Accounts Receivable Factoring Services

Accounts Receivable Factoring ServicesCash flow is typically the main concern for any company that is looking for accounts receivable factoring. However, there is a lot more that goes into accounts receivable factoring than just cash flow, and it is these other services that are also important to consider when selecting the correct factoring company to work with. While common services include credit approvals, collections, and credit insurance, there are other services that factoring companies can offer as well.

Credit Approvals

Every factoring company should provide you with credit approvals; after all, one of the main benefits of factoring is that funding is based on your customers’ good credit rather than your own credit. By providing you with credit approvals, your factoring company is making sure that your customers are credit worthy and will pay their invoices when they become due. Not only does this take the responsibility of credit checking off your back, it also saves you money as you don’t need to subscribe to expensive credit agencies such as Dun and Bradstreet.

Of course, it is one thing to provide credit checking of your accounts; it is another thing to provide you with credit approvals. At DSA Factors we are proud to offer our clients an over 98% approval rate. Unlike banks and many other factoring companies who look for reasons to turn down your accounts, we look for reasons to approve your accounts.  Furthermore, we will work with your customers to build up their credit, so as long as they make timely payments, we will be willing to raise their credit limit over time.

Collection Work

It would be nice if everyone would just send you a check on the day that an invoice is due, but in reality we all know that this isn’t the way things work. Reminding your customers that payment is due is just a normal part of doing business. Whether you are sending out letters or making phone calls, collecting your receivables is a very time consuming process and can be frustrating at times. Since your factoring company is purchasing your receivables, they should also handle all of your collection work for you. This includes, sending out account statements, e-mailing copies of invoices, and making phone calls.

The most obvious benefit of having a factoring company handle your collections for you is that it may be able to save you some payroll as you won’t need to hire someone to manage your accounts receivable. However, another benefit is that factoring companies actually have more leverage in collecting prompt payments than you would have in collecting on your own. If a customer doesn’t need any new merchandise from you they may reluctant to pay you in a timely manner. However, factoring companies have many clients and not paying a factoring company in a timely manner means that they won’t be able to order new merchandise from a handful of vendors.

While it may seem scary to let another company deal with your customers, it is important to keep in mind that factoring companies are not collection agencies and will always treat your customers with respect. A factoring company is purchasing current receivables, not past due receivables, so there is no need for them to be rough with your customers. Furthermore, your factoring company’s success is tied directly to your company’s success, getting reorders is what allows both you and your factoring company to grow. In fact, if an account becomes seriously past due, your factoring company will probably hand them over to a collection agency just like you would.

Credit Insurance

If your factoring company offers non-recourse factoring, then that means that they provide you with credit insurance on your accounts. This means that if a customer is unable to pay for merchandise due to financial problems, that you still get to keep the funds that your factoring company provided you with. Of course with any insurance it is important to look at what is covered. Some factoring companies will only cover you in situations where a customer files for bankruptcy or goes out of business, other factoring companies will cover you for deadbeats as well. At DSA Factors, no matter what your customer’s situation is, your invoices are insured.

While it is possible to get credit insurance from insurance companies, generally they will require you to deal in very large volumes and to be dealing with very credit-worthy accounts. As a result, if you have small invoices, or sell to independent retailers and not major corporations, it will be very difficult to get credit insurance through an insurance company. With non-recourse factoring, you can rest assured that all of your accounts and all of your invoices will be covered, regardless of how small they may be.

Real-Time Reporting

Many factoring companies provide their customers with real-time reporting on their accounts. At DSA Factors, we will send you an aging of your accounts once a week; however, you also have access to real-time aging from our web page 24/7. Furthermore, we give you access to remittance advice from all payments we ever sent you directly on the web page. Other reports give you the ability to track open approvals and retrieve sales reports so you can see how much volume you’ve done with each of your accounts over a specified period of time. Plus, if there is something you would like to see that isn’t available on our web page, just give us a call and we will do our best to provide it for you, and maybe even add it to our web page.

Purchase Order Financing

While you do receive improved cash flow with accounts receivable factoring, there are times when that improved cash flow may not be enough. This is often times the case when you get a large purchase order from a major retailer. If you manufacture overseas, often times your factory will require a 30% deposit to start production and the other 70% prior to shipment. This results in you paying for the merchandise 30-60 days prior to when you are able to invoice your customer and factor the invoice. In situations like this, purchase order financing can provide you with a short term loan so that you have the additional funding that you need. At DSA Factors we can provide you with incremental purchase order financing so that you receive the funds you need when you need them and are able to minimize the amount of interest that you need to pay.

Cost of the Service

Of course the accounts receivable factoring isn’t free, and you are going to have to pay a factoring fee. It is important to keep in mind that when comparing rates, you need to compare all of the costs, and not just the factoring fee. Many factoring companies lock you into long term contracts and require that you factor all of your receivables with them. Another common cost to look out for is the minimum volume requirement where a factoring company will require you to reach a specified sales volume and if you don’t they will still charge you fees based on those volumes. At DSA Factors there is no need to worry about any of this. Of course we will charge you a factoring fee, but we don’t have any long term commitments, we don’t require you to factor all of your receivables, and we don’t have any minimum volume requirements.

Another thing to look at is whether you are getting a fixed-rate factoring fee or if you will be charged interest for as long as the money is out. With a fixed-rate fee the fee is higher, but you don’t pay interest even if your customer pays you late. Factoring companies that charge you interest typically offer incredibly low fees, but from the day they fund you until the day they get paid by your customers they will charge you interest. Typically when you do the math you will find that both rates are comparable, although typically companies that charge interest don’t tend to advertise the interest charges, but rather focus on the lower factoring fee. A company that charges interest also has less motivation to get paid on time, and may wait longer to contact a customer that becomes past due than a factoring company that offers a fixed-rate. At DSA Factors we offer fixed-rate factoring to our clients. We find that it not only saves you money, but that is more honest and much easier to understand.

