Frequently Asked Questions about Invoice Factoring
Q. How much money will you get through factoring? A. We typically will advance you 70 — 85% of the amount of your receivables immediately, and the balance, less our fees, when the invoices are actually paid. For example, if you have $100,000 in accounts receivable on your books, you could promptly receive up to $85,000 in additional working capital. If your sales boost, so will your receivables, and we will advance you more capital. You can see that factoring can be best illustrated as a way of financing your sales.
Q. How long will it take before you receive funding? A.After You are established as a client of Tradepay, funding usually appears within a day or two after you submit your invoices to us for factoring. We can often establish you as a client within a week. There is no faster funding source than factoring with Tradepay.
Q. How much are your factoring fees? A.They differ depending on the amount of factoring volume you do with us, the size of your invoices, and who your customers are. In general, our fees are no higher than those charged by a credit card company to businesses that accept credit cards for payment. We will gleefully give you a firm quote of our exact fees for your situation after we have enough information — we do not charge any fee for a quote. You can get the process started by going to the “Factoring Application” page on this website.
Q. Can I factor my consumer receivables? A. Unfortunately, no. Although most consumers are credit-worthy, our legal system simply doesn’t provide an approach for successfully factoring consumer receivables. Factoring is reasonable only for businesses that have other businesses as customers.
Q. Will you collect my old accounts for me? A.We commonly factor current accounts and accounts that are not past due. Unfortunately, factors are not a alternative for an ace collection agency or attorney.
Q. What if some of the accounts I factor get old? A.Sometimes, just the act of factoring will prompt some of your customers to pay more rapidly. This is because many factors are reporting companies to the various credit agencies, and your customers know this. They may also know that you are not a reporting company, and if they are reluctant in paying you it will not be reported. However, if an account we have factored becomes substantially past due, we will discuss the situation with you before taking any collection action. We are respectful of your customer relationship. Also, if we take collection action, you are bestowed the crisis of trying to keep your customers happy while trying to collect from them at the same time.
Q. Are there any other benefits to factoring? A.Yes, there are many other advantages other than the certain cash flow and the capital you will receive. We supply you with weekly reports of all movements on your accounts at no charge as part of our factoring activity. This should save you time and administrative cost. We will check the credit of probable future customers before you prolong them terms, immensly lowering your bad debt expense.
Q. Will factoring your invoices hurt your customer relationships? A.No, in fact it can better your relationships. Your factoring of invoices allows us to provide a form of Quality Control for you. If your customer is discontented or unhappy with your products or services, they are quite likely to tell us about it. We will hand over these comments to you so you can take appropriate action to keep your customer happy. At Tradepay we are very cautious of the time and care you have taken to develop your client relationships.
Q. What if there is a bankruptcy, bad credit, poor financials or other offensive information in your company’s or your history? A.Generally there is no problem. Tradepay focuses on the credit-worthiness of your customers, not on your credit. If you have good customers, we can provide capital based on their credit-worthiness rather than yours.
Q. Should your business meet net worth, profitability, debt-coverage, years in business or other financial ratio requirements? A.As conferred in the answer above, we look through your business to the credit-worthiness of your customers. So there is absolutely no compulsion.
Q. If you factor, can your business still borrow money from other sources? A.Yes! That is one of the big benefits of factoring. Tradepay only takes a security interest in your accounts receivable. Your plant, equipment, intellectual property, inventory, etc., are unencumbered and available as collateral for other lenders. Be aware that if a commercial bank provides you with credit, they almost always take a security interest in ALL your assets. This means that you cannot borrow from any other source, since you have no collateral to offer another lender.
Q. What if my business has already borrowed from a bank, can I still factor? A.Most propably yes, but its situational. You can factor without complications if your bank has not taken a security interest in your accounts receivable — very rare, but does happen. Most of the times, your bank has taken a security interest in all of your assets, which includes accounts receivable. In this situation, Tradepay will be glad to work with your company and your bank to work out an acceptable arrangement.