Category: Factoring Invoices

What is Factoring?

By: Chris Lanchech
What is Factoring?
What is Factoring?
What is factoring is a good question, because most business owners can not define factoring. If you own a business selling goods or services on credit terms then odds are your business can benefit greatly from a finical tool called factoring.

Factoring is a method of selling your accounts receivable or invoices. Factoring companies advance your business 70-90% of your invoice amounts. When your customer pays the invoice in the future the factoring company pays you the remaining 10% minus a small factoring fee. This fee is typically 1.5% to 2.5% depending on industry and other variables.

Why is factoring a popular finical too for business owners?

good question, to answer this lets use a trucking company as an example. Generally a trucking company bills its customers on credit terms such as net 30. However the trucking company has weekly expenses like tires, tolls, gasoline and beef jerky. Okay maybe they don’t spend a lot of cash on beef jerky but you get the point.

Now the trucking company will turn to a factoring company for an advance on their invoices. For example a $10,000 invoice > factoring company advances 90% ($9,000) > the customer pays the invoices in 60 days > the factoring company sends the trucking company the remaining 10% minus a factoring fee 1.5% > The trucking company paid $150 ($10,000 x 1.5%) and got their cash without waiting.

This small factoring fee is well worth it for many businesses that sell on credit because they greatly benefit from having cash in their hands without waiting. Business owners also save money by having cash in hand faster without waiting to get paid. How?

They can pay their suppliers faster and take advantage of discounts, they have cash on hand to handle marketing and new projects ect.

To see the pro’s and con’s of factoring click here or visit neebocapital.com and check out the free ebook about the pros and cons of factoring.

Good Luck!

Oil & gas Providers Factoring

This blog is written for businesses working in the oil and gas industry:
Oil & gas Providers Factoring
We all know how well the gas and oil industry has been performing. For many people, it’s been a spark of hope to push the economy forward. States that have oil sources (e.x. Pennsylvania, Ohio, Colorado), have seen an expansion in oil related industry growth and oil affiliated jobs. Most of all, this has lead to a significant increase in the amount of small businesses who provide for the oil and gas industry.

Many of these start-ups where created by individuals who have a lot of technical know how but usually not a lot of money. They start getting new business and their customers start growing. Many these start-ups in the oil and gas industry get into trouble once they realize that their company has weekly expenses however , Oil and Gas clients pay their invoices in 45 to 60 days. Sooner or later, they experience trouble paying expenses while they wait for slow paying customers to pay their bills. And that’s exactly where the factoring companies step in.

Quite a few factoring finance companies have noticed this and have started to finance oil field service businesses as an new extension of their existing factoring businesses. This area is become a powerful financing area and is going more mainstream. This makes the industry has strong customers and shows growth.

If your business is in the oil and gas industry and is in need of funding, give us a call 1-888-382-3766 or visit us online by clicking here

Factoring VS Bank Loans

Just about the most common statement I hear individuals make is that factoring is far more expensive than a loan from the bank. This comparison is like comparing apples & oranges but most business owners still believe it. The reason is because factoring is a financial tool that few business owners fully understand.

banking vs factoring

First, lets make it clear that when a company can qualify for sufficient financing from a traditional bank and that is the very best financial option for the business then factoring need not to be considered.

However if a company is unable to obtain adequate financing from a bank then factoring may be a better option for small businesses.

first- Factoring is not debt financing, you don’t receive money like you will from a traditional bank. A factoring company actually purchases the invoice from your business, therefore the invoice is an asset you’re selling. These invoices must be purchased at a discount so it should not be compared to an interest rate from a line of credit.

2nd- Turnaround time for authorization for funding from your traditional bank is often longer than 2 months with alot of unnecessary pain and paperwork. Your banker has to get approvals and the underwriting team has many hurdles for you to jump over in order to get funded. With factoring you can get an account and get funded in as fast as a week and then on future invoices you can receive funding in 24 hours. Plus if you acquire additional customers the factoring company will fund you for them in 24 hours.

third- A traditional bank generally needs to see a minimum of 2 years of financial for your business as well as requires you to have collateral together with your invoices EVEN a personal guarantee. On the other hand, A factoring company can provide funding to start-up companies so long as their customers are creditworthy and all that is required is the accounts receivable and many factoring companies don’t demand a personal guarantee.

fourth- A factoring company in addition offers even more services. As opposed to a traditional bank, a factoring company constantly monitors your accounts receivable and collections. They offer credit screening for potential new clients for your company and they provide up to date aging reports to help you in getting a better handle on your receivables aging. A factoring company is also constantly advancing new funds as well as collecting outstanding invoices and your credit facility continues to grow with your new accounts.

