In today's economy 30 to 90-day pay terms are standard. These long pay terms can create "Cash Flow Stress" to growing companies.
Our specially designed Factoring Lines can ease your stress by allowing you to access the capital that is tied up in your accounts receivables. What’s more, Set-up is as easy as 1-2-3.
History of Invoice Factoring
Factoring's origins lie in the financing of trade, particularly international trade. Factoring Companies were in fact a part of business life in England prior to 1400, and then came to America with the Pilgrims, around 1620. Invoice Factoring appears to be closely related to early merchant banking activities. The latter however evolved by extension to non-trade related financing such as sovereign debt. Like all financial instruments, Account Receivable Factoring evolved over centuries. This was driven by changes in the organization of companies; technology, particularly air travel and non-face to face communications technologies starting with the telegraph, followed by the telephone and then computers. These also drove and were driven by modifications of the common law framework in England and the United States.
Originally Factoring Companies took physical possession of the goods, provided cash advances to the producer, financed the credit extended to the buyer and insured the credit strength of the buyer. By the twentieth century in the United States, the use of a Factoring Company was still the predominant form of financing working capital for the then high growth rate textile industry. In part, this occurred because of the structure of the US banking system with its myriad of small banks and consequent limitations on the amount that could be advanced prudently by any one of them to a firm.
Today Accounts Receivable Factoring Companies are still dealt with the task of advancing funds to smaller to mid sized rapidly growing firms who sell to larger more creditworthy organizations. While almost never taking possession of the goods sold, Factoring Companies offer various combinations of money and supportive services when advancing funds.
Invoice Factoring Today
Factoring Accounts Receivables is a method used by some firms to obtain cash. Certain companies factor accounts when the available cash balance held by the firm is insufficient to meet current obligations and accommodate its other cash needs, such as new orders or contracts. In other industries, however, such as textiles, Oil & Gas and Trucking, for example, financially sound companies factor their accounts simply because this is the historic method of finance. The use of a Factoring Company to obtain the cash needed to accommodate a firm's immediate cash needs will allow the firm to maintain a smaller ongoing cash balance. By reducing the size of its cash balances, more money is made available for investment in the firm's growth. Accounts Receivable Factoring is also used as a financial instrument to provide better cash flow control especially if a company currently has a lot of accounts receivables with different credit terms to manage. A company sells its invoices at a discount to their face value when it calculates that it will be better off using the proceeds to bolster its own growth than it would be by effectively functioning as its "customer's bank". Accordingly, Invoice Factoring occurs when the rate of return on the proceeds invested in production exceed the costs associated with Factoring the receivables.
Factoring Company Terms
There are many different names a Factoring Company will refer to Factoring including, Factoring Invoices, Invoices Factoring, Accounts Receivable Factoring, A/R Factoring and Factoring Services.
Factoring is a financial transaction whereby a company sells its Accounts Receivable (invoices) to a Factoring Company at a discount in exchange for immediate cash.
Factoring Invoices is different from a bank loan in two significant ways. First, the Factoring Company places the emphasis on the value of the receivables, not necessarily the firm's credit worthiness or fixed assets. Secondly, Invoice Factoring is not a loan; it is the purchase of a financial asset (the receivable). The Receivable is a financial asset associated with the debtor's liability to pay money owed to the seller for work performed or goods sold. The seller sells its invoices (the Receivables) at a discount to the Factoring Company to obtain the cash needed for day-to-day operations.
The sale of the Receivables (or Invoice) transfers ownership of the Receivables to the Factoring Company. The account debtor is then notified of the sale and then remits payment directly to a lockbox designated by the Factoring Company.
A Factoring Company provides other mission critical services including Credit Analysis, Risk Assessment, AR Management, Billing, Collection, Treasury and 24/7 web reporting.
There are three integral parts to an Invoice Factoring transaction.
1. The fee, this is the amount a Factoring Company will charge you for the service. Most Factoring Companies will charge you a Factoring fee also known as a service charge, based on how long it takes the debtor to pay.
2. The advance, this is the percentage of the face value of the invoice you will be paid upon submission of that invoice.
3. The reserve, this is the remainder of the total invoice amount held until the payment by the account debtor is made in full.
TCI Business Capital is a leading Factoring Company. We provide our Invoice Factoring service to a wide variety of small to mid-size companies.
TCI Factoring has earned a reputation for providing world-class service to companies who need Factoring lines for their businesses. When searching for a Factoring Company, look no further than TCI Factoring.
Banks often call their Factoring programs Factoring Loans. Don"t be confused with this statement because Factoring your Accounts Receivables is not a loan. Factoring is simply the sale of your Invoice at a discount to a Factoring Company.
Are you interested in learning more about TCI Factoring?
Call today and talk to one of our Factoring specialists. Our Factoring specialists will give a free consultation on how Invoice Factoring can help your business succeed. With TCI Factoring there is no red tape to cut through or bureaucratic maze to navigate. We make the Factoring application process simple and straightforward, what's more we"ll get you approved in just 5 minutes.
Do you want to learn more about TCI Factoring? Call 800.707.4845
Sometimes securing a Factoring line can be a challenge because of the unique nature of your business. At TCI Factoring, we offer a variety of creative Factoring solutions to companies preforming a wide range of services. We take pride in understanding the needs of our clients and working with them to meet their goals.
Tired of waiting to get paid? Factoring is the answer for improving cash flow. TCI Factoring specializes in providing innovative financing solutions to companies in a variety of industries.
Our specially designed Factoring lines can ease the stress and give you the cash you need to take advantage of new business opportunities.
We are experts in the Factoring industry
TCI Factoring is a leading:
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For more information about Factoring programs with TCI Factoring, please call 800.707.4845