One 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.
Often 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.
There are two different types of rates that most factoring companies quote potential clients these days, fixed 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.
For 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.
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.
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.
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.
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.
There 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.
PayPal Working Capital
PayPal Working Capital
Take on New Debt
No, 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.
No, 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.
Based on Your Credit
No, 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 Interest
No, 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.
No, 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.
Yes, 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 Receivables
Yes, 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 Factor
Yes, 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 Requirement
No, 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 Commitment
No, 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 Fees
No, 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.
DSA 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 Service
As 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.
Many 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.
It used to be that you would purchase a product and on it would be a tag featuring the stars and stripes and would say “Made in USA”. However, as our shopping habits have evolved, with more and more people doing their shopping online, and big box stores becoming pretty much the only option for traditional brick and mortar shopping, that “Made in USA” label is becoming harder and harder to find. Despite these changes and rapidly developing global market, it should come as no surprise that the old “Made in USA” tag is becoming more and more sought after. Many Americans have even joined the “Shop Local” movement and make an effort to do as much shopping as they can at mom and pop stores in their community.
While you probably have seen “Shop Local” stickers in suburban downtowns and throughout the neighborhoods of big cities, there is a lot more to the movement than just shopping at a store whose owner happens to be your neighbor. Many of these stores will strictly source merchandise that is manufactured here in America. So by shopping locally you aren’t just helping out your neighbor, but you are also helping out your fellow Americans by creating manufacturing jobs right here in the states, rather than outsourcing those jobs overseas.
How Important are American Made Products to Consumers?
Just how important is it to consumers to purchase an American made product? According to research done by Consumer Reports, eight in ten Americans would prefer to purchase an American made product over an import, and six in ten would even be willing to be 10% more for a product that was made here at home. Furthermore, two in three consumers prefer to shop in stores that advertise American made products. However, more than half of consumers still believe that American made products are too costly.
There are many reasons why consumers prefer to buy products made in America. One reason is patriotism, a lot of consumers take pride in the fact that the products in their home were made in America. Consumers also like that they are creating jobs and supporting the American economy when they buy an American made product. However, the most important factor may simply be the quality of the product, most consumers believe that when they buy a product that is made in America that it is something that will last for a long time.
The Cost of Manufacturing in America
Despite the fact that consumers prefer American made products, the cost of labor in America is the reason why most manufacturers still prefer to produce their products overseas. It has nothing to do with America having a high minimum wage, in general most factory workers in America are skilled professionals who get paid at a much higher rate than minimum wage. In addition to this they also receive benefits such as health insurance and 401Ks, along with paid vacations and sick leave.
Then there is the question of materials, its one thing for a product to be assembled in America, but it’s another thing for it to be assembled in America from parts or materials that are also American made. If a factory is purchasing metals, plastics, or fabrics that are made in America, their suppliers also have to deal with higher expenses which of course impact the price of the raw materials that manufacturers purchase.
Advantages to Manufacturing in America
Despite these higher costs, there are still many advantages to producing merchandise here in the USA. It isn’t just the quality of the product, but also the quality control. If a product is being made overseas, the importer may have little control over how it is being made, and may not even be aware of any issues until it arrives at an American port a month after it has already been paid for. Of course the most obvious benefit is that the product does not have to be transported from overseas. This not only saves money, but it also saves time. It doesn’t need to spend a month on a ship and then go through customs before you have access to it, and that’s assuming that there aren’t any port slow downs. You also don’t need to fill an entire container in order to receive your product.
Of course the most important benefit to American manufacturing is consistency. American factories can produce goods 365 days a year. Yes, employees request time off for vacation, but those vacations are staggered so that a factory is never short-handed. In China, and other parts of Asia, factories have to shut down for an entire month as employees return to their homes to celebrate Chinese New Year. Even worse, when Chinese employees return from New Year celebrations, they tend to find a new job at a different factory. As a result you not only need to train an entire team of new employees every year, you never have any employees with the experience required to make high quality products.
