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.

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.

What is Invoice Factoring?

Improve Your Cash Flow with Invoice FactoringWhat is Invoice Factoring?

Invoice Factoring is a way of improving your cash flow without taking on any new debt. When you factor an invoice, what you are doing is selling that invoice to a factoring company. As a result, factoring is not a loan and you can get paid immediately for the products or services that you invoiced for, rather than having to wait until the invoice becomes due.

Why Should I Use Invoice Factoring?

While invoice factoring isn’t the only way to speed up your cash flow, it offers many benefits that you won’t get from other methods. Below are a couple of common methods used to improve cash flow and how they compare to invoice factoring:

Bank Loans vs Invoice Factoring

With a bank loan, or SBA loan, you are taking on new debt, the money you receive is not yours and has to be paid back. However, when you factor an invoice the money you receive is yours to keep. Banks, also assign you a strict credit limit, you can only borrow up to that credit limit. However, with invoice factoring the sky is the limit, the more invoices you have, the more money you can receive. Furthermore, securing a bank loan is a cumbersome process and often times you may wait months only to find out that you haven’t been approved because your credit isn’t good enough. With invoice factoring decisions are made quickly, often times within minutes, and decisions are based on your customers’ credit, not your own.

Investors vs Invoice Factoring

While taking on an investor is a good way of getting a quick cash infusion without taking on any new debt, it also means that you are giving up a portion of your company. From a financial point of view you no longer own a significant portion of your business. However, even more problematic is that you are giving up control of your company to someone else. If you and your investor don’t meet eye to eye on various matters you may be running into trouble. With invoice factoring this is not an issue, you still receive the cash that you need without having to give up any portion of your company or having anyone else tell you how to run your business. Furthermore, invoice factoring is a continual process, it can provide you with unlimited positive cash flow for many years to come. With an investor it is a one time deal for a fixed amount of money, unless of course you want to give up even more of your business.

How can I Use Cash Flow I Receive from Invoice Factoring?

The positive cash flow you receive from invoice factoring can be used in any way you want. With invoice factoring you don’t need to answer to a bank or to an investor in your company, you are still in the driver’s seat. The cash flow you receive can be used to meet payroll, get a container released, attend a trade show, start a new marketing campaign, upgrade equipment and facilities, or for anything else that you can think of.

Are there Additional Benefits to Invoice Factoring?

In addition to the improved cash flow, invoice factoring also provides you with other benefits that you will not receive from other sources. With invoice factoring you are also outsourcing your entire accounts receivable department. You no longer need to worry about keeping tabs on your customers, your factoring company will handle all of your credit checking for you. Further more you no longer need to keep on top of your customers since your factoring company will handle all of the collection work for you. If that isn’t enough, with non-recourse factoring you are also insured against non-payment of your invoices, your factoring company will assume the risk for you.

How can I Start Invoice Factoring Today?

Give DSA Factors a call at 773-248-9000 and one of our principals will be happy to speak with you. DSA Factors has been providing non-recourse invoice factoring for over 30 years to a wide range of industries, including but not limited to furniture, bedding, giftware, housewares, textiles, clothing, trucking, food, marketing, and staffing. As a family owned and operated business you not only receive low competitive rates, but also personalized service that the larger, bank-owned factoring companies can not provide. Call us today, and we can be providing you with improved cash flow tomorrow.

Using Factoring to Survive the Cash Flow Crunch

Companies facing a cash flow squeeze have the option of selling their invoices or accounts receivable to factoring companies as a quick and reliable way of receiving the funds necessary to run their business.  The way a factor works is they check the credit-worthiness of your customers and assuming they have good credit will purchase your accounts receivable for that customer at a small discount.  As a result you will receive immediate cash instead of waiting for 30 or 60 days to collect.

At DSA Factors we can offer to pay you up to 96% for your invoices, and you can receive that money the very same day with a wire transfer or the next day via an ACH.

Many businesses use factors when they are first starting out because they may not have established a long enough credit history to get a loan from a bank, while a factoring company is more concerned with the credit-worthiness of their customers.  However many older, well established companies also use factoring because of the many advantages it offers.  Not only is it much easier to work with a factoring company than get a loan from a bank, but the factoring company also provides valuable services such as doing all of your collections and even insuring your receivables.  Additionally a factoring company is more willing to work with you than a bank as their success is directly tied to your own success.  At DSA Factors you will always be able to talk with one of our principals as well as be able to access a variety of information about your accounts 24/7 from our online tools.

