Factoring 101 Blog - Acounts Receivable Factoring and Other Industry News

The Factoring 101 Blog is your one stop destination for all things factoring related. With well over 100 posts dating back to 2011, if you have a question about accounts receivable factoring, purchase order financing, fintech, managing accounts receivable, or anything else, chances are you will find an answer to your question right here on the Factoring 101 Blog. If there is something that you can't find the answer to, or you want more information about it, please feel free to give DSA Factors a call at 773-248-9000 as we are always happy to help you with any questions you may have.

Finding the Lowest Factoring Rate

July 5, 2016

How to Find the Lowest Rate for Accounts Receivable Factoring
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...
Avoid The Pitfalls of Online Lending

Avoid The Pitfalls of Online Lending
Online lending, often referred to as Fintech, is becoming increasingly popular and is a major disruptor in the world of finance...
January 8, 2019

Purchase Order Financing vs Accounts Receivable Factoring

Purchase Order Financing vs Accounts Receivable Factoring
There are many different financing options available to businesses that could use improved cash flow...
May 3, 2017

Finance in the High Tech World

Factoring vs Fintech: Finance in the High Tech World
For most small business owners, obtaining a line of credit from a bank has never been easy...
December 30, 2016

What To Look For in a Factoring Company

December 31, 2018

What To Look For in a Factoring Company
Every accounts receivable factoring company is different, it is important to know the questions you need to ask when looking for the correct factor for your business...
Accounts Receivable Factoring Services

Accounts Receivable Factoring Services
Cash flow is typically the main concern for any company that is looking for accounts receivable factoring...
June 19, 2017

Micro Factoring - Funding Your Small Business

Micro Factoring for Your Small Business
Micro factoring is just like normal accounts receivable factoring, only it is on a smaller scale...
February 7, 2017

fixed rate vs adjustable rate accounts receivable factoring

Fixed Rate vs Adjustable Rate Accounts Receivable Factoring
There are two different types of rates that most factoring companies quote potential clients these days, fixed rate (or flat rate) and adjustable rate...
January 4, 2017

Purchase Order Financing vs Accounts Receivable Factoring

May 3, 2017

Purchase Order Financing vs Accounts Receivable Factoring
PO financing and factoring are considered alternative financing options, as the process is much faster and easier to obtain than a traditional SBA loan from a bank...
Purchase Order Financing and Accounts Receivable Factoring can work together to fund your business.

Factoring and PO Financing: Working Together to Fund Your Business
There are many different ways to fund your business out there, but choosing the correct funding method for your business can sometimes be difficult...
December 4, 2019

A Guide to Purchase Order Financing

A Guide to Purchase Order Financing
Explore the two most popular ways to obtain purchase order financing, from a purchase order financing company and an accounts receivable factoring company...
July 19, 2021

Accounts Receivable Factoring vs Fintech

September 1, 2016

Traditional Factoring vs Fintech
There has been a lot of talk about fintech lately. However, factoring has always been an alternative financing method, and has a long track record of success...
Fintech: Balancing Speed and Availability with Service and Privacy

Fintech: Balancing Speed and Availability with Service and Privacy
Fintech is becoming increasingly popular each year. The success of Fintech is primarily driven by the ease and speed of getting access to funding...
January 15, 2020

Accounts Receivable Factoring vs Supply Chain Financing

Accounts Receivable Factoring vs Supply Chain Finance
With each passing day it seems like a new technology is disrupting a traditional business model...
May 2, 2018

Accounts Receivable Factoring in many ways predates Fintech in the field of financial technology.

How Accounts Receivable Factoring Fits Into the Fintech World
It may seem strange that accounts receivable factoring, a form of financing that dates back further than the Silk Road, could fit into the modern world of Fintech, an industry that is less than a decade old...
May 9, 2017

A Guide to Net Payment Terms

December 18, 2019

A Guide to Net Payment Terms
Net payment terms are when you offer your customers a fixed amount of time to pay you back. Net 30 day terms are the most commonly used payment terms...
Having a good collections process is key to turning your receivables into cash, but that doesn't mean that you need to be doing the collecting.

Collections: Turning Your A/R Into Cash
You've developed a product or service that everyone loves. You've marketed it. You've sold it. Now all you need to do is get paid for it...
December 9, 2019

Nothing is worse than when you sell a product to your customer and then they don't pay you for it. The solution to this problem is to acquire credit insurance.