Furniture Manufacturing in America
When you consider all of these factors, you actually can put together a pretty good argument for American manufacturing. However, in the furniture industry, manufacturing in America becomes even more important. By offering American made products you can also offer custom made furniture, allowing consumers to choose the configuration and sizes they want along with the finishes or fabrics they want. With overseas manufacturing you would be left with lead times of art least 10-12 weeks, but with domestic manufacturing lead times may be cut down to 4-6 weeks, which coincides very nicely with how long it usually takes a home buyer to close on their new home. These reduced lead times are also very important if a replacement part needs to be ordered and your local store doesn’t have any in stock.
As a result of these benefits, American manufacturing definitely plays a very important role in the casual furniture industry. According to Casual Living, three quarters of outdoor specialty shops carry American made lines, and four in ten consumers prefer to purchase American made products. The only features that are more important than where the furniture is made are price, comfort, and style. Again the main reason why consumers prefer to buy American is because they believe it is higher quality, and as a result, most high end merchandise is manufactured in the USA.
The only thing that may surprise you, despite the Shop Local movements strong grass roots efforts and social media presence, only 10% of Millennials believe that it is important to buy American made products. This number is slightly higher among Millennials that are married and have families, as well for those who live in the North and the West. However, there is another figure that does bode well for American manufacturing. 93% of all Millennials are willing to pay more for an American made product, with the vast majority willing to pay 20% more for a product with a “Made in USA” tag on it.
There are a lot of different accounts receivable factoring companies out there, and for most businesses looking to factor, the biggest concern is how much factoring will cost them. While a low factoring rate is very important, it is also important to make sure that when you get two different rates that you are comparing apples to apples. It isn’t only looking at services such as advance rates, approval rates, or recourse vs non-recourse, but also looking at fees and interest charges. So while you could call five, ten, fifteen, or even twenty factoring companies to find out their rates, it might not be so clear-cut as to which company is the cheapest and provides the best service. This article will show you how to find the best factoring company for your business.
Adjustable Rate Factoring vs Flat Rate Factoring
Adjustable Rate Factoring
There are two different types of rates that a factoring company may charge you. The most popular type of factoring these days is adjustable rate factoring. With adjustable rate factoring the factoring company will offer what seems like an impossibly low rate, they may advertise anything from .5% to 1% as a base rate for factoring your invoices. However, they will then charge you interest from the day they advance you the money until payment is received and then they will add an additional 10 days for payment to clear the bank. The way that this interest is computed can vary, but it is most common for factoring companies to use blocks. A block may be a period of 10, 15, or 30 days. For each block that passes, the factoring company will charge you an additional fee. For example, if a factoring company offers a .5% base rate and uses 15 day blocks and charges 1% for each block, this how you would be charged for factoring an invoice. Lets say the invoice is purchased on July 1st, then you will be charged the base rate of .5% for factoring on that day, in addition you will also be charged 1% for the first 15 day block. On July 15th if payment has not been received yet and cleared the bank, then another 1% will be charged for the 2nd 15 day block. Lets say payment is received August 10th, you will be charged another 1% on July 30th, and on August 14th, since the factoring company is still waiting for the funds to clear the bank, you will be charged a final 1%. As a result, your overall costs for factoring the invoice will be 4.5%.
Flat Rate Factoring
With a flat rate factoring program your factoring fee is much easier to compute. If you are offered a rate of 4% then that is exactly how much money you will pay for factoring the invoice, regardless of how long it takes your customer to pay your factoring company. While the base rate may appear much higher with flat rate factoring, the actual rate you pay to factor an invoice is typically lower, especially if your customers don’t pay their invoices early.
While the overall rate may be the main reason why you choose to go with an adjustable rate or flat rate for your accounts receivable factoring, it is also important to consider the service that goes along with these two different rate structures. With an adjustable rate, the longer it takes your factoring company to get paid, the more money they make. As a result, an adjustable rate factoring company has little motivation to collect from your accounts until they start to become seriously past due. With a flat rate factoring program, your factoring company is very motivated to collect from your accounts when the invoices become due. This motivation to collect doesn’t just affect how much you pay for factoring, but can also affect if future orders from your customers get approved. If a customer is past due on your invoices, then they won’t get approved until they catch up. As a result a factoring company with an adjustable rate may not be able to get you approvals in a timely fashion causing your customers to become upset.
