| 1. |
What is factoring? |
| 2. |
Is factoring beneficial to my company? |
| 3. |
Is receivable financing a widely accepted financial practice? |
| 4. |
Will receivables financing inhibit my ability to secure traditional bank financing? |
| 5. |
How does factoring affect my relationship with my customers? |
| 6. |
What are your basic requirements of a factored client? |
| 7. |
What happens if one of my customers is unable to pay? |
| 8. |
What is the difference between recourse and non-recourse factoring? |
| 9. |
What are your minimum and maximum restrictions
as to the size of clients you serve? |
| 10. |
Do you require that I offer all of my accounts
receivable to you for factoring? |
| 11. |
What do you take into consideration when establishing
your fees? |
| 12. |
How do I know which of my customers are factorable? |
| 13. |
Will any of my customers object to their invoices
being factored? |
| 14. |
Can the Freight Capital factoring program co-exist
with existing bank funding that we have already established? |
| 15. |
Do you factor any companies who are either in
or contemplating Chapter 11? |
| 16. |
Do I have to be an old established business
for you to factor my invoices? |
| 17. |
Do I have to be presently operating profitably
for you to factor my invoices? |
| 18. |
Does my customer still make payments to my company? |
| 19. |
Can I talk to other companies who are factoring to determine their experience? |
|
| 1. |
What is factoring? |
| |
Very simply stated, factoring is the sale of your accounts receivable (the monies due you from your invoices) at a discount.
 |
| 2. |
How can factoring benefit my company? |
| |
Factoring can be very beneficial to you if you use it as
a tool with which to expand your sales. Many companies are unable
to grow past a given level because they're unable to carry the
additional receivables that come with increased sales. The irony
is that the most profitable sales are generally those that have
not yet been made. The reason for this is that fixed expenses
such as rent, basic office salaries, telephone, etc., are paid
out of the first sales made. Therefore, the profit margin is
much high if you're unable to make those additional sales due
to the lack of cash flow, the lost profit on the additional
sales generally is more than the cost related to factoring.
|
| 3. |
Is receivable financing a widely accepted financial practice? |
| |
Receivables financing dates back to the Ancient Greek and
Roman Empires when merchants sometimes financed themselves through
the sale of receivables. Until recent years, receivables financing
was only available to companies maintaining annual receivables
base of $20 million or more. Now, due to advances in technology,
financing sources such as Freight Capital, can serve the small
to mid-sized business community without incurring severe administrative
expenses. According to published reports, in excess of $90 Billion
in accounts receivables are financed annually in the USA alone.
|
| 4. |
If you factor my accounts, will it be more difficult to
get bank financing? |
| |
Quite the contrary. Receivables financing actually enhances
your ability to qualify for low-cost, long-term financing. Since
Freight Capital does not lend against assets, your balance sheet
shows no liability and your debt to equity ratio will markedly
improve. In addition, you will benefit from an accelerated cash
flow that allows you to pay suppliers faster, improving your
credit rating. All of these factors should actually improve
your ability to secure traditional bank financing.
|
| 5. |
How does factoring affect my relationship with my customers? |
| |
The impact should be a positive one. Freight Capital is skilled
at providing a positive image of your business to your customers.
|
| 6. |
What do you require from companies you work with? |
| |
You should be honest, reasonably accurate in your paper work,
do business with credit worthy customers, and be in a position
to expand your sales or reduce your expenses as the result of
our factoring program.
|
| 7. |
What happens if one of my customers is unable to pay? |
| |
If you have selected to factor ‘non-recourse’ you will not suffer any loss if your customer goes bankrupt and cannot pay you. However, if you are factoring ‘with recourse’, you will still be responsible. This is why we recommend our non-recourse programs, as they offer you a level of insurance. If the reason for non-payment is an issue related to non-performance by you or if an invoice is not paid within 60 days (or some other agreed upon time period), Freight Capital will typically ask you to exchange the invoice for another invoice of comparable value. We will provide collection services at your request.
|
| 8. |
What is the difference between recourse and non-recourse factoring? |
| |
Non-Recourse factoring is invoice factoring in which the factor takes the credit risk of an account debtor, protecting the client from credit loss. When an invoice is factored with "recourse" it means that the client is ultimately responsible for payment, regardless of whether the account debtor pays or not .
|
| 9. |
What are the minimum and maximum size of clients you serve? |
| |
We have no set minimums or maximums. We have clients with
credit lines ranging from $10,000 to $500,000.
|
| 10. |
Do you require that I offer all of my accounts receivable
to you for factoring? |
| |
You decide which customers you offer to us for factoring.
After reviewing those offered, we advise you as to which ones
we are willing to accept. We do, however require that you factor
all the receivables due from any particular customer. To attempt
to factor some and not factor other receivables due from the
same customer generally results in a confusing situation for
your customer. There are exceptions to this rule as long as
we can make sure that it does not cause any confusion within
the accounts payable department of your customer.
|
| 11. |
What do you consider when establishing your fees? |
| |
The credit worthiness of your customers, the average dollar
amount of the invoices, the total number of invoices factored
per month, the total dollar volume of invoices factored per
month and the average number of days your customers take to
pay their invoices.
|
| 12. |
How do I know which of my customers are factorable? |
| |
By providing us with a complete list of customers proposed
to be factored together with address, phone number and estimated
credit line needed, we will respond to you promptly.
|
| 13. |
Will any of my customers not like their invoices being
factored? |
| |
There are some customers who will question their invoices
being factored. However, there are relatively few situations
like this and we have usually been able to overcome any problems.
The primary reason for a client problem is an initial lack of
understanding of factoring.
|
| 14. |
Can we use the Freight Capital factoring program along
with existing bank funding that we already have? |
| |
Yes, we do this quite often by agreement with your bank. The
combination of your bank financing and our factoring can give
you considerably more cash flow than you would otherwise be
able to generate, and the blended cost of bank financing and
factoring reduces your overall cost of financing as opposed
to strictly factoring.
|
| 15. |
Do you factor any companies who are either in or contemplating
Chapter 11? |
| |
Yes. There are some very legitimate uses of Chapter 11 proceedings.
If you are presently in a Chapter 11 proceeding, it is necessary
to obtain a court order permitting the factoring agreement.
In such case it will be necessary for Freight Capital to work
through your attorney to obtain the necessary court consent
and orders. If you are contemplating a Chapter 11 filing but
have not yet done so, there are certain pre-filing considerations
that should be taken into account and a thorough and open discussion
between an attorney representing your company and Freight Capital
should be had. Timing in such cases is critical and certain
steps must be taken with timing in mind.
|
| 16. |
Do I have to be in business a long time for you to factor
my invoices? |
| |
Some of our clients are new start-up businesses or relatively
young businesses.
|
| 17. |
Do I have to be making a profit now for you to factor my
invoices? |
| |
If you are not presently profitable, we need to be reasonably
comfortable with the belief that you will become profitable
as the result of using our factoring program.
|
| 18. |
Does my customer still make payments to my company? |
| |
Factors in general require that checks be mailed directly
to the factor's address.
|
| 19. |
Can I talk to other companies who are factoring to determine their experience? |
| |
The best way to get answers to your questions about factoring in general and about Freight Capital, in particular, is to call three or four companies who are using our services. Before entering into a factoring relationship with us, we will provide you with a confidential list of current clients.
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