Quality of Service Provided

Just like with any other company that you deal with, it is one thing to provide you with service, but another thing to provide you with fast and friendly service. While there are many factoring companies out there, many of the larger ones are owned by banks or other financial institutions. You may even find factoring companies who are subsidiaries of overseas companies. Furthermore, the fintech factoring companies not only have to answer to their investors, but most have been in business for less than a decade. While they may provide you with most, or all, of the services above, it is important to think about the quality of those services. DSA Factors is a family owned and operated business based in Chicago, Illinois that has been factoring for over 30 years. Whenever you call you will always be able to speak with one of our principals. As a result, we can provide you with a much higher level of service than the other larger factoring companies out there. Best of all, not only do we offer you with exceptional service, but we also offer very competitive rates that often times are lower than what the bigger guys have to offer.

Is Amazon Lending Right for My Business?

Amazon Lending vs Accounts Receivable FactoringYou may have noticed Amazon Lending in the news recently. According to Bloomberg, Amazon has given out more than three billion dollars in loans since the inception of the Amazon Lending program in 2011, with one billion of those dollars being lent in the last twelve months. They have reportedly given loans to 20,000 businesses throughout the US, UK, and Japan in amounts ranging from $1000 to $750,000. Their loans supposedly carry a very modest APR between 6% and 14%, which would make them cheaper than most other Fintech lenders out there. But just like with PayPal Working Capital, there is a catch. While the APR may be low, Amazon makes up for this by taking a large sales commission. As a result, Amazon Lending may work for very small businesses, but if you’re ready to take the next step in growing your business, accounts receivable factoring may be the better option.

Who qualifies for Amazon Lending?

You can not request a loan from Amazon Lending, rather Amazon makes loan offers to sellers on Amazon Marketplace, and those sellers can either accept or ignore the offer. It is unknown what criteria is used to determine when a loan offer is made, how much the loan offer is for, what the term of the loan will be, or what the APR on the loan will be. However, Amazon bases the loan on the seller’s sales history on Amazon Marketplace, so you can probably assume that if you don’t have large and steady sales figures, you probably won’t be offered a loan. Furthermore, if you sell directly to Amazon, then you do not qualify for these loans.

What is the difference between Amazon and Amazon Marketplace?

While shoppers who use Amazon will see all the products available from both Amazon and Amazon Marketplace every time they search for something they want, the platforms are very different from a wholesale point of view. If you sell direct to Amazon, it is like selling to any other retailer. They give you a purchase order, you ship the merchandise and invoice them, and when the invoice is due Amazon pays you. However with Amazon Marketplace, it is kind of like selling your product on eBay. Amazon will list your product on their site, and will take a commission for each sale you make. If you would like your product to qualify for Amazon Prime, then you need to ship your product to Amazon warehouses, pay storage fees, and when the product sells, you are charged a shipping fee as well. Basically you are giving Amazon merchandise on consignment, and you may be paying them additional fees as well.

How much are Amazon Marketplace commissions and fees?

Commissions are based on what type of product you are selling. Commissions can be as low as 6% if you are selling computers, and as high as 45% if you are selling an accessory for an Amazon device, for example a Kindle cover. In general, commissions are typically around 15%. In addition to these commissions, Amazon may charge you either a monthly fee or a transaction fee on each sale. If you let Amazon warehouse your product so it qualifies for Prime, you will be paying storage fees and shipping fees as well. If you ship yourself, then you are responsible for paying for shipping. Additionally, Amazon will also charge you a closing fee for each item sold.

Should I accept a loan offer from Amazon Lending?

Only you can decide whether or not a loan is correct for you. If you sell your merchandise on Amazon Marketplace and wish to continue doing so for the term of the loan they offer you, then you are already paying their commissions and the loan may carry an attractive APR. The loan gets repaid automatically as you sell more merchandise through the Amazon Marketplace, so as long as sales volume remains steady you won’t need to worry about paying off the loan. However, if you would like to start selling directly to Amazon or any other retailers, then this loan probably isn’t right for you.

Are there other options for financing my small business?

Accounts receivable factoring is another form of alternative lending that works with small businesses. Unlike Amazon Lending, accounts receivable factoring works with companies who sell directly to Amazon or other retailers, both online and brick and mortar. With accounts receivable factoring you get funded for your receivables the same day you invoice your customers. Plus, since your factoring company is purchasing your receivables, you aren’t taking on any new debt.

What’s my next step?

Amazon Marketplace may be a great way to introduce your product to the market, and Amazon Lending might allow you to purchase more product to increase your sales volume. However, if you really want to grow your business and want to take the next step, you will have to start selling direct to Amazon and other retailers. If you are ready to take that next step, then give DSA Factors a call today at 773-248-9000 and find out how we can help you fund your growing business.

Purchase Order Financing vs Accounts Receivable Factoring

Purchase Order Financing vs Accounts Receivable FactoringThere are many different financing options available to businesses that could use improved cash flow. Two of the more popular options are purchase order financing and accounts receivable factoring. Often times PO financing and factoring are considered alternative financing options, as the process is much faster and easier to obtain than a traditional SBA loan from a bank. While these two methods are related, have similar benefits, and often times can even work together, they still are very different forms of financing.

Improved Cash Flow

While both purchase order financing and accounts receivable factoring are great ways of improving your cash flow, the main difference is when you receive the improved cash flow. With PO financing, you receive funding to pay your suppliers with once they provide you with a purchase order.  With factoring you get funded once you invoice your customers.

Since the money is out longer, and isn’t backed up by a receivable yet, PO financing is typically more expensive than factoring. However, for very large purchase orders, traditional accounts receivable factoring may not be able to provide you with enough cash flow to pay your suppliers so that you can fulfill the purchase order. In these situations purchase order financing may be necessary. As a general rule, accounts receivable factoring is a better way to maintain healthy cash flow for your business, while purchase order financing should be used for extremely large purchase orders.

