by admin | Sep 10, 2020 | Articles
Factoring companies provide the ideal solution for businesses looking for better cash-flow management. When searching for the perfect company to meet your factoring needs, there are several common questions that should be asked. Some factoring companies serve multiple industries and some specialise in niche ones; the key is to find the factoring company that can help your business grow.
Industry leader, Charter Capital, has collated a list of the most important questions to ask before you sign into a factoring agreement.
What is factoring?
Factoring is a form of financing, otherwise known as “accounts receivable financing,” that provides businesses with immediate cash for their invoices, without them having to take out a loan. The third-party (factor) buys the company’s invoices and then collects on those invoices on the company’s behalf, for a percentage of the invoice.n
How does factoring work?
Factoring is not the same as a bank loan; you do not get into debt when you sign a factoring agreement and you do not need collateral to secure the cash; it also does not show up as debt on your balance sheet. Rather, factors focus on the creditworthiness of your clients. The factor first does a credit check on your client and, if they are satisfied, they pay you the majority of the invoice amount, and the balance once your client has paid the invoice, less their fee.
What is a factoring company?
A factoring company relieves businesses of the stress and worry associated with a restricted cash flow. Factoring companies provide an instant cash solution instead of businesses having to wait 30 to 60 days for clients to pay for services or goods, effectively giving them the opportunity to take on more clients and grow.
What does a factoring company do?
Factoring is a centuries-old debtor-financing practice that enables companies to enhance their cash flow and expand their business. Some factoring companies take care of all the associated back-office admin as well, with limited paperwork and documentation required from their clients. Unlike a bank, funds are not restricted and grow as your invoices grow. Several factoring companies give you access to cash needed in as little as 24-hours.
Why should you consider factoring?
Factoring essentially provides a stepping stone towards more traditional forms of finance, such as bank loans. It’s a short-term solution to help businesses boost their cash flow. Consider factoring if you need to free up your cash flow in order to use that capital elsewhere; if you are a small business with few assets; or if you are a start-up with no credit history.
When should you use a factoring company?
Companies constantly face peaks and troughs but there are a few definite “signs” that indicate when it’s time to begin using a factoring company: if your customers take a long time to pay and you are struggling to manage your cash flow in the interim; if you don’t have the manpower to do the back-office work associated with collecting on invoices; if you have seasonal cash restrictions; and if you are a new company with few assets and no credit history.
The definition of factoring
Factoring is defined as the process whereby a third party buys a company’s invoices at a discount in order for that company to raise capital. The factor pays the company approximately 80% of the value of the invoice, collects on the invoice on the company’s behalf, and then pays the outstanding balance, minus their factor’s fee. They do not extend credit and, therefore, are not primarily concerned with a business’ creditworthiness – credit is based on sales.
How to choose a factoring company?
When choosing a factoring company, you need to first pinpoint your business’ unique needs. Find a factor that specializes in your industry, that way they will know first-hand what tools are required to factor your invoices successfully. Choose experienced companies that have a high customer-service rating and competitive discount and advance rates.
Who uses factoring?
Factoring is accessible to companies ranging from small business start-ups to large corporations in a variety of industries. The following industries commonly make use of factors:
- Agriculture
- Construction
- Distribution
- Food & Beverage
- Government
- Healthcare
- Information technology
- Manufacturing
- Oil & Gas
- Service providers
- Small business
- Staffing agencies
- Transportation & trucking
Who needs factoring?
Factoring is open to any and all businesses, big or small. It provides the ideal solution for companies that are experiencing a tight cash flow; have slow-paying customers; who don’t yet have a credit rating, or for those who don’t have many assets to use as collateral.
The benefits of invoice factoring?
Invoice factoring benefits companies that have a limited cash flow and require the capital for other areas in the business that would better increase profitability. For example, companies who use invoice factoring can then redirect the cash flow towards payroll, buying new equipment, restocking supplies, hiring more employees, etc. and generally expand and develop at a much quicker rate.
Factoring versus a bank loan
The main difference between factoring and a bank loan is the flexibility factoring offers. Factoring fees are higher than a bank loan; however, factoring offers much more flexibility as there are no restrictions on the amount you can access – as your invoices increase, so does the advance available to you. Similarly, you are not charged interest as you would be by a bank, you do not need to have a credit rating, or any assets, and you don’t get into debt.
Factoring types: Recourse vs. non-recourse factoring
Most factoring companies offer both recourse and non-recourse factoring options. In a recourse agreement, the client takes responsibility if the invoice does not get paid and buys the invoice back. In a non-recourse agreement, the factor covers the cost if the client does not pay. For obvious reasons, the latter option is more costly.