To sum it up the big issue is not if factoring is more costly than a bank loan, because it is obvious that the two cannot be compared. As a business owner you should consider advantages of factoring vs. a bank loan.

With factoring you never be worried about out-growing your credit line or quickly spend your loan and get into debt with the bank. With factoring you can get additional capital easily when needed so your credit line grows as your business grows.

Plus if you are unable to meet orders due to insufficient working capital, then factoring offers you the cash-flow needed to complete the order. If you find your business in this situation give us a call 1-888-382-3766 or visit us online by clicking here.

Factoring Websites Claim Unreal 1% rates?

 A quick online search shows that you will find a number of factoring companies that offer what appears to be very cheap factoring rates. Based upon what you search online, you will find claims saying you can factor your invoices for only 1%. Sometimes, the rates are even lower. How can this be? And in some advertised websites, the rates appear to be cheaper than traditional bank financing.
cheap factoring rates
Just how can factoring be cheaper compared to a conventional business loan that’s only reserved for prime customers with plenty of assets?

Let us explain this for you:

The key is to recognize how nearly all factoring rates work. Even though the rates might seem to be cheaper than bank financing, often they will not be.

Why?

Well first we need to evaluate how factoring fees are commonly evaluated. Factoring company’s commonly charge you a fee that will increase the longer that a invoice remains un-paid. This is sensible, the more time an invoice goes unpaid = the greater the cost.

Below are 2 popular techniques for determining factoring fees:

1. Ten Day Fee: This is certainly the most popular factoring fee structure. In this case, the factoring company prices a fee for a 10-day period. For instance, 1.00% for every 10 days the invoice remains unpaid, this fee adds up until the customers pay the invoice in full. The fee for the first 10 days is 1.00%. The fee for the second ten days is 2.00% and etc.

2. Daily fee: This is the most basic factoring fee model you are charged a daily fee for each day that the invoice is unpaid by the customer. An example of this would be a 0.30% fee per day. This equals about 1.00% for ten days and about 3.00% for every 30 days the invoice remains unpaid.

These illustrations have got one thing in common = the cost of factoring a invoice for ten days is 1.00%. Using this information, you could say factoring is provided at rates “as low as 1%” Definitely, just make sure your invoice are paid very quickly and in ten days or less.

in the event that you are evaluating factoring proposals, you should contemplate looking at the fee structure carefully to recognize what the total cost of factoring is going to be for you. The best way to find out – check with your factoring company for the cost of factoring invoices for thirty or sixty days. That will provide you with a good measure of the actual factoring fee cost.

If your business is experiencing cash flow issues and is in need of funding, give us a call 1-888-382-3766 or visit us online by clicking here

Neebo Capital.com Explains Factoring Invoices

Welcome to NeeBo Capital, this article was written to give you a better understanding of how factoring invoices works.

As you know business owners need cash. However how do you get money for your small company when banks are unwilling to offer your company any type of funding?Our team would like to introduce you to accounts receivable factoring,a proven approach of obtaining investment capital swiftly. That way, you will make the payments required to keep your business afloat while reducing your risk amounts.Factoring invoices involves selling yourcompany accounts receivable to a company such as NeeBo Capital in order to obtain instant cash flow. The factoring company pays you an advance, which is a percentage of the total invoice (typically 80-95%). Your clients re-pay the factor, and you receive the remaining, minus a small factoring fee. This is a time tested method to keep your company cash flow growing.If many of your invoices are not paid on time, use NeeBo Capital as your factor. Your business depends on money to run, and factoring is a way to avoid waiting Thirty to 60 days for invoices to be paid. Factoring companys such as NeeBo Capital look at your customer’s credit history and offer you an advance and a fee.

Something to remember is the fact you do not have to factor all your invoices. You should not look to factor clients who usually pay rapidly and dependably. The loss of money from the factoring fee would be greater than the immediate benefits. By studying your invoices and choosing carefully which ones to factor you will increase your profits. You do not have to take the very first rate that a factor company offers.

In the event you do not feel like you are receiving a bargain, check if the factoring company can offer a reduce rate over time or even determine if you could get a greater advance at the start while the factor works with your customers. Most factor companies give lower fees to companies that use their services often. This benefits the factor in addition to your business by generating a partnership.So do not hesitate, start factoring your invoices with neebo capital.com today!