A Guide to Credit Insurance
For any business owner, there is nothing worse than when you sell a product to your customer and then they don't pay you for it...
January 7, 2020

Just like personal credit for consumers, businesses also have credit that can be used to determine their ability to pay for merchandise and services.

Performing Due Diligence: Credit Checking a Business
In the same way that we have personal credit that determines our ability to make purchases, businesses also have credit that can be used to determine their ability to pay for merchandise and services...
December 31, 2020

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Why Should I Offer Net Payment Terms?

For many small wholesalers, the decision to offer net payment terms is oftentimes one of the most difficult business decisions to make. While it may seem easier and safer to just take a credit card, from a customer’s point of view it is the exact opposite. There are even situations where credit cards may not even be an option. In order to determine whether it is time to start offering net payment terms to your customers, it is important to look at several factors. Why do customers prefer net sales terms, How do you take the risk out of net sales term, how to you manage accounts receivable, and how do you maintain healthy cash flow.

Why Do Customers Want Net Payment Terms?

Time to Pay

Perhaps the most important reason why a customer would request net payment terms is so that they have time to pay for their merchandise. While it would be simple to argue that charging an order to your credit card means that they don’t need to pay for it until their next statement becomes due, the amount of time they have to pay can vary by an entire month depending on if they are near the start or end of their billing cycle. This means that when paying with a credit card they will have somewhere between 15 to 45 days to pay for their merchandise. The big problem of course is that if they are unable to pay their credit card on time, they will be assessed late fees and interest for not making a payment on time. With net payment terms, customers know that so long as they pay their bills within a reasonable amount of time, they will not be charged any interest, and there are never any late fees. So, while they can’t wait 90 days to pay a net 30 day invoice, if it takes them 45 days it shouldn’t be a problem. As a result, they may be willing to place a larger order if offered net payment terms as they won’t be as worried about needing to make a payment exactly on time.

There is also the case of customers who need more than 30 days to pay. For seasonal businesses, such as garden centers or gift stores, they will need to place the orders early for their busy season. So whether they sell outdoor products and need to stock up for the spring and summer, or sell gifts and décor for the holiday season, they may ask for longer payment terms than just 30 days. It is not unusual for seasonal businesses to request extended terms of 60 or 90 days, which is something that a credit card company will never offer them.

Credit Limits

Another issue with paying via credit card is credit limits. While it is true that there will always be a credit limit whether paying with a credit card or getting net payment terms, companies are able to purchase more when they are given net payment terms. A credit card has a strict credit limit which applies to everything that the business purchases with it. For a business placing orders at a large trade show, they need to be conservative with how much they charge to their credit card with each vendor or they will risk maxing out their credit limit before they are able to place all of their orders. Furthermore, they most likely already are using their credit card to pay for business expenses such as cleaning supplies, phone and internet, advertising, and in the case of a trade show, their flight and hotel, meaning they have less credit available to spend on merchandise.

This also is problematic with seasonal businesses as their credit limit may be sufficient for them to make purchases on for most of the year, but can become woefully insufficient as they stock up for their busy season. As a result, any wholesaler who sells seasonal products may face even greater difficulties in making sales if they require their customers to pay via credit card.

Of course, if you offer your customer net payment terms, you will still need to impose a credit limit on them. You don’t want to overextend to a customer or they may have difficulty paying you back. However, if all their vendors establish appropriate credit limits for them, then combined they should have more credit than what a credit card would give them. Furthermore, as you develop a good working relationship with a customer, you will be able to gradually raise their credit limit over time so that they will be able to order more from you in the future.

Major Retailers

Finally, there is the issue of selling to major retailers. One of the best ways to quickly grow a business is to get into a major retailer such as Target or TJ Maxx. Not only are the orders they place very large, but they have the ability to get your products out to large number of consumers all across the country, which of course is a great way to expand your sales territory and market your products. While it is possible that you may be able to negotiate the price of your merchandise with the major retailers, one thing you will not be able to negotiate with them is the payment terms. Refusing to accept the payment terms that they are requesting, or simply trying to negotiate the sales terms, is the easiest way to lose a sale, and even worse, losing future sales. While it may seem unfair that a multi-billion-dollar corporation is asking you to wait to get paid, the simple fact is you need their business, if you are unwilling to play along then they will simply find another vendor who will.