Factoring can work for pretty much any industry, and some industries are almost entirely reliant on factors to meet their cash flow needs.  At DSA Factors we specialize in factoring for the furniture, trucking, and staffing industries.  However we have a wide range of clients that sell everything from office supplies to clothing as well, and we are able to work with any industry to meet their financing needs.  We can also work with any size account, whether you are selling tens of thousands of dollars worth of merchandise to a Target or Sam’s Club, or just a few hundred dollars worth to mom and pop stores.

Money To Make Your Company Grow

From time to time, both large and small businesses have a problem with cash flow.  This shortage in cash may be due to seasonal requirements, rapid expansion, product development, or any number of other circumstances.  The remedy most business owners and managers consider first is bank financing.  Many times, however, businesses are ineligible because they have used their entire line of credit, or they need to avoid long-term monthly payments.

DSA Factors offers a solution to this cash shortage through factoring. Factoring is the purchase of accounts receivable on a discount basis.  In effect, DSA Factors is a secondary financial market that helps businesses through the cash flow crunches that can occur when they have to wait for payment on their invoices.  Companies with creditworthy customers can factor their invoices and receive cash in as little as 24 hours, with no minimum or maximum contracts.  In fact, we currently have clients that factor invoices for less than $200 as well as clients that factor invoices for many thousands of dollars.

To see how your business can benefit from our professional services, contact Howard Tolsky at DSA Factors, 773-248-9000, today for additional information.  Or visit our web site at www.dsafactors.com.

What can factoring do for you?

If you try our factoring service, the benefits you will receive are as follows:
  • You will get INSTANT cash for your accounts receivable (24 hours MAX!)
  • You can offer your customers 30 or 60 or 90 day terms!
  • You will eliminate all work associated with collecting money from your customers.
  • You will spend more time doing what is “KEY” to your business, which is increasing your SALES!!
  • You will have the cash necessary to pay your bills more promptly like payroll, inventory, and office expenses.
  • You most certainly will expand your business by having the ability to handle larger orders.
Why use DSA instead of CIT or GE or any of the other factoring companies?
  • You will be able to talk to the principals at DSA any time you need to, in other words you will get real CUSTOMER SERVICE.
  • You will receive approvals for your orders normally within 1 hour!
  • You will receive a much higher APPROVAL rate on your requests (we look for reasons to APPROVE your accounts, not reasons to turn them down).
  • You will receive a very competitive factoring rate for your receivables.
  • You are not required to sign any LONG TERM or SHORT TERM contract.
  • You won’t pay any minimum monthly or annual factoring fees.
  • You don’t need a Philadelphia lawyer to comb through the typical 37 page factoring agreement. (Ours is a total of TWO pages).
In a nutshell, here are SEVEN benefits you will receive from us when you are factoring your receivables:
  1. You are paid on your receivables 96.1% up to 98.1% of their value.
  2. You don’t  make collection calls anymore. You will be assured that we, DSA will treat all of your customers with respect and care just as you would.
  3. You and DSA will work together with “as a team” in handling your customers. 
  4. You can eliminate quoting your customers terms of COD or PREPAY or CREDIT CARD.
  5. Your customers will place larger orders knowing that you will be giving them open credit terms.
  6. You will have access to our interactive website 24 hours a day where you can request approvals, check to see if your accounts have paid, look back at all  transactions between us, and lots more!
  7. You don’t stay up nights wondering when your customers will pay you!
If factoring sounds like something you can use visit our web page at www.dsafactors.com or call us at 773-248-9000.
P.S. You can just TRY our service on an invoice or 2 to see how it works. No long term obligations.
P.P.S. You will be able to pay all your bills timely and maybe even get discounts if  you prepay some of your bills. If that is the case, our service can be FREE to you.
P.P.P.S.  Our program is non-recourse, which means if we approve an account and they don’t pay because of their inability to pay (bankrupt, financial problems, etc.), you will not have to incur the loss.

NOW would be a great time for you to
TURN YOUR RECEIVABLES INTO CASH!!!