The Advance – Improved Cash Flow
Perhaps the most important reason why companies want to factor their invoices is because of the advance that provides them with the improved cash flow they need. When choosing a factoring company, the most important question should be if they provide an advance and how long it takes. Most factoring companies should be able to provide you with an advance on your receivables within 24 hours, or even the same day. A factoring company who is offering you rates to good to be true may not be providing you with an advance. After that you need to look at the rate of advance. All factoring companies hold back money in reserve, but some companies hold back more than others. However, rather than advertise how much they hold back, factoring companies prefer to advertise how much they advance. So if a factoring company holds back 10%, then they have an advance rate of 90%. Advance rates can vary anywhere from 75%-90%, so it is important to make sure that you are getting a high advance rate.
Recourse vs Non-Recourse Factoring
Another benefit of factoring is the insurance that it provides on your receivables. A company that offers non-recourse factoring will insure your receivables against non-payment for financial reasons, meaning for example, that you will not be on the hook if a customer of yours goes bankrupt. However, if your factoring company only offers recourse factoring then they are not providing you with any insurance, and you will be have to pay them back if one of your customers files for bankruptcy.
Approval Rate and Credit Limits
Because a factoring company may be insuring your receivables, they are also assuming some risk. How much risk they are willing to take can vary. As a result it is important that you choose a factoring company with a high approval rate. It is also important to learn about how your factoring company assigns credit limits. It is important that your factoring company assigns your customers a credit limit based strictly on your business with them. Some factoring companies assign a single credit limit to a business that applies across all of their clients, as a result, if another client has orders that reach that credit limit, your orders will get turned down until that other client’s invoices are paid off.
Hidden Fees and Commitments
Of course the last thing you want is to get a bill from your factoring company asking you to pay a bunch of hidden fees. Many factoring companies may charge you fees for day-to-day operations such as running a credit report. Other companies may charge you annual fees or fees for not meeting minimum volume requirements. While some companies may lock you into a long-term contract and will charge you fees if you choose to stop factoring or want to change factoring companies. Another thing to consider is whether you are required to factor all of your accounts. Some factoring companies will require you to factor all of your accounts, including ones that pay on credit card, meaning that you will be forced to pay factoring fees even on accounts that you don’t factor. It is important that you look at these fees as they of course affect the overall rate that you are paying to factor your receivables.
Service and Benefits
Finally, the last thing you need to look at it is the service and benefits that your factoring company can provide you with. When it comes to service, many larger factoring companies will treat you simply as a number and assign you to an account manager who may not be able to make difficult decisions. Often times these larger factoring companies are owned by banks or are headquartered overseas, meaning that it may take them a long time to make simple credit decisions. With smaller factoring companies, and especially family owned companies, you will always be able to speak with one the companies principals, and quick turn-around times on credit decisions or anything else are another advantage that they offer. Of course, sometimes you need a little bit more than just factoring, so it is important to look at some of the other benefits factoring companies may offer.
Sometimes when you get a large order from a major retailer you may need a little extra help fulfilling the order. As an importer you may need to pay the overseas factory to start production, and certainly they will want payment in full before a container is released. As a manufacturer you may need funds to purchase additional materials so that you can start production. Whatever the case may be, some factoring companies offer purchase order financing, which is basically a short term loan based on the purchase order so that you have no problem getting the order fulfilled. Even if you don’t need purchase order financing right now, it is important to choose a factoring company that offers it to their clients as you never know if you one day may need it.
Small Business Loans
Some factoring companies may even offer their clients small business loans in addition to factoring services. If you might need a loan from time to time, whether you need to pay to attend a trade show, or you are developing a new product line, it is nice to know that your factoring company may be able to help you out. Since you will have established a working relationship with your factoring company, they will be much more likely to offer you a loan than a bank, and will also make a decision much quicker.