Factoring agreement
A factoring agreement is the document you sign, together with your factor, outlining the expectations and requirements of the transaction. The details will vary from factor to factor, but all basic agreements should state who is responsible for what, the fees involved and the processes to follow.
Factoring rates
The costs associated with factoring are dependent on the discount and advance rates, and the length of the factoring period. The discount rate is what companies are charged to borrow the money, ranging from 0.49% to 5%, based on the original amount of the invoice; Charter Capital offers competitive rates as low as 0.49%. Advance rates vary, depending on the type of industry involved and the value of the transaction, and range from 70 – 100%.
Are factoring companies regulated?
Factoring companies are largely unregulated; however, associations such as the Commercial Finance Association and the International Factoring Association “self-regulate” factors and monitor and maintain high standards within the industry.
Is factoring an option for small business?
Small businesses are often limited by a restricted cash flow and factoring provides the perfect solution to this problem. Ordinarily, small business owners would seek a loan from a bank to bridge the cash gap; however, bank loans are only accessible to clients with a credit history and assets. They also get you into debilitating debt. Factoring provides small businesses with interest-free access to cash.
For professional, personal service and to find out more about factoring, contact Charter Capital today.
by admin | Aug 10, 2020 | Articles
Freight brokers across North America continue to choose Triumph Business Capital’s factoring services for a reason: Our 20 years of experience and industry knowledge has placed us at the forefront of the factoring industry.
Triumph Business Capital is the freight brokers’ factor of choice. Our services include factoring rate quotes online, in only two minutes; simple application processes; minimal paperwork; and competitive rates from as low as 0.49%. We pay your carriers in order for you to focus your time and resources on improving and expanding your business.
We understand that different industries require different factoring solutions and we structure our business around those industry needs.
What we offer
At Triumph Business Capital, personalized customer service is a priority and our dedicated employees give all our customers focussed, professional service, regardless of their size and budget. Why would a freight broker choose our services? Because we are reliable, available and committed to being present for our clients every step of the way.
Freight brokers who work with Triumph Business Capital can use the access to funds to provide fuel advances and quick pay to their carriers. We also enable brokers to offer fuel discount cards and we help establish AAA credit. Any association with our reputable company immediately broadens a broker’s appeal. We employ simple and user-friendly processes, which enable clients to have online access to broker history whenever they want. We can even handle your invoices and collections.
Freight brokers choose Triumph Business Capital because we are undoubtedly leaders in the invoice factoring world. Triumph Business Capital has provided funding for more than 8 000 companies and has bought almost $1 million worth of invoices.
To speak to one of our consultants, or to get an instant online rate quote, contact Triumph Business Capital today.
by Francois Muscat | Jul 27, 2020 | Articles
Email marketing is an opportunity to form a virtual relationship with your existing and potential customers. Promotional emails can take many forms, such as weekly newsletters, customer retention emails and sales promotion emails. Ultimately, the aim of promotional emails and the email marketing strategy is to convert email recipients to customers and create revenue. But why are promotional emails important in marketing?
1. Email marketing is cost-effective
Emails are an efficient, cost-effective inbound marketing tool. They generally have a high return on investment (ROI) and are a great digital marketing tool for small businesses as they are relatively inexpensive to start and maintain.
2. You can reach more mobile customers with email marketing
Most everyone has a mobile phone today, and many consumers read their emails on smartphones or tablets. This makes email marketing an effective way to reach customers anywhere in the world.
3. Email marketing can be automated
Email marketing lends well to automation, and this improves the relevancy and timeliness of email marketing campaigns. A digital marketing agency can assist by identifying triggers and workflows that automatically send messages to customers when they take a certain action.
4. Email marketing content is easily personalised
Personalisation is becoming important to customers, and they like content that feels more personal and tailored to their needs and preferences. Even something as simple as using a customer’s name in the subject line can result in higher clickthrough rates.
5. It is easy to make email marketing interactive
Customers love interactive content such as videos, graphics, music, or other multimedia. Including interactive content in the body of an email keeps consumers engaged, with a greater likelihood of them clicking on a link to access your business website.
6. Email marketing results are easy to measure
Email marketing analytics allows you to see which users opened an email, if they clicked on any links or took a desired action. It also allows you to see how many people unsubscribed, allowing you to adjust your email marketing strategy.
WSI OMS is a digital marketing agency with specialist knowledge of the South African market. Contact us today for more information on growing the email marketing of your business.
by admin | Jul 10, 2020 | Articles
Supply chain financing (SCF), also known as reverse factoring, is a practical, debtless way to manage your company’s cash flow. Cash flow problems are common among even well-established businesses. Poor cash flow can damage relationships with clients and suppliers and possibly signal a company’s downfall. In their urgent need to do damage control in the event of cash flow issues, companies often resort to high-interest bank loans or to liquidating assets or inventory. Solutions such as supply chain financing are hassle-free alternatives that allow you to fill gaps in your cash flow quickly, without having to incur debt or part with valuable assets. This article will tell you all you need to know about SCF and why you should not hesitate to use it to smooth over those periodic cash flow shortages.