Debt vs No Debt

Another big difference between purchase order financing and accounts receivable factoring is whether or not you are taking on new debt. In the case of factoring you are not taking on any new debt, instead you are selling your receivables at a discount in order to get improved cash flow. With PO financing, you are taking on new debt.  PO financing provides you with a loan based on a purchase order.  This loan can get paid off if you factor the resulting receivable, or once your customer pays you for the resulting receivable. However, it is still a loan that uses the purchase order, and resulting receivable, as collateral. As a result, you are taking on new debt with purchase order financing.

Credit Limits

Since accounts receivable factoring and purchase order financing are both alternative forms of lending, they don’t come with the strict credit limits that a traditional loan from a bank would assign you based on your company’s credit. Accounts receivable factoring is probably the only form of financing that does not come with any credit limit. With factoring there is no limit to how much your factoring company can advance you. Since factoring is an ongoing relationship, as your receivables grow so does the advance you receive. Factoring is based on your customers’ ability to pay, not your own. With purchase order financing, it is typically looked at on a case by case basis and the amount of the advance is limited to a certain percent of the purchase order’s value. So similar to factoring, the larger the PO, the larger the loan. However, you will not receive one hundred percent of the purchase order value.

Credit Insurance

Whether or not you receive credit insurance is another difference between purchase order financing and accounts receivable factoring. If your factoring company offers non-recourse factoring, then that means that you receive credit insurance when you factor an invoice. With purchase order financing, since there is no receivable yet, you are not receiving credit insurance. That said, if your customer you are looking for PO financing on is not credit worthy, then their purchase order may not qualify for PO financing. On the other hand, once a purchase order is fulfilled and invoiced, by factoring the invoice you will receive credit insurance on it.

Accounts Receivable Outsourcing

When you factor an invoice, you are doing much more than just receiving an advance and getting credit insurance, you are also outsourcing your accounts receivable. Your factoring company will perform all of the credit checking as well as collection work. This can result in significant cost savings as you will not need to subscribe to expensive credit agencies and also may allow you to avoid hiring extra employees to manage your accounts receivable. With purchase order financing, most likely the company providing you the funding will still run credit checks on your customer, they do not manage your accounts receivable for you. You are still responsible for sending out account statements and making collection calls.

Should I Use Purchase Order Financing or Accounts Receivable Factoring?

There is no clear cut answer to this question, it depends on your needs. For most small to medium sized businesses accounts receivable factoring is not only more cost effective but also provides you with additional service such as credit insurance and accounts receivable outsourcing. However, while factoring allows you to maintain healthy cash flow, it may not provide you with enough cash flow if you need to pay your suppliers to fulfill a larger purchase order. In these situations purchase order financing may be necessary.

At DSA Factors we actually recommend using accounts receivable factoring to maintain healthy cash flow and reduce costs. The cash flow you receive from factoring may provide you with enough funds to avoid needing purchase order financing. However, you may still use purchase order financing from time to time as needed.  As a result we offer our factoring clients the ability to obtain PO financing when needed.

While there are companies that only provide purchase order financing, they often times may take a week to a month or more to provide you with funding. Typically they only work with foreign suppliers and finished products that are being shipped directly to your customers from overseas. Their interest rates tend to be variable and often times higher than what a factoring company might offer you on a similar loan.

By factoring your invoices and having your factoring company provide you with purchase order financing as necessary, you will most likely receive a better rate and a quicker response when you need purchase order financing. At DSA Factors we make PO financing decisions in a matter of minutes, and can fund you the same day you call us about a PO. We also don’t require you to work with foreign suppliers, we don’t require you to be purchasing finished products, and you can ship to your customers yourself. Because you are shipping to your customers yourself, if the order isn’t for a full container, you will be able to fill up the container with additional merchandise for smaller PO’s or just for inventory. Since we will also be factoring the resulting invoice for you, we can also offer you a lower interest rate on the loan you receive and reduce the time that the loan is out for. Plus you get all the benefits that come with factoring, credit insurance and accounts receivable outsourcing.

Another benefit to working with an accounts receivable factoring company is that by factoring invoices on a regular basis, you are developing a healthy working relationship with a financial partner. In the future, as your company’s needs change, your factoring company may be able to offer you additional services to facilitate growth. By securing purchase order financing through a PO financing company, it is typically a one-time deal, and you don’t get the opportunity to develop a working relationship with them.

To learn more about how accounts receivable factoring and purchase order financing can be used together to help grow your business, give DSA Factors a call at 773-248-9000. We are a family owned and operated business that works with clients nationwide. Whenever you call DSA, you will always be able to speak with a principal, whether it is Ben, Max, or Howard Tolsky. With over 30 years experience offering factoring and PO financing to our clients, we have money to make your company grow!

Finance your business, Improve your cash flow

Improve your cash flow and grow your business with accounts receivable factoringOne of the most difficult challenges for startups or young businesses is obtaining proper financing so that your business has the cash flow it needs to grow. Often time small or new businesses don’t qualify for a traditional SBA loan, and if they do often times the amount they qualify for isn’t enough to sustain growth.

With accounts receivable factoring, not only does your small business qualify, but there is unlimited potential for how much funding you receive. Even better, with accounts receivable factoring you are selling your outstanding receivables, so you aren’t taking on any new debt. You also no longer need to worry about performing credit checks or making collection calls, plus you can rest assured that all of your receivables are insured.

At DSA Factors we have been providing accounts receivable factoring to small businesses and young startups for over 30 years. We make credit decisions in minutes, not months, so that you can grow your business now, not later. Best of all, we are a family owned company, so whenever you call you can ask for Ben, Max, or Howard and one of us will be available to speak with you.

If you are ready to start growing your business, give DSA Factors a call today at 773-248-9000.

