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.

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.

Is your web site mobile friendly?

Mobilegeddon

As of April 21st Google made a major change where sites that are not considered mobile friendly will be ranked lower on searches made on mobile devices.  It is important that businesses understand these changes and make sure that their site is mobile friendly.

What does this mean?

First of all, it is important to understand exactly what these changes mean.  If your site is not mobile friendly, it will not effect search results made from desktops, laptops, or tablets.  It will only effect searches made from mobile devices such as an iPhone, Android phone, or iTouch.
It will also only effect generic, non-branded queries.  For example if ABC Furniture Store does not have a mobile friendly site and you search “furniture store” from your smartphone, ABC Furniture Store probably won’t appear in the results.  However, if you search “ABC Furniture” on your phone, ABC Furniture Store should still appear at or near the top of the results.
This change also will only effect individual sites that are deemed not mobile friendly.  For example if your home page is mobile friendly and your “Contact Us” page is not mobile friendly, then your home page will still appear in search results on smartphones, but your “Contact Us” page will appear much lower down.  Therefore even if you can’t make your entire web site mobile friendly, it would be a good idea to make at least your home page mobile friendly.
Finally, just because you didn’t update your page by April 21st doesn’t mean that Google will never show your page on a search from a phone ever again.  Google is constantly crawling the web, so once you update your web site to make it mobile friendly, Google will see it, and you will reappear on searches made from smart phones.
So how do I know if my web site is mobile friendly?
Google uses its algorithms to determine whether or not your site is mobile friendly.  There are three main things that Google looks at:
  1. Are touch elements too close?
A touch element would a link or anything else that you would normally click on while viewing a site on a computer.  On a phone since you don’t have a mouse, you need to touch these objects.  If you have two links really close together it makes it difficult for a phone user to touch the correct link.  Its very important that you make links large enough or far enough away from other links so that visitors to your site can easily touch them.
  1. Is your viewport configured?
This might be the trickiest thing to understand because what is a viewport?  Its quite simple, the viewport is simply the size of the screen you are viewing the page on.  On a tablet or computer you have a large screen so you can fit a wider web site design onto it.  However on a phone you have a very narrow screen, if your site uses a wide design then it will not fit very well onto a phone.  So you need to make sure that your mobile site uses a narrow, stream-lined design.
  1. Do you use a small font size?
This should be the easiest thing to fix.  Obviously using a small font size makes it very difficult to read your site.  Combine this with the small screens that we have on a phone and its nearly impossible to read your site.  So quite simply all you have to is use large or normal sized fonts.
To find out if Google considers your site mobile friendly you can submit it to Google’s Mobile Friendly Test.
How can this effect my business?
If most people visiting your business’s site are using a desktop computer, then this will have very little impact on your business.  However, if many people access your site from their phones then this could have a very large impact on your business.
Not only will your site appear much lower on Google searches made from a phone, but more importantly, visitors will have a very hard time reading and navigating your site from their phones.  As a result, even if they find your site, they will be less likely to read or stay on your site.
If you are at a trade show, most people you meet will be looking at your web site on their phone.  So make sure they are impressed with what they see.  A clean, easy-to-read design will leave them with a much better impression of your business.
If you have sales reps who use their phones to show your product, it is very important that your website looks good on a phone.  It can be very hard to make a sale if it is very hard to show your product.
So Google implementing these new rules can actually be a very good thing, especially if you do not have a mobile friendly site.  This might just give you the motivation to create a mobile friendly site.  And with a new mobile friendly site you might start getting a lot of new business from people who primarily use their smartphones to surf the web.
If your new mobile web site is leading to higher sales volumes and you don’t have enough working capital to keep up with it, give DSA Factors a call today at 773-248-9000.  With accounts receivable factoring you will have the improved cash flow you need to grow your business and take on more and larger orders.

Who Can Benefit From Using DSA Factors

Factoring can be applied to all sorts of businesses.  Today, virtually any company providing goods and services on an ongoing basis is a factoring candidate. DSA Factors has many nontraditional clients that have benefited from its factoring service. Besides companies in the transportation and trucking business which many of them use factoring services, we have clients in the advertising “media” business that use our services to improve their cash flow.  They buy media time at a discount and resell it to all types of companies, retailers, doctors, home builders, virtually anyone that advertises on the radio and TV.  Other companies we factor for are talent agencies, who need to pay the talent right away while awaiting payment from their customer.  A few years ago, we had a start-up company that we were reluctant to get started with and they finally convinced us to give it a shot, they sold office chairs to office supply companies. Soon they were selling a large office store over $100,000.00 of office chairs per month. Then the next thing they knew they landed a large multi-million dollar order with one of the large warehouse clubs.  The company had only modest capital, but possessed excellent contacts in the industry, coupled with lots of ambition. With the help of DSA’s service and cash-flow assistance, it has grown into a substantial supplier of office furniture in the country.  One of the principals of the company reminded us on many occasions that he believes factoring was the only way to fuel the company’s growth.

Certainly a company does not have to do many millions of dollars worth of business to reap the benefits of factoring. Even clients with sales volume less than $1 million need factoring services. At this modest sales level, the company obviously cannot afford to take a bad debt or hire internal credit, bookkeeping and collection expertise. Most importantly, the principal can direct energy to more productive areas that will help the company grow.

Factors, specifically DSA are now considered the premier receivable management entities. With numerous years of experience, extensive databases and state-of-the-art computer equipment and programs, factors like  DSA can offer their services to a greater variety of companies in various fields of different sizes. With increasing emphasis on growth and productivity, there are constant pressures to improve gross margins and computerization. Today, it is important for a company to have the benefit of a factor to help take it into the 21st century.

Are you an ideal Candidate for Factoring?

Any business that provides a product or service to other creditworthy businesses and is constrained by their day-to-day cash flow situation is an ideal candidate.
 
Your business can benefit by using DSA Factors if you have any of the following needs:

  1. Cash to cover your payroll?
  2. Working capital to stimulate growth?
  3. Help with the ability to pay “your” bills timely?
  4. Help because your bank is not providing the funding you need to grow your business?
  5. New Equipment to Grow?
What is factoring all about?

A factoring arrangement is when a company sells its receivables to a factoring company, such as
 DSA Factors at a discount. After the sale, the receivables balances are owned by the factoring company. Because the factor owns the receivables, it generally provides all the required credit, collection and accounting services necessary to collect the receivables, including assumption of the ultimate loss exposure from the client debtor if the account does not pay due to the financial inability to pay. It is true that a business person can attempt to retain a loan from their bank, but even if they can get a loan, the bank does not do the various functions that a factoring company does.  A bank doesn’t check the credit worthiness of your customer.  A bank does not actually collect the accounts receivable. DSA Factors does all these things.  The bank does not assume responsibility of invoices if the company doesn’t pay due to financial inability to pay.  Let DSA Factors help you acquire the capital that can grow your business.
 
Whether you are a start-up company or are having growing spurts, DSA Factors can help your company. . We have the funding sources with virtually no limitations that understand your business cash flow needs and we are the lenders who understand your industry and want to help your business.