Choosing the Right Factoring Company
As you can see, there is a lot that goes into choosing the right factoring company for your business. At DSA Factors we offer low, competitive, flat rate factoring fees with the personalized service that you would come to expect from any family owned and operated business. Our clients receive non-recourse factoring with a 90% advance rate. Furthermore, we have an approval rate of over 95% and most companies get approved instantly when submitted on our web page. We have no hidden fees, no minimum volume requirements, and no long term commitments. We also offer purchase order financing to our clients and have offered small business loans to clients who we have developed a working relationship with. DSA Factors is well known throughout the factoring industry as one of the best companies to work with, earlier this year we were named by Factoring Club as the Best Micro Factoring Company for 2016. If you are looking for a factoring company to help grow your business, give DSA Factors a call at 773-248-9000, and find out just how easy factoring can be.
There is no doubt that technology has changed the way we communicate and the way we shop, but smart technologies are starting to become a major part of the way we live as more and more household products become connected with smart technologies. In the same way that smartphones have had an impact on how we stay connected, soon our furniture and appliances will be connected as well.
Nearly three quarters of American adults own a smartphone, and over two thirds of US households have high speed internet connections according to Pew Research Center. The iPhone alone has more than 75 million users in the US.
While the number of smartphone users and internet users may not come as too much of a surprise, you might be surprised by just how many of the products we find in our home are now connected to our smartphones. The most popular item in the house connected to the smartphone is the TV. Whether you are using the smartphone as a remote to change the channel, to record a show at home when you are at work, or to stream video off the internet, TVs offer far and away the most smart features of any product in the home. 65% of households with TVs have at least one TV that is connected to the internet.
After TVs, home security systems come next in connectivity, allowing you to monitor your home from your office, a ballgame, or even when your on vacation thousands of miles away. Next comes audio systems which may use bluetooth technology to play music from your phone or stream music from Pandora or other popular apps.
The other most popular connected products are garage doors, indoor lights, thermostats, locks on doors, outside lights, detectors (such as smoke or carbon monoxide), and kitchen appliances.
The reasoning behind owning connected devices varies. When it comes to TV and audio, certainly convenience plays a major factor in why consumers would want a connected product. For home security and smoke detectors it less about convenience and more about safety. In the case of a connected thermostat the goal might be cost savings. But of course the most important thing to look at regardless of what product you are considering connecting is that it’s just fun!
According to HGTV, almost half of all consumers find it extremely important to have products in their home that utilize smart technologies, and over half of all homeowners would consider making their home a smart home in order to increase its value and make it more appealing to potential buyers. It should also come as no surprise that Millennials are 10 times more likely to make a smart home improvement than any other generation.
Despite the popularity of being connected, the furniture industry has lagged behind in integrating smart technologies into their products. However, by offering smart technologies furniture companies have a lot to gain. Over half of consumers under the age of 50, and nearly 3 in 10 consumers over the age of 50, would be interested in a couch that offers a smartphone docking station so that they can charge their phones while watching TV. Over a third of consumers regardless of age would appreciate a couch that has integrated reading lights. For those under the age of 50, one third would like a couch with integrated speakers, and a little more than a quarter would like bluetooth connectivity so that they can control motion features from their smartphone or tablet.
There is no doubt that technology is changing how we live our lives. While many companies have been focusing a lot on eCommerce and social media, it is also important that they look beyond marketing and expand technology into the products themselves.
Whether you are looking to integrate smart technologies into your current products, or you are a new start-up that just invented pants with a smartphone controlled fly, it is important that you have the funds to not only develop your product, but to keep up with increased sales volume. While many companies look for SBA loans or investors, with accounts receivable factoring you can get the cash flow you need without taking on any new debt or giving up any portion of your company. Call DSA Factors today at 773-248-9000 and find out just how easy it can be to get the funds you need to grow your business.