Financing a Startup Business with Accounts Receivable Factoring

Finance your startup business with accounts receivable factoringOften times for a new startup business, it can be difficult to obtain financing. SBA loans are usually out of the question as banks will want to see a track record and will require collateral that a startup business most likely wouldn’t have. Venture capital is an option, but is usually reserved for tech companies that have a huge potential for growth, plus often times it requires you to give up ownership of your business. However, accounts receivable factoring is a great way for a startup to finance their business without having to give up any ownership or taking on new debt.

What is Accounts Receivable Factoring?

Accounts receivable factoring is a type of financing where you sell your receivables to a factoring company for a discount. For startups the main benefit is that you get funded the same day you invoice your customers rather than having to wait 30 days or longer for them to pay you for goods or services that you have already provided them. As a result you have healthy cash flow so that you can take on more orders as well as larger orders without having to worry about how you will pay your suppliers. Since you are selling your receivables to your factoring company, the funds they provide you with are yours to keep, there is no need to repay your factoring company as your customers will be paying them once their invoices become due. As a result accounts receivable factoring is one of the few financing options available that doesn’t require you to take on any new debt.

Additional Benefits of Accounts Receivable Factoring

While improved cash flow may be the main reason a startup business would use accounts receivable factoring, it isn’t the only one. Since your factoring company is relying on your customers to pay their invoices in order to get repaid, your factoring company will also handle all of the credit checking for you. For a startup business the last thing you want to do is spend several thousand dollars subscribing to a credit agency so that you can determine whether or not an order you receive is from a credit worthy company. Your factoring company will also handle all of your collection work so there is no need for you to spend time making collection calls and no need to purchase accounts receivable management software. Finally, with non-recourse factoring, your receivables are insured against non-payment for financial reasons. So if one of your customers goes bankrupt or out-of-business you still get to keep the funds that your factoring company gave you.

How Does My Startup Business Qualify for Accounts Receivable Factoring?

Unlike a traditional bank loan, accounts receivable factoring is not a loan, your factoring is instead extending a line of credit to your customers. As a result, your factoring company isn’t too concerned with your company’s credit or your personal credit, but rather with your customer’s good credit. So as long as you are selling to reputable businesses you qualify for accounts receivable factoring.

How Much Funding Can My Startup Business Receive with Accounts Receivable Factoring?

With accounts receivable factoring there is no limit to how much funding you can receive. The amount you are funded is tied directly to how much you have in receivables. So as your receivables grow so does the amount of funding you receive. While your factoring company will assign credit limits to your customers, since you are not receiving a line of credit there is no limit to how much you can get funded.

So What’s the Catch?

Obviously there are fees associated with accounts receivable factoring and these fees can vary based on which factoring company you choose to factor with. At DSA Factors we offer a flat rate factoring fee, meaning that we do not charge you interest if your customers do not pay their invoices on time. The factoring fee we charge is very similar to a payment processing fee that you would pay to take a credit card. So if you can afford to take a credit card, you can afford to offer your customers net 30 payment terms with accounts receivable factoring. While every factoring company charges a factoring fee on each invoice they purchase, these rates do vary and you may be subject to other fees as well. At DSA Factors we do not have any annual fees, there are no fees for setting up new accounts, we have no minimum volume requirements, and we have no long term commitment. Please read our article on how to find the lowest rate for accounts receivable factoring to learn more about what types of fees you can expect to pay for factoring.

What if I Need Additional Help Financing a Large Purchase Order?

Sometimes waiting until you invoice to get funded isn’t enough, especially if you need to pay your factory for a container before they will release it. In situations like this your factoring company may offer you purchase order financing. Purchase order financing is a short term loan that allows you to pay for a container in order to fulfill a large order. Even though you may not qualify for a business loan, since you have developed a relationship with your factoring company, and you will be factoring an invoice as a result of the purchase order, your factoring company may be willing to give you a short term loan to finance the purchase order.

So How Do I Get Started With Accounts Receivable Factoring?

Factoring is a fast and easy process where credit decisions are made in minutes, not months. Getting started is easy, give DSA Factors a call today at 773-248-9000. With just one call you can be well on your way to getting the financing your startup business needs to succeed. We can be funding you for your invoices in as little as 24 hours.

Fixed Rate vs Adjustable Rate Accounts Receivable Factoring

fixed rate vs adjustable rate accounts receivable factoringThere are two different types of rates that most factoring companies quote potential clients these days, fixed rate (or flat rate) and adjustable rate. These terms should sound familiar to anyone with a mortgage, and surprisingly they aren’t all that different in the world of factoring. In the world of mortgages, a fixed rate remains the same for the entire 30 year life of the mortgage, while with adjustable rate mortgages you get a teaser rate for the first 3, 5, or 7 years and then the rate goes up on you. In the factoring world, a fixed rate means that the rate you are quoted is the rate you pay for the life of the invoice, you don’t pay any interest, even if your customers pay their invoices late. With adjustable rate factoring, you are offered a low teaser rate, but you wind up paying interest for as long as it takes your customers to pay back your factoring company. Just like with mortgages, getting a fixed rate costs more than an adjustable rate, but in the long run it will save you money. At DSA Factors we have had a number of companies ask us about adjustable rate factoring over the last few years, but upon doing the math, all of them have chosen to go with fixed rate factoring, which we have been offering to our clients for over 30 years.

How does adjustable rate factoring work?

Adjustable rate factoring offers you a very low base fee for factoring invoices, often times it can be less than even 1%, but like most things in life, if it’s too good to be true it probably is. Once your factoring company funds you for the invoice the clock starts ticking and you start getting charged interest from that time until payment is received for the invoice by your factoring company. They will also add another 5-10 days worth of interest as they wait for the check to clear the bank.

What are the advantages to adjustable rate factoring?