Another thing that major retailers look for is long term relationships. If they are going to make the investment in selling your product at their stores, then they want to make sure that the shelf space they are giving you will always carry your product. For many major retailers, most notably Walmart, they associate the ability to offer net payment terms with stability and financial strength. A company that can give them 60, 90, or even 120 days to pay has their finances in order and will be around for many years to come. A company who is requesting payment via credit card may not even be around in one month’s time when it is time to place a reorder.

How to Deal with Net Payment Terms

It can be very difficult for most SME’s to deal with all the challenges associated with net payment terms. There is a need to perform credit checks to make sure that the businesses that are being offered net payment terms are credit-worthy and will pay their bills. Even if a business is credit-worthy, you still need to send out reminders and make collection calls in order to get paid on time. Of course, you can do everything that you need to do in terms of credit checking and collecting, but sometimes even when you do everything right things can still go wrong and a customer can unexpectedly go bankrupt or out of business, meaning that you will be stuck with bad debt. Of course, perhaps the biggest problem for any SME that offers net payment terms will be managing their cash flow. Instead of being paid instantly by a credit card company, with net payment terms you will need to wait 30 days or longer before you get paid, making it difficult to pay your own bills.

Luckily, there is a simple solution to all of the above problems, that is accounts receivable factoring. With accounts receivable factoring you eliminate all the work and stress associated with net payment terms, plus you get paid just as quickly ensuring that you have healthy cash flow as well. With factoring, you are selling your receivables, or invoices, to a factoring company who will pay you for them the same day you bill your customers. They will also handle all of the credit checking, collection work, and insure your receivables against non-payment. So basically, you are outsourcing all the work associated with net payment terms, eliminating your risk, and getting paid just as quickly as you would have if you had charged a customer’s credit card. Best of all, the cost of factoring is comparable to a credit card processing fee.

If customers are requesting net payment terms, don’t let the fear of offering terms get in the way of doing business with your customers. Instead, give DSA Factors a call today at 773-248-9000, email us at info@dsafactors.com, or chat with us right here on this web site. We have been providing accounts receivable factoring for over 35 years and have the knowledge and expertise to allow you to take the next step forward in doing business with your customers. At DSA Factors we make net payment terms easy.

Recourse vs Non-Recourse Factoring

Recourse vs Non-Recourse Factoring

October 29, 2021

When it comes to factoring there are a lot of different aspects that need to be looked at when determining the best factoring option for your business, however, the decision between recourse and non-recourse is probably the most important. Quite simply, recourse means that if a customer does not pay an invoice, then you are responsible for paying back the advance you received on that invoice. Non-recourse on the other hand means that you are insured against a customer who doesn’t pay for an invoice, so there is no need to pay back the factoring company if they don’t pay. While this may seem like a simple difference, there is actually a lot more to it than what these simple descriptions state...

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B2B Financing

B2B Financing

September 9, 2021

As the old saying goes, it takes money to make money. One of the most important parts of running any successful business is having the finances available to keep it running smoothly. While financing can be difficult for any business, it is often most difficult for businesses that operate B2B, or business to business. To understand why financing is so crucial for B2B businesses, it is important to understand the differences between B2C (business to consumer) and B2B (business to business)...

Read More

The Changing Furniture Landscape

The Changing Furniture Landscape

August 27, 2021

Over the past decade we have slowly been watching the retail landscape transform from traditional brick and mortar stores to online shopping. However, as a result of the COVID-19 pandemic, 2020 not only experienced the greatest shift towards online shopping, but for the first time direct-to-consumer e-commerce sites have taken the largest share of the furniture market. After leading in growth rate for the past seven years, these online retailers grew by an incredible 47% in 2020. According to Furniture Today, online retailers now have a 20.8% market share of the furniture market, where traditional furniture stores only have a 20.5% market share. After that, lifestyle furniture stores have a 14.3% share of the market, discount department stores have a 13.4% share, manufacturer-branded furniture stores have a 11.5% share, bedding specialists have a 8.7% share, warehouse clubs have a 7.4% share, and finally rental centers only have a 3.4% share. This shifting marketplace can be seen by taking a look at the top 10 furniture retailers for 2020...

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