Factoring Accounts Receivable Can Improve Cash Flow - PowerPoint PPT Presentation

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Factoring Accounts Receivable Can Improve Cash Flow

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Title: Factoring Accounts Receivable Can Improve Cash Flow


1
Factoring Accounts Receivable Can Improve Cash
Flow
2
Improving Cash Flow would Benefit Your Business
You Performed Services
You Delivered Goods
Now, You are Waiting to receive the payment on
outstanding invoices
3
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.

4
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

5
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)

6
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

7
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