What is supply chain financing?
SCF or reverse factoring is a supplier finance solution in which companies can offer early payments on approved invoices to their suppliers, using the financial institution as an intermediary. The lending institution – or factor – advances the early payment to the supplier and then collects payment from the buyer on the maturity of the invoice. By giving your suppliers access to reverse factoring, you can prevent any possible disruptions in your supply chain. It is a financing option that helps your key suppliers to fill gaps in their cash flow to ensure that they can continue to supply to you. It also indirectly enables you to maintain your own working capital position.
How does reverse factoring differ from invoice factoring?
Invoice factoring is a popular cash flow financing solution, which can easily be confused with reverse factoring. However, as the name suggests, reverse factoring works the other way around from invoice factoring. With invoice factoring, a supplier sells their receivable invoices to the factor, who advances a certain percentage of the total value of those invoices, and then takes charge of collecting payment from the supplier’s debtors. Once payment is collected, the factor takes their fee and pays any outstanding amounts to the supplier.
With reverse factoring, it is the buyer rather than the supplier that initiates the process. The buyer offers to make early payment on invoices it has received from the supplier. The factor advances the payment on the buyer’s behalf and then collects the payment from the buyer at a later stage. In this way, the buyer can still pay the invoice on the stipulated payment terms, while the supplier can receive settlement on that same invoice earlier, helping it to ease up its cash flow and keep the supply chain moving.
How does reverse factoring work?
Reverse factoring is an ongoing three-way relationship between a buyer, a seller, and a factoring company. There are several steps in the reverse factoring process:
- First, the buyer purchases goods from the supplier.
- Typically, the supplier would then issue an invoice for the goods, indicating specific payment terms, such as 30 days. When an SCF arrangement has been set in place, the supplier instead uploads the invoice to the reverse factoring platform operated by the factoring company.
- The buyer approves the invoice and the seller requests early payment.
- The factor settles the invoices with the supplier, minus its factoring fee.
- On the stated maturity date of the invoice, the buyer pays the full amount of the invoice to the factoring company.
The benefits of reverse factoring
SCF or reverse factoring benefits both the supplier and the buyer in a number of ways:
- Improved cash flow: The main benefit is that reverse factoring helps to prevent breakdowns in cash flow. The supplier receives early payment on its invoices and so does not have to wait for accounts receivable. The result is increased cash flow and better cash flow management and better financial health.
- Fewer early payment requests: Once reverse factoring has been activated, businesses will stop receiving requests for early payment from their suppliers. With the agreement in place, the supplier can request early payment from the factoring company, and the buyer can continue to pay on the usual terms.
- Fewer disputes: Businesses will deal with fewer disputes with their suppliers, because a third party is involved.
- Fast payment: Suppliers get to enjoy early settlement of their invoices, reducing long delays.
- Less admin: With a factoring agreement in place, businesses will spend less time chasing payment and managing invoices. The reduction in administrative tasks means that the company can use its resources for more constructive purposes.
- Low interest rates: Bank loans incur considerable costs in the form of interest. Factoring companies charge lower interest and what it does charge is based on the creditworthiness of the buyer, rather than the supplier.
- Foster relationships: Without a reverse factoring arrangement, relationships between buyers and suppliers can quickly fall apart in the event of late payment or non-payment. When there is a factoring agreement in place, this is not an issue, so the two parties can develop long-term relationships, which can only benefit their business and supply chains in the long run.
- Improved working capital: Working capital flows are enhanced for both the supplier and the buyer. The suppliers lower their days sales outstanding (DSO) and accelerate their cash flow and improve their working capital position. Buyers get to increase their days payable outstanding (DPO). When setting up reverse factoring agreements, they can even make provisions to pay invoices later than the supplier’s stipulated terms.
- Reduced risk of supply chain disruption: Buyers can use their factoring agreement to reduce the possibility of interrupting their supply chains. Suppliers are less likely to struggle to meet orders if they have access to early payments.
- Stronger negotiating position: If a buyer offers reverse factoring options, it can put them in an excellent position to negotiate better trade terms with their suppliers.
- Better cash forecasting: Suppliers can enjoy better predictability of future payments, making it easier to forecast their cash flows.
Who uses supply chain financing?
Businesses in all sectors can benefit from supply chain financing. It has become a preferred method of financing for businesses on both sides of the supply chain. Whether you deal in electronics, FMCGs, textiles, or almost any other products, you can enjoy the benefits of reverse factoring either as a supplier or a buyer.
Which suppliers should you offer reverse factoring?