Adjustable rate factoring can be beneficial if your customers pay like clock work and pay early. It also can be beneficial if you don’t need immediate cash flow. If you can hold onto your invoices for a few weeks before submitting them to your factoring company to get paid, you can potentially save quite a bit of money as your factoring company won’t have the invoices for very long before they get paid. Of course in both these situations you are missing out on one of the primary benefits of factoring, improved cash flow.

What are the disadvantages to adjustable rate factoring?

Besides the fact that you can face some pretty steep interest charges on your slow paying customers. Your factoring company has little motivation to collect payments for invoices in a timely fashion. If a good customer misses an invoice, which we all know happens from time to time, your factoring company may not bother to notify them until the invoice becomes 30 or even 60 days past due since they can charge you more interest during this time.

How does fixed rate factoring work?

Fixed rate factoring is very simple, you are given a rate based on the payment terms of the invoice, and that is the fee you pay regardless of how long it takes your customers to pay for your invoice. While it is true that it will cost more to factor a net 60 day invoice than a net 30 day invoice, you will not be charged any additional fees if it takes a customer 60 days to pay a net 30 day invoice. At DSA Factors we have always offered fixed rate factoring, and while it may be harder to sell the higher rate to prospective clients, we find that it is a much more honest and cheaper option. As a result we have clients who have been factoring with us for over 20 years.

What are the advantages to fixed rate factoring?

Besides the fact that you aren’t being charged interest for slow paying customers, with fixed rate factoring it makes your accounting much simpler as you always know what factoring will cost you and you can easily build the cost into your prices. Plus, since your factoring company does not benefit from late payments, they have more reason to collect in a timely fashion. As a result, they are less likely to turn down reorders due to an account being past due.

What are the disadvantages to fixed rate factoring?

If your customers pay early you still pay the same factoring fee. However, if you have customers who consistently pay early, DSA Factors would be willing to work with you to put together an early pay discount program for these customers.

How do I choose which factoring rate is right for me?

A good way of thinking about adjustable rate factoring is that it is a lot like taking a cab, you have a small flag fall but the meter keeps running until your factoring company gets paid. With fixed rate factoring, it is a lot like taking a limo, you know the price going in, and the service is usually better as well. But don’t worry, whichever route you choose, you don’t need to give your factoring company a tip!

At DSA Factors we have run reports for our clients showing them what their fee would be with adjustable rate factoring, and while it typically is very similar, flat rate factoring has always proven to be the cheaper option. If you would like to learn more about adjustable vs flat rate factoring please give DSA Factors a call at 773-248-9000 and we would be happy to talk to you about it. We would even be happy to run an analysis on your payment data to see which option would work best for you.

Factoring vs Fintech: Finance in the High Tech World

Finance in the High Tech WorldFor most small business owners, obtaining a line of credit from a bank has never been easy. In recent years a number of technology companies have discovered this problem and it has led to the emergence of fintech, a form of online lending. However, what many small business owners don’t realize is that there is another alternative to the banks, which is factoring. Factoring companies however offer a whole lot more than the fintech companies, but also have much more experience and knowledge, better customer service, and typically cost less.

Industry Knowledge

Fintech companies provide their customers, who don’t qualify for a small business loan from a bank, with short-term, high-interest loans using their receivables as collateral. Because they are using receivables as collateral, companies such as BlueVine claim that they provide accounts receivable factoring, but really they are just providing their customers with a loan. Other companies like Fundbox claim they provide invoice financing, which they differentiate from factoring. While it is true that they do not provide factoring, what they don’t realize is that invoice financing and accounts receivable financing mean the same as factoring. This demonstrates a very big difference between fintech and factoring. These fintech companies are really young IT start-ups with little or no experience in the industries that they serve; in fact, they may not even know basic industry terms. Factoring on the other hand has been around for hundreds of years, even Christopher Columbus used factoring. While most factoring companies haven’t been around quite that long, they all have quite a bit of experience and a background in the industries that they serve. For example, DSA Factors started off as the consumer finance arm of a retail furniture store under the same ownership. Eventually they decided to start offering factoring services to furniture and bedding wholesalers who they bought from. As the factoring business grew they started expanding out to other industries such as giftware, housewares, apparel, and trucking. Now, having factored for over 30 years, they are still helping small and medium sized businesses grow.

Improved Cash Flow – Debt vs No Debt

While the goal of both fintech and factoring is to help you improve your cash flow, perhaps the biggest difference between fintech and factoring is how they accomplish this. A fintech company provides you with a loan, meaning you are taking on debt. Furthermore, the loan has a very short term and if you offer extended terms, such as net 90 days, to your customers, it is quite possible that the loan will become due before you receive payment on the invoice that was used as collateral. With factoring, the factoring company is purchasing your accounts receivable, or invoices. The funds you receive from a factoring company are yours to keep and spend however you like. Even if one of your customers pays late, you don’t need to worry about paying back the funds you received.

Accounts Receivable Outsourcing

Of course services provided are another really big difference between fintech and factoring. Fintech companies seem to pride themselves on how they will never contact your customers; they seem to think that you will appreciate this. However, all that this means is that if your customers don’t pay them, they will come after you.  With fintech you still need to stay on top of your accounts receivable and send out statements and make collection calls. For a small business this means that the owner typically needs to spend a lot of time just trying to get paid by their customers. For medium sized businesses you will probably need to hire another employee just to manage your accounts receivable, meaning additional payroll. With factoring you are outsourcing your accounts receivable. Factoring companies have already invested heavily in the software necessary to manage A/R, and are able to do so because they manage A/R for many clients. They have professional and courteous collectors who are able to make the phone calls for you. Plus, because your customers may purchase from several other vendors who factor their receivables, a factoring company has a lot more leverage in collecting from a customer who may not be willing to pay. The fintech companies try to scare you by saying that factoring companies can ruin your relationship with your customers, but this couldn’t be further from the truth. Factoring companies are not collection agencies, they understand the importance of the relationship you have with your customers, after all, they have a similar relationship with you. As a result, your factoring company provides your customers with gentle reminders that payment is due, and always treats your customers with the respect they deserve.

