers by mail, fax or phone to confirm the validity of invoices.
Q: How will my customers react to UCVC?
A: Factoring represents over $150 billion a year in revenue in the U.S. alone; it's become an accepted and prevalent form of commercial finance. Most of your customers deal with factoring companies already. Usually, customers will be comfortable that you're factoring, because you'll have more cash to meet their needs. Working with us, you will have extensive credit management and we will deliver consistent, professional collection efforts.
Q: If UCVC purchases my company's invoices will they bill my customers?
A: No. You invoice your customers as usual and fax a copy of that invoice to us. After verifying the invoice, we'll make an immediate cash advance to your company. Then, you or a UCVC specialist will follow-up with the customer to ensure prompt, accurate invoice payment.
Q: When I use UCVC factoring services, where does my customer send payments and to whom are payments written?
A: When you factor with UCVC it is easy. All you do is change the remit to address on your invoices and payments are mailed to us at our P.O. lock-box address.
Q: How will UCVC communicate with my customers?
A: Our factoring team communicates to your customer through letters, faxes and occasional telephone calls as part of our accounts receivable management/collection services. The letters ask your customers to verify the invoices and direct invoice payments to us. Should your customer default on payments, we will first contact you before taking any action.
Q: Does the location of my customer matter?
A: No. UCVC is a nationwide commercial factoring company that purchases invoices from credit-worthy companies anywhere in the U.S.
FAQs – Factoring Information about THE FACTORING PROCESS
Q: What types of businesses do you factor?
A: We fund a wide range of industries, including distributors, trucking companies, telecommunications companies, temporary personnel agencies, printing companies, computer hardware and software providers, manufacturers, wholesalers, consulting organizations and service organizations, including such industries as janitorial services, computer services and armed-guard services. If you sell goods or services to another credit-worthy business or government entity, it's likely we have a factoring solution for you.
Q: Do I need to be an established business, operating a minimum number of years, to be approved?
A: No. UCVC prides itself on catering to the financing needs of small-to-medium size businesses, regardless of their operational stage. Even pure start-ups are welcome in most cases, as long as the accounts receivable are straightforward (i.e., not guaranteed sales, progress payments, etc). We routinely finance start-ups, companies that are recently unprofitable, those with wild swings in their business cycle and even those needing assistance with various tax issues. Businesses that do not qualify for bank financing are our most successful customers.
Q: What size business will UCVC finance?
A: We can factor your business if you have $50,000 or more in outstanding accounts receivable from credit-worthy customers. Some of our clients began factoring with their first sale; others were well-established businesses.
Q: How long does the process take to get started?
A: Within 24 hours of receiving your basic company information, we'll issue a proposal. If it's accepted by you, we conduct due diligence and complete all documentation. Initial funding typically takes place about one week from the time we receive all necessary documents. After that, funding generally occurs on a recurring basis within 24 hours of your invoice submissions.
Q: What other financial services does UCVC offer?
A: Click here to find out more about the wide range of Other Services UCVC provides, including accounts-receivable management, purchase-order finance, collection work, credit insurance and vendor guarantees.
Q: Do I need to jump through the same hoops for accounts receivable factoring as with bank financing?
A: No. All we need to produce a proposal is a completed pre-qualification form and basic company information.
Q: Do I need to be an established business operating a minimum number of years to start factoring with
A: No. We work with companies in all stages of development, including small-to mid-size companies with limited histories. Even pure start-ups are usually viable customers. If your company has invoices from credit-worthy customers, we'll be happy to speak with you about how we can help.
Q: Are my receivables held as collateral while my company is factoring?
A: Yes. We require a first position security interest on all accounts receivable.
Q: Does UCVC require additional collateral when my company is factoring?
A: Not always. Many of our standard factoring programs, only require a first position on accounts receivable. In some situations, we may take an available security interest in other assets of your company.
Q: How quickly will I receive funding?
A: We fund all verified invoices from approved customers within 24 hours. Quick turnaround is one of the main reasons businesses choose us over other factoring companies.
Q: Do I need to sell all my invoices?
A: No. You decide which invoices you want to submit for factoring to help successfully manage your financial needs. We provide you with a flexible financial service that allows you to create the cash flow you need to be successful.
Q: How long must I factor my invoices?
A: Our standard term is one year, but we do not require that you factor all your invoices during this time. Our agreement simply states that if you are going to factor invoices during the term of our agreement, that you factor those invoices with us.
Q: Who is responsible for collections?
A: We encourage you to actively participate in the collection process, but we understand that to reduce costs, you may choose to have us monitor and independently pursue collections on factored invoices. This relationship will free you to pursue more important sales and marketing activities
Q: How will I know the status of my factored invoices?
A: We are pleased to offer our clients a state of the art on-line management system, UCVC Online Account Management-or ROAM. ROAM allows you to securely access your complete account history in real-time, via the Internet, any time of day or night. You will also be assigned to a professional Client Services Executive, who will be your direct contact for questions and more information.
Q: What reports will UCVC provide me?
A: We provide you with status reports on each invoice we've purchased (e.g., those that have been paid and when, which invoices are still outstanding, the balance in your reserve account, etc.). You can also access daily and weekly reports with full account details. These reports are available on-line 24/7 via our ROAM on-line account management system.
Q: Can you supply me with references from existing factoring clients?
A: Yes. We are proud of the services we offer, and we're more than happy to provide references.
Q: How do I receive the money from my factored accounts?
A: We can wire funds directly to your bank account, send a check via an overnight service or send a check via the U.S. mail.
Q. Does my business need to meet net worth, profitability, debt coverage, years in business or other financial ratio requirements?
A: No. We are primarily concerned with the credit-worthiness of your customers, not your business, in making funding decisions.
Q. If I factor with UCVC, can my business still borrow money from other sources?
A: Yes! That's one of the big advantages of factoring with us, as we typically only take a security interest in your accounts receivable as collateral for our purchase of them. Your machinery, equipment, intellectual property, inventory and real estate generally remain unencumbered and available as collateral for other lenders. If a commercial bank provides you with credit, they almost always take a security interest in ALL your assets. This means you generally cannot borrow from any other source-unless the bank subordinates its interest in those assets, since you have no collateral to offer another lender.
Q. Can I still factor if my business has already borrowed from a bank?
A: Sometimes yes-and sometimes no. You can still factor if your bank has not taken a security interest in your accounts receivable. This is rare, but it does happen. Otherwise, we must work with your bank to arrange for them to subordinate their interest to us-or work out some other acceptable arrangement. If you have an existing loan and would like to determine if you can still factor with UCVC.
Get the factoring information that you need to start building your business today!
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