Factoring Accounts Receivable Can Improve Cash Flow (1)

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Factoring Accounts Receivable Can Improve Cash
Flow
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Improving Cash Flow would Benefit Your Business
You Performed Services
You Delivered Goods
Now, You are Waiting to receive the payment on
outstanding invoices
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Bank Loans Have Become Scarcer And Smaller

• Recession has made borrowing difficult
• Even if Your Business qualifies for a Bank loan

• Credit Standards for business loans have
  tightened
• The Shift is from Cash is lending to Asset
  Based lending
• Asset Based loans are secured against specific
  collateral.

• Covenant You must maintain positive Cash Flow.
• Covenant You cannot exceed a total leverage
  ratio.
•  Covenant You must maintain a minimum net
  worth.

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Instead of Borrowing Use Invoice or Account
Receivable
List Of Business Assets

• Real Estate
• Equipment
• Inventory
• Furnishing and Fixtures
• Accounts Receivables
• Intellectual Property
• Stock in Other Property

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Collection Time Determines the Factors Fee ,
With the Balance Remitted to the Company Income
Factors Fee 
Company Income
Factors Fee

• Once The Factor Purchase the invoices,
• the factor collects from the customer.
• The amount of time it takes for Invoice
• the customer to pay, determines the
• Factors fee (typically, 3 if Brokers
• Fee collection in less than 30 days,
• plus 1 for each extra 10 days)
• CFAs Brokers fee is in addition to the
• Factors Fee.

Your Companys Invoice or Account Receivable are
sold in exchange for

•   Advance Rate (75-95 of the invoice.
• Less the Factors Fee and the Brokers
  Fee
• The Reserve Release (Paid to you after the
  factor collects)

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You Maintain Control in the Factoring Process

• You select which Invoice you want to sell

• On an invoice-by-invoice basis

• You Control Factoring Costs

• Internet-based factoring systems, basis. allow
  you 24/7 online account access.
• Advances and Reserve Release done via wire
  transfer.
• Factors will also perform credit on new or
  existing customers

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