Credit Insurance

Another big difference between fintech and factoring is the insurance they provide. With Fintech you receive no insurance on the invoices you put up as collateral, if the invoices don’t get paid, you still have to pay back the fintech company. However, many factoring companies, such as DSA Factors, provide non-recourse factoring, meaning that you are insured in the situation where one of your customers is unable to pay due to financial problems. Furthermore, since your factoring company is insuring your receivables, they also handle all of your credit checking for you, meaning that you don’t need to subscribe to expensive services such as Dun & Bradstreet. While it is possible to purchase credit insurance separately, it of course comes with additional fees, and typically only covers large orders for very creditworthy companies such as Amazon or Walmart. If your customers are mom and pop stores, or your invoices are smaller than five or six figures, credit insurance is not something that is readily available to you.

Purchase Order Financing

Of course, for many small companies simply getting funded for your invoices isn’t enough. For a company that has just received their first six figure purchase order, it may be very difficult to put that order together. To make matters worse, if you are unable to accept such a large order, it is unlikely that the company placing the order will come back to you in the future. If you manufacture in China you typically need to put 30% down to start production and then a month later when production is complete, pay the remaining 70% to get the merchandise put onto the boat. It will be another month before the container arrives in the US and you are able to ship and invoice your customers, and a fintech company will not provide you with a loan until you do so. For service companies you may need to hire additional labor and will need to meet payroll long before you complete the job and invoice your customer. If use fintech for your financing they won’t lend you the capital in advance, and you won’t be allowed to take out a loan with a bank. However, many factoring companies, such as DSA Factors, will provide their clients with purchase order financing, which is a short term loan based on the PO so that you can fulfill a large order.

Customer Service

Finally there is one more major difference between fintech and factoring companies, and that is customer service. Fintech companies are all about technology; they integrate with business software such as QuickBooks, and believe that customer service is about giving their customers fancy online tools. Of course this means that you too need to use QuickBooks or whatever other software they may integrate with. Factoring companies on the other hand realize that a big part of doing business is developing a relationship with the people they work with. Perhaps factoring companies don’t offer all the fancy technology and software integrations as the fintech companies do, but they aren’t dinosaurs. Nearly every factoring company has an online portal where their clients can login, request approvals, and view a variety of reports. While there are some large bank-owned factoring companies, there are also plenty of family-owned factoring companies such as DSA Factors. At DSA Factors you can always call and speak with a principal, no need to deal with account managers or low-level employees who can only answer simple questions. As a result, factoring companies are able to work with you creatively and aren’t restricted to just the 1’s and 0’s of the digital fintech world.

Choose Your Financing Carefully

When it comes to financing your small business it is important that you look at the big picture. While fintech may be new and exciting, you get a whole lot more with factoring. Plus, with factoring you most likely will save money as well!

If you would like to give factoring a chance, call DSA Factors at 773-248-9000 and either Ben, Max, or Howard will be available and able to help you. There is no obligation or long-term commitment, and you can start receiving funds in as little as 24 hours.  Start growing your business today with a time-tested and proven method that works, accounts receivable factoring.

The Benefits of Online Sales

Product Reviews may be the main benefit of selling your product through online retailers.As a manufacturer you may think that online retailers are simply another retailer who you can sell your product to, however, there may be a lot more to an online sale than just the sale itself. It’s quite possible that making one online sale could lead to many more sales both online and in brick and mortar stores. The reason for this is because of the importance that consumers place on online product reviews.

When consumers use their phones to go shopping at home or on the road, you may be surprised that the most common things that they look for our store locations and hours. That’s right, 75% of internet users at home and 80% of internet users on the road want to find a brick and mortar store to shop at. Other popular uses of the internet include some more obvious benefits such as comparing prices, looking for coupons, making actual purchases, checking on the status of orders, and of course reading product reviews.

Of course, once these consumers get to an actual store their use of the internet changes. Once in the store the most popular use of the internet is searching for and redeeming coupons, an activity that 55% of smart phone owners do. 51% of smart phone owners will compare prices at other stores to make sure that they are getting the best deal. Then the next most popular activity is looking at product reviews which is done by 47% of smart phone owners.

Over three-quarters of Millennials and Generation Xers state that product reviews are very influential in the decision making process when purchasing something. Nearly six in ten Baby Boomers feel the same way, and almost half of all seniors also take consumer product reviews very seriously. Of course these product reviews are online, and the only way you are going to get them is if your products are available from online retailers.

While it is true that anyone can write a review of a product online, what makes a review most valuable is that it comes from a verified buyer, meaning that a person bought the product from the same online retailer that they are writing a review on. If you look at reviews on Amazon, you will notice that many of them will say “Verified Purchase” meaning that the person who left the review purchased the product on Amazon. While it may not be important to consumers that a product was purchased on Amazon, it is important that the writer of the review actually did purchase the product, and isn’t just someone in the manufacturer’s office trying to brag about how great their product is to improve sales.

Other important features on reviews are the amount of detail included in the review, the more detail the better. If you reviewers include pictures then the review can become really influential. Also, consistency is very important as well. If five different reviewers say the same thing about a product, then it must be true.

Of course, as a manufacturer it may seem like all of these factors are out of your control, it is up to the consumer, whom you do not know, to leave a review out of their own good will. However, in many ways you do have control when it comes to leaving reviews. First you need to make sure that your product is available online so that consumers can leave reviews of it. Of course, it can’t just be available from any online retailer, it has to be available from reputable online retailers where consumers look at reviews such as Amazon, Wayfair, Target, and Walmart.