As a buyer, you may wonder which of your suppliers you should invite to enter into a reverse factoring agreement with you. There are at least two different ways you can approach an answer to the question. Traditionally, buyers only offer this option to their top 10 to 20 suppliers. The main reason for this limitation is that it tended to require a substantial administrative effort to onboard suppliers onto an SCF program.
However, the administrative costs of reverse factoring are not as heavy as they used to be. Technology has made the process much easier. It is now possible for a company to add its entire supplier base to its reverse factoring program, which means that even smaller suppliers can enjoy the benefits of SCF, to which they may not normally have access.
Viva Capital’s SCF program
Viva Capital Funding is a factoring company based in El Paso, Texas. In addition to invoice factoring, short-term financing, equipment financing and other financial services, we offer an easy reverse factoring service that will give you and your suppliers all the benefits described above. We serve a wide variety of sectors, including healthcare, staffing, transportation, manufacturing, service providers, and a specialized skill set for the oil industry.
If you would like to access these benefits and offer reverse factoring to your suppliers, contact Viva Capital Funding today.
by admin | Jun 10, 2020 | Articles
If you own a trucking company, then you may have heard of freight factoring. Instead of lending funds as a bank would do, freight factoring companies purchase overdue invoices and exchange them for a cash advance that can be used to improve your company’s cash flow.
Factoring is right for your trucking company if you have to wait 30, 60 or 90 days for your customers to process payments. Even if your clients are great payers and you have an excellent working relationship with them, this long waiting period can pose problems seeing as you have to pay fuel, driver fees and other normal expenses as they occur. Factoring your invoices gives you the ability to meet all your obligations when you need to.
There are many different freight factoring companies to choose from, so it’s vital that you compare what the companies are offering so that you are able to choose the best one for your unique situation. Here a few value-added services that you should look out for:
- Fuel advance programs that offer funding before delivery.
- Flexibility. Freight factoring should provide you with the option to factor invoices long term or just as a once-off service. Make sure ask about minimum invoice requirements and contracts to ensure you don’t get locked into a service that you don’t need long-term.
- Fuel cards that give you access to discounts when refueling.
- Competitive factoring rates. Getting money upfront is important, but you don’t want to be spending to much on factoring costs in order to receive an advance on your payments.
- Same-day funding. This will enable you to use your cash immediately for daily overheads or other expenses that you incur to make your trucking business run smoothly.
- Tailored solutions for you industry. Some factoring companies specialize in the financial sector, professional services or specific industries like oil and gas or construction. A factoring company that specializes in the freight industry will understand you pain-points and challenges. This is the type of expertise and in-depth industry knowledge that you should look for in factoring company.
- Exceptional customers service. Your clients are going to be dealing with the factoring company, so you want to partner with a company that is not only professional, but goes out of their way to provide a great customer service.
At Charter Capital, we offer customized funding that fits your business needs with zero hidden fees. With industry specialists who understand your unique business problems and goals. We are true partners to help you overcome financing hurdles and put in the extra work to make factoring work for you, all with fast response and no added layers in an approval process. These are only a few ways that we have tailored our factoring services for the freight industry,
For more information about factoring agreements and rates, get and instant quote factoring today.
by admin | May 10, 2020 | Articles
As a freight broker, you are often faced with competing demands for your money. On one side you have commercial shippers that want to pay your invoices in 30, 60 or 90 days and on the other hand you have motor carriers that want to be paid immediately. This situation puts the broker right in the middle.
Obviously, if you have the cash flow you can pay the carriers immediately and simply wait for your clients to pay. If you don’t have the cash flow or if your freight business is growing quickly, this situation could lead to cash flow problems as well as unhappy motor carriers.
Freight Factoring can improve you cash flow instantly as well as improve the customer service you are able to offer both commercial shippers and motor carriers. Here’s how factoring can improve your customer service and client relationships:
- Take on more loads: You could unknowingly be damaging your relationship with existing clients because your are unable to take on more loads and new customers due to cash flow issues. When you partner with a factoring company, you will receive upfront payment for your invoices which will in turn enable you to take on more loads and new clients.
- Work with better quality clients: While your business might be offering a great customer service already, relationships can quickly turn sour when you discover that some clients don’t pay invoices according to the agreed upon date or that they weren’t creditworthy to begin with. Factoring companies review the credit quality of your new clients as well as your existing customer base, which will help you to determine which clients have good payment habits and enable you to only work with the best clients.
- Remove yourself from the collection process: A factoring company will handle the entire collection process for you. They usually have a team of highly experienced and professional collection agents that will do all the calling and administration involved with receiving payments for you. This allows you to focus on your business while the factoring company handles the collections.
Charter Capital partners with many freight brokers. Contact us today for a factoring rate quote.
