In today's economy 30 to 90-day pay terms are standard. These long pay terms can create "Cash Flow Stress" to growing companies.
Our specially designed Factoring Lines can ease your stress by allowing you to access the capital that is tied up in your accounts receivables. What’s more, Set-up is as easy as 1-2-3.
History of Factoring Services
Factoring's origins lie in the financing of trade, particularly international trade. Factoring Companies were in fact a part of business life in England prior to 1400, and then came to America with the Pilgrims, around 1620. Invoice Factoring appears to be closely related to early merchant banking activities. The latter however evolved by extension to non-trade related financing such as sovereign debt. Like all financial instruments, Account Receivable Factoring evolved over centuries. This was driven by changes in the organization of companies; technology, particularly air travel and non-face to face communications technologies starting with the telegraph, followed by the telephone and then computers. These also drove and were driven by modifications of the common law framework in England and the United States.
Originally Factoring Companies took physical possession of the goods, provided cash advances to the producer, financed the credit extended to the buyer and insured the credit strength of the buyer. By the twentieth century in the United States, the use of a Factoring Company was still the predominant form of financing working capital for the then high growth rate textile industry. In part, this occurred because of the structure of the US banking system with its myriad of small banks and consequent limitations on the amount that could be advanced prudently by any one of them to a firm.
Today Accounts Receivable Factoring Companies are still dealt with the task of advancing funds to smaller to mid sized rapidly growing firms who sell to larger more creditworthy organizations. While almost never taking possession of the goods sold, Factoring Companies offer various combinations of money and supportive services when advancing funds.
Invoice Factoring Services Today
Factoring Accounts Receivables is a method used by some firms to obtain cash. Certain companies factor accounts when the available cash balance held by the firm is insufficient to meet current obligations and accommodate its other cash needs, such as new orders or contracts. In other industries, however, such as textiles, Oil & Gas and Trucking, for example, financially sound companies factor their accounts simply because this is the historic method of finance. The use of a Factoring Company to obtain the cash needed to accommodate a firm's immediate cash needs will allow the firm to maintain a smaller ongoing cash balance. By reducing the size of its cash balances, more money is made available for investment in the firm's growth. Accounts Receivable Factoring is also used as a financial instrument to provide better cash flow control especially if a company currently has a lot of accounts receivables with different credit terms to manage. A company sells its invoices at a discount to their face value when it calculates that it will be better off using the proceeds to bolster its own growth than it would be by effectively functioning as its "customer's bank". Accordingly, Invoice Factoring occurs when the rate of return on the proceeds invested in production exceed the costs associated with Factoring the receivables.
Factoring Services Terms
There are many different names a Factoring Services company will call this service including, Factoring Services, Factoring Service, Service Factoring, and Services Factoring.
Factoring is a financial transaction whereby a Service provider sells its accounts receivable (invoices), to a Factoring Services company at a discount in exchange for immediate cash.
Factoring Services are different from a bank loan in two significant ways. First, the Factoring Services Company places the emphasis on the value of the receivables, not necessarily the firm's credit worthiness or fixed assets. Secondly, Factoring is not a loan - it is the purchase of a financial asset (the receivable). The receivable is a financial asset associated with the debtor's liability to pay money owed to the seller for work performed or goods sold. The seller sells its invoices (the receivables) at a discount to the Factoring Services Company to obtain the cash needed for day-to-day operations.
The sale of the receivables (invoice) transfers ownership of the receivables to the Factoring Service Company. The account debtor is then notified of the sale and then remits payment directly to the Factoring Services Company lockbox.
Factoring Services companies should provide other mission critical services including Credit Analysis, Risk Assessment, AR Management, Billing, Collection, Treasury and 24/7 web reporting.
There are three integral parts to a Factoring Services transaction.
1. The fee, this is the amount a Factoring Services company will charge you for the service. Most Factoring Services companies will charge you a Factoring fee also known as a service charge, based on how long it takes the debtor to pay.
2. The advance, this is the percentage of the face value of the invoice you will be paid upon submission of that invoice.
3. The reserve, this is the remainder of the total invoice amount held until the payment by the account debtor is made in full.
TCI Business Capital is a leading Factoring Services company. We provide our Factoring Service to a wide variety of small to mid-size companies.
We have earned a reputation for providing world-class Factoring Services to companies who need Factoring lines for their Company. When searching for a Factoring Services company, look no further than TCI Business Capital.
Banks often call their Factoring programs Factoring loans. Don"t be confused with this statement because Factoring your invoices is not a loan. Factoring is simply the sale of your invoice at a discount to a Factoring Services company.
Are you interested in learning more about TCI Business Capital?
Call today and talk to one of our Factoring Services specialists. Our Factoring Services specialists will give a free consultation on how Factoring can help your business succeed. With TCI Business Capital there is no red tape to cut through or bureaucratic maze to navigate. We make the Factoring application process simple and straightforward; what's more, we"ll get you approved in just 5 minutes.
Want to learn more about TCI Business Capital? Call 800.707.4845
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For more information about Factoring Services programs with TCI Business Capital, please call 800.707.4845