What is Factoring?
Factoring is an alternative form of commercial finance that provides fast working capital to business owners. It uses accounts receivable as a basis for financing, providing those who use it with a fast and predictable cash flow. Factoring helps business owners smooth out cash flow mismatches, enabling them to focus on their core business without being weighed down by continual short-term funding constraints.
Benefits of Factoring:
- Credit Protection – Since factoring depends on the credit strength of client’s customers rather than the client itself, there is little to no risk involved. Unlike with traditional bank loans, businesses with little to no credit history are able to qualify with Coral Capital Solutions.
- Accounts Receivable Management – Coral Capital Solutions constantly monitors the aging of the receivables, verifies timely payment by customers, and provides access to real-time on-line detailed reports.
- Collection and Cash Management – Coral Capital provides cash receipts and daily cash application. We manage receivables and provide a comprehensive on-line reporting tool.
What is Purchase Order Financing?
Purchase order financing is a commercial finance option that provides capital to businesses to pay suppliers upfront for purchase orders.
It allows fast growing businesses to develop and expand beyond what their existing working capital can support. At Coral Capital Solutions, we work in conjunction with international and domestic suppliers to secure advance funds on the delivery of finished goods. By doing this, we put the weight of our financial strength behind the order, giving suppliers the assurance that they will be paid on time.
Who Should Consider Purchase Order Financing?
A typical client would be a fast growing importer, an undercapitalized business, or a company that is outsourcing production of its goods to domestic subcontractors in the USA or Canada.
Factoring may also benefit those who are:
- Rapidly growing
- In its early stages
- Saddled with a large customer concentration
- Strained by slow turnover of receivables
- Seasonal with high levels of sales
- Hurt by losses
- Concerned about adding fixed costs or additional overhead
Which Industries Utilize Purchase Order Financing and Factoring?
Service Businesses including staffing; software management companies; call centers; Business Process Outsource firms, consulting firms, design; technicians, IT providers, transportation businesses, janitorial companies, government contractors, security firms, B2B companies including consumer goods businesses, food and beverage, toys, pet products, home goods, furniture, fashion, housewares, electronics, manufacturing, distributors, hardware, importers, engineering and printing firms.
What Size Companies Use Factoring?
Factoring can be used by companies of all sizes, from small privately-owned companies to large multi-national corporations. Most companies that use factoring have annual sales between $1 million and $200 million.
What is the Difference Between Recourse and Non-Recourse Factoring?
Recourse factoring means that the client ultimately takes the responsibility for the payment of the invoice. Factors that purchase invoices on a recourse basis provide advances without providing credit protection.
Non-recourse factoring allows companies to sell their invoices to the factoring company, which assumes all of the credit risks for the collection of the invoice.
How is Accounts Receivable Funding Different than a Bank Loan?
Accounts receivable funding focuses on the creditworthiness of a client’s customers, not on their financial history or cash flow situation.
Also, unlike traditional bank loans which may take weeks or even months to secure, the process of factoring is quick, easy, and reliable. Those who apply for factoring are most often able to collect cash within days—some even within 24 hours. This quick turn around allows factors to provide additional liquidity during growth periods whereas companies are often constrained by a firm line of credit at a bank.
What Information is Needed to Begin the Factoring Process?
- Most recent accounts receivable and accounts payable aging reports
- Customer list [including name, city, and state]
- Company financial statements, if available
- Brief description of your business
What If I Already Have a Lender?
We are usually able to arrange a subordination agreement or negotiate the release of any liens that may be encumbering your receivables.
Are There Any Location Restrictions?
No. Coral Capital Solutions is a nationwide commercial finance company–we cover all 50 states and Canada. In addition, we also may consider international receivables on a limited basis.
Do I Have to be an Established Business, Operating a Minimum Number of Years?
No. We cater to the financing needs of small to medium size businesses as well as recently established start-ups.
Do I have to Factor All Invoices?
No. We do not require a company to fund all of their invoices. It is the client’s decision which invoices or customers it needs to submit for funding.