Another option is to offer an incentive to consumers who leave you a review. One way of doing this is by offering consumers a chance to get a free product for leaving a review. Ask consumers to fill out a registration card that asks for their Amazon profile so you can see the review that they left for your product, as well as other products. Then select several consumers who gave valuable detailed reviews on both your product as well as other products to receive a free product. You can also look at how many other people found these reviews helpful as these are people who are highly influential in others purchasing process. You can assume that the recipients of the free product will also leave you a quality, detailed review on this free product as well.

If you need to start selling to online retailers, or need to start offering incentives for leaving product reviews and find that some improved cash flow will help, why not try accounts receivable factoring. At DSA Factors we make solving your cash flow problems easy by funding you for your receivables the same day your merchandise ships. You no longer need to worry about waiting 30 days or more to get paid for a large order, so what are you waiting for, call us at 773-248-9000 and start factoring today. At DSA Factors we have money to make your company grow.

Traditional Factoring vs Fintech

Accounts Receivable Factoring vs FintechThere has been a lot of talk in the news about fintech (financial technology) lately.  Certainly there is a lot to be said about alternative approaches to financing over more traditional methods offered by the banks. However, accounts receivable factoring has always been an alternative financing method over what the banks offer, and has a long track record of success. In fact, many of the fintech companies even offer factoring programs, but they tend to be bare bones versions of factoring that only offer some of the benefits gained by factoring, and oftentimes even charge higher rates than traditional factoring companies.

The factoring industry has been around for a long time. It was well established in Europe when the original colonists brought it over to America. In fact, the king and queen of Spain offered a form of factoring to Christopher Columbus when he wanted to set sail for the “New World”. While this may seem antiquated in our modern technology driven world, the fact is that most factoring companies do take advantage of modern technologies, offering most of the benefits of fintech, but with much more experience, a proven track record of helping to grow small to medium sized businesses, and much lower rates.

To see the difference, the chart below compares traditional factoring with DSA Factors to similar programs with PayPal Working Capital, Bluevine, and Fundbox, three of the more popular fintech companies offering similar programs to invoice factoring.

 DSA FactorsPayPal Working CapitalBlueVineFundbox
DSA FactorsPayPal Working CapitalBlueVineFundbox
Take on New DebtNo, the funds DSA provides you with are yours to keep.Yes, PayPal is offering you a loan, so you are taking on new debt.Maybe, if your customers don't pay BlueVine, they will require you to pay them back after 90 days.Yes, Fundbox is offering you a loan, so you are taking on new debt.
Credit LimitNo, with DSA Factors we will fund you for all of your receivables.Yes, the lesser of 18% of your annual sales on PayPal or $97,000.Yes, $20,000 to $500,000 based on your company's credit.Yes, $25,000.
Based on Your CreditNo, since DSA is giving your customers a line of credit, credit decisions are made based on your customer's good credit.No, the loan amount is based on your annual sales volume with PayPal.Yes, BlueVine will assign you a credit limit based on your credit worthiness.Yes, Fundbox determines your credit limit based on your credit worthiness.
Charges You InterestNo, DSA offers a flat rate factoring fee.Yes, the interest is charged to you up front when you get a loan, regardless of how long it takes to pay the loan off.No, BlueVine also offers a flat rate program, but at 10-15% their rates are at least triple or quadruple the rate that DSA offers.Yes, based on the size of the loan, Fundbox may charge you anywhere from 5-12% over the course of a 84 day loan.
Term LimitNo, DSA Factors has no problem working with extended terms.Yes, PayPal requires you to pay back 10% of the loan every 90 days, with the full amount due in 540 days.Yes, if payment has not been received after 90 days, you are required to pay back BlueVine.Yes, you must pay off the loan in 12 weekly installments.
Collections OutsourcingYes, DSA Factors handles all of your collection work.No, your customers must make payments through PayPal, but PayPal does not help with collections.No, your customers are required to make payments to a BlueVine drop box or bank account, however BlueVine does not help you collect.No, Fundbox does not handle collections for you, it is strictly a loan that you need to pay back.
Insure Your ReceivablesYes, with DSA's non-recourse factoring your invoices are insured against non-payment.No, PayPal only does payment processing for you.No, if an invoice has not been paid after 90 days of being funded for it, you are required to pay back BlueVine.No, Fundbox is strictly a loan that must be paid back in 12 weekly installments.
Choose Which Invoices You FactorYes, DSA Factors does not require you to factor all of your receivables.No, a percentage of all payments made through PayPal will be applied towards your loan.Yes, you can choose which invoices you want to get funded on.Yes, however there is a $100 minimum in order to get funded for an invoice.
Minimum Volume RequirementNo, at DSA Factors you are not required to factor a certain amount, and there are no annual fees.Yes, PayPal requires you to pay back 10% of the loan every 90 days if you aren't doing enough volume.No, BlueVine does not require you to fund a minimum amount each year.No, Fundbox does not require you to draw a minimum amount each year, however, they will not fund you if an invoice is worth less than $100.
Long Term CommitmentNo, with DSA Factors you can stop factoring at any time, but since many of our clients have been with us for over 20 years, we don't think that you will want to stop.No, once your loan with PayPal is paid off you can start looking for alternative sources of financing.No, BlueVine allows you to stop drawing on your line of credit at any time, but you will need to pay them back for any invoices that they have not received payment on.No, once you have paid off your loan with Fundbox, you are free to pursue other financing options.
Charge Payment Processing FeesNo, DSA will never charge you for processing a payment.Yes, you are required to accept payments through PayPal and pay their payment processing fees.No, although BlueVine will funnel all payments into their account without your customers knowing that BlueVine is receiving the payment.N/A, Fundbox does not process payments.
Available TechnologyDSA offers its clients an online portal where they can get automatic approvals, view agers, remittance reports, and other reports in real time. Your customers may also go online to make payments.With PayPal you get a loan online and customers make payments online.BlueVine requires the use of Quickbooks or similar software to get funded.Fundbox requires the use of Quickbooks or similar software to get funded.
Good Old Fashioned ServiceAs a family owned and operated business, you can call DSA at any time and speak with a principal who can come up with creative solutions to help grow your business.PayPal doesn't even list a phone number on their web site.BlueVine may have a phone number, but it is doubtful that you will be able to speak to anyone who can actually help you.Fundbox may have a phone number, but it is doubtful that you will be able to speak to anyone who can actually help you.