Purchase Order Finance and Accounts Receivable Financing

Have you ever considered Purchase Order Financing or Accounts Receivable Financing , also known as factoring invoices?

In contrast to Purchase Order Financing, Accounts Receivable Financing focuses on advancing a large portion of the invoice immediately after the product is delivered to the customer. Instead of waiting Net 30 to up to net 90 days to get paid, an accounts receivable financing company is able to reduce the wait to virtually net zero by advancing 70-90 percent of the invoice amount. After the full payment has been received from the customer the accounts receivable financing company will transfer the remaining portion of the invoice, minus their cost (typically one to three percent).
purchase-orders-vs-accounts-receivable-funding

 

Get you Cash Fast!  As compared to the drawn out process of traditional financing, both Purchase Order Financing and Accounts Receivable Financing can be obtained in a matter of days, albeit Accounts Receivable financing can be faster than purchase order financing.

Credit Worthiness. Both methods focus on the credit worthiness of your client, not your balance sheet. Traditional lending look to your past history of managing your company’s finances and credit when deciding if a line of credit will be approved. Purchase Order Financing and Accounts Receivable Financing, on the other hand, will look to the future of your company and the creditworthiness of your clients.

These two funding strategies are  great for newer companies. Companies without a track record of at least 2-4 years,  you may  not have much of a shot at getting approved for business credit through a traditional lender. Since purchase order financing and accounts receivable financing companies put more weight on your clients creditworthiness, than on yours, young businesses are able to get the financing they need! Visit NeeBo Capital Today!
purchase-orders-vs-accounts-receivable-funding

Finance a Freight Brokerage with cash now

Today Freight Brokers are adapting to industry changes and continue to earn money. However one factor has remained the same for freight brokers, and that is getting a line of credit or business loan. Many smaller sized freight brokerages continue to limit the amount of cash flow and growth they can build.
define-factoring-Neebo
What do you do to address slow paying customers? A slow paying customer can put a real strain on cash flow. If you put pressure on your customers to pay you early you run the risk of losing business, and in the freight brokerage business drivers need to be paid on time.

Many freight brokerages spend too much time balancing reserve accounts to cover the gap between collecting 30 to 60 day receivables. But mismanagement of the ‘all mighty’ reserve account is a sure way to create stress and poor cash flow.

What we recommend at neebocapital.com is invoice factoring freight bills. By picking this route freight brokerages cover expenses early, pay drivers on-time, offer their buyers 90 day terms, and spend more time focusing on growth. The best part is you can get the cash in less than 24 hours and the fees are typically less than 1.59%.

How does this work? Who are these cash flow providers at neebocapital.com and how do they get freight bills paid so fast?

Good questions, Neebocapital.com acts as an intermediary between freight brokerages and customers. Neebo advances the capital against due invoices. This gives brokerages capital they need on hand to meet obligations, fees are not collected by the factoring company(Neebocapital.com) until after your invoices are paid in full. Freight factoring transactions are safer for freight brokerages because factoring companies may assume the risk on your invoices by advancing you the capital needed.

One of the big advantages of factoring invoices is that it’s easier to get than other forms of financing. To qualify for this solutions, your brokerage must work with shippers that have good commercial credit – this is the most important requirement. Also, your company must have a good track record and be free of liens or judgments. This solution is also available to startup freight brokerages, provided the company owners and operators have industry experience.

 

The History of Factoring Def, How Factoring Invoices Started…

Believe it or not Factoring Invoices is older than the last 5 presidents combined! If you still can not define factoring then you are most likely a business who is not using it as leverage. Almost all fortune 500 companies’ factor invoices to better manage their cash flow.  Neebo Capital is one of the top picks for US Fortune 500 companies.

Factoring def  goes like this…

The arrival of the well-known business practice of factoring invoices began since the inception of commerce that dates back 5,000 years. The earliest recorded factoring transaction of invoices was dated sometime before the revolution in the US when cotton, animal furs, timber and other materials were shipped from the colonies to Europe’s continent.

This was a way for ship sailors to carry on the harvest in their new land,  where merchants  awaited to loan their finances to the colonists.  We also see factoring def of invoices throughout the Industrial Revolution when factoring became more focused on credit when they assisted clients in determining the creditworthiness with their customers and setting credit limits.

The method of factoring invoices has been greatly approved over the years. We now have the ability to give instant quotes to potential factorees and loan then cash for their receivables within hours. Visit Neebo Capital and get an instant quote with rates as low as .59%.

 

Get an Instant Factoring Quote Today!