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Visions Capital Funding |
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See What VISIONS Can Do For You |
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FACTORING (ACCOUNTS RECEIVABLE) |
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WHAT IS FACTORING?
Factoring is the Purchase of a business’s accounts receivable at a discount. (See bottom of page for Cash Flow Calculator)
Factors rely on the creditworthiness and financial strength of the account debtors (local, state and/or federal governments or other businesses) instead of the creditworthiness of the business itself. Poor personal credit for the business owner can be problematic for traditional methods of financing however this is not an issue with regards to factoring programs.
Factoring is not a loan which means the business does not incur additional debt. It is the purchase of a business’ accounts receivable for a discount, therefore the entity remains debt free but has access to a line of credit limited only by the amount of the accounts receivable.
Factoring Amounts (Per Month) General Business to Business or Business to Government Receivables Minimum: No Minimum Maximum: No Maximum
Medical Receivables Minimum: $50,000 Maximum: No Maximum
Construction Receivables Minimum: $50,000 Maximum: No Maximum
Example:
A mid-size plumbing, heating and air conditioning distributor has supplied many area contractors with services and goods since opening 3 years ago. The company has built a valuable commercial customer base which averages around $180,000 per month in invoices. Even though its customers pay invoices (bills) on time, which averages around 52 days, the distributor has experienced a sudden growth period and needs to expand in order to fulfill its customers’ needs by purchasing additional supplies and hiring additional employees. Unfortunately, it’s lacking sufficient cash flow and has exceeded its financing limit with the bank.
The distributor decides to factor its invoices (accounts receivable) to gain immediate access to working capital. The immediate infusion of cash allows the business to expand as needed. With this type of accelerated funding, the distributor was able to receive a prompt payment and volume discount of 5% from its suppliers, which in many cases offsets the cost associated with factoring.
After the initial set-up of the factoring relationship is complete, the business can receive funding in as little as 24 hours.
The funding source pays the distributor $144,000 (80% of the $180,000) within 24 to 48 hours of receiving the invoices (accounts receivable).
The funding source pays the distributor the remaining 20% (minus the agreed upon discount fee*) after it has received payment in full from the customers of the distributor. *Discount fee percentage is based on amount of monthly invoices and can vary each month.
This type of financing is very flexible. It allows a business to factor their accounts receivable when they want or feel the need.
A business can turn non-performing assets (invoices/receivables) into an immediate performing asset (cash) instead of waiting 30, 60 or 90 days to be paid.
We suggest that our clients who factor their invoices contact their suppliers to receive prompt payment and volume discounts. The discounts that suppliers provide average around 5% which generally offsets the cost associated with factoring.
Types of Receivables Funded (Purchased)
· Business to Business Receivables · Business to Government Receivables · Medical Receivables · Construction Receivables · Bankruptcy Receivables · International Receivables
Why Do Companies Factor?
Growth
· Create New Markets · Hire New Employees · Increase Sales · Fulfill Large Orders · Cash and Volume Discounts · Unrestricted Use of Funds · DEBT FREE FINANCING
Survival
· Need Cash · Payroll · Payroll Taxes · Expenses · Maintain Credit Rating
Viable Factoring Deals
· Business to Business or Business to Government Invoices · Strong, Multiple Debtors · Accounts Receivable history under 60 days · Decent Margins · Poised for Growth · Unencumbered Accounts Receivable
Other Services Provided With Factoring
Invoicing Collections Payroll Services Letters of Credit Tax Remittances Purchase Order Funding Credit and Credit Insurance (Maturity Factoring)
Tax Liens and Bankruptcies? - FUNDING IS STILL POSSIBLE!
Most financial institutions avoid companies that have tax liens or have filed bankruptcy. With our funding sources, these companies are their niche.
Tax Liens When the IRS has placed a lien, our funding sources can negotiate a subordination agreement. The IRS is generally willing to subordinate because the infusion of cash provided from factoring can help nurse the company back to financial stability. Specifically, with this type of plan, the entity will stay current with ongoing liabilities as well as make timely remittances according to the IRS repayment plan.
Bankruptcies In the case of a bankruptcy, the trustee is motivated to work with our funding sources because their services can turn a non-performing business asset (Accounts Receivable) into a performing asset (Cash) which can fuel new business activity. The capital provided by the factoring of the receivables allows the company to maintain the obligations set forth in the restructuring of the post petition entity.
Overview Contrary to traditional financing, our funding sources are more interested in the financial strength of your customers, as opposed to the financial strength of YOU and YOUR COMPANY. This pattern shift in underwriting will open you up to a line of credit limited only by the strength and size of your accounts receivable. This financing is flexible (totally controlled by your need for cash) and affordable. Generally, the IRS wants money owed and does not want to put a company out of business since future taxes depend on your company’s survival. For more details, we can set up a conference call with one of our funding sources. All we would need in advance is a simple, completed application which we will be more than happy to assist you with (General Information is needed prior to conference call). You will then receive, within 48 hours, a no-cost evaluation on the benefits that your company can receive.
Click on Link below for Cash Flow Calculator, click the Cash Flow link at the top and enter your specifics
http://www.bplans.com/business_calculators/cashflowcalculatorwindow.cfm
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