As you can see, traditional accounts receivable factoring with DSA Factors offers all of the benefits that the fintech companies offer, along with many more.  You still get an online portal where you can efficiently do business and your customers can make online payments, but you also can pick up a phone and speak with one of our principals at any time.  As a result, we can come up with creative solutions for your business that might not fit into a fintech company’s software, such as purchase order financing.  So if you are looking for ways to finance your business, go with a time-tested method that works, accounts receivable factoring.  Give DSA Factors a call today at 773-248-9000 and we can be funding you in as little as 24 hours.

What are the Benefits of Accounts Receivable Factoring

Benefits of Accounts Receivable FactoringMany companies out there aren’t familiar with all of the benefits that accounts receivable factoring has to offer. While cash flow might be the main reason why companies use accounts receivable factoring, it is not the only one. Companies that don’t use accounts receivable factoring often times are missing out on the bigger picture, and as a result, may not be able to grow their business as quickly as they would like or as quickly as competitors who do factor their invoices. Below are some of the benefits of accounts receivable factoring.

Improved Cash Flow

The main reason why companies choose to factor their accounts receivable is for the improved cash flow that factoring offers.  Rather than wait around 30 days or more to get paid for merchandise you have shipped or a service you have performed, with factoring you can get paid the same day that you invoice your customers.  This improved cash flow can help you to make payroll, pay off your suppliers, or cover any other expenses you have in growing your business.

Larger Orders, Larger Accounts

While it is true, many customers are happy to give you a credit card when they place an order, when you offer your customers payment terms they are more likely to place larger orders with you. The reason for this is quite simple, cash flow is very important to them. Your customers are just like you, they’ve got payroll expenses, rent, and utility bills, plus they need to pay their vendors. Even if sales are slow, they still need to meet payroll, pay rent, and pay the utility bills, if they don’t they will face some pretty serious consequences. If their vendors require them to pay with a credit card, then they also need to pay that credit card bill on time and in full every month or they can be facing late fees and high interest rates. As a result a company that is giving you a credit card is going to be conservative with how much they are ordering, if they can’t sell it all between the time the order is placed and the time the credit card statement is due they will have some pretty serious problems. However, if you offer them payment terms they know that if they pay a few days late that there won’t be any consequences. As a result they will be more willing to place larger orders knowing that if it takes them a week or two extra to pay the bill that they won’t be facing any interest charges or late fees.

Then there are the big box stores and online retailers. If you want to sell Walmart, Costco, Amazon, or any of the other big boys, there is no way that they will give you a credit card, in fact they may even request longer terms such as net 60 or net 90. If you want to get these large accounts it is absolutely crucial that you offer terms.

Eliminate Bad Debt

With non-recourse factoring you no longer have to worry about bad debt because your factoring company insures your receivables. If one of your customers is unable to pay for the merchandise you shipped them due to financial hardship, including bankruptcy or out of business, your factoring company assumes full responsibility for the bad debt and you still get to keep the money that they gave you for the invoices. And unlike insurance companies who will only insure receivables for large corporations with great financial strength, such as Walmart, factoring companies are willing to take a lot more risk and will not just insure sure bets, but will also insure mom and pop stores, online retailers, and a variety of other businesses. So by factoring your receivables you not only improve your cash flow, but you also get insurance on the accounts that you need insurance on

Outsourcing your Accounts Receivable

With factoring you are also outsourcing your accounts receivable department which has several benefits. For one, you won’t need to have any staff dedicated to accounts receivable, which can lower payroll or allow you to refocus their efforts on another aspect of running your business. You also won’t need to subscribe to expensive credit agencies in order to stay on top of which customers are credit worthy, instead your factoring company will do this for you.

Your factoring company will also handle all of your collection work for you. Furthermore, your factoring company also has more leverage in collecting on seriously delinquent accounts than you would. Since your factoring company has a large number of clients, it is possible that they may have five, ten, or even more clients who sell also sell to your customer. If your customer doesn’t pay you then you will stop shipping them, however, they will still be receiving merchandise from other vendors who they pay in a more timely fashion. If your customer doesn’t pay your factoring company, then they will be cut off from a large number of their vendors.

No New Debt

When you factor your accounts receivable you aren’t assuming any new debt.  Factoring is not a loan, the money you receive from your factoring company is in exchange for your invoices. Basically all you are doing is selling your invoices to your factoring company, and therefore the funds they provide you with are yours to keep. As a result you can spend these funds in any way you choose, these is no need to justify where the money is being spent like you would with a loan from a bank, the money is yours to spend however you wish.

Purchase Order Financing

While purchase order financing is not the same as accounts receivable factoring, it is a service that some factoring companies offer to their clients. Unlike accounts receivable factoring, purchase order financing is a loan. The loan is based on a purchase order that you have, and the funds you receive are to be used to fulfill that purchase order. Once fulfilled and the merchandise is shipped to your customer, you would factor the invoice and your factoring company will apply a portion of the invoice toward the loan they gave you and give you an advance based on the remainder.

How do I Start Factoring?

Factoring is quick and easy. Unlike securing a loan from a bank, factoring companies are able to make decisions in minutes rather than months. At DSA Factors we offer a simple flat rate fee factoring program and can be funding you in as little as 24 hours. We are a family owned and operated business that has been providing accounts receivable factoring for over 30 years. Call today at 773-248-9000 and find out just how easy factoring can be.