Invoice Factoring - REO Property Preservation Forum
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post #1 of 23 (permalink) Old 01-18-2012, 08:44 AM Thread Starter
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Invoice Factoring

Hello,
Do any of you guys have experience in using invoice factoring in our industry? The cost seems a little high, 1%/10 days, but that means for every $100k/yr if your average time to pay is 40 days, you'd be paying $4k/year. A little expensive, but to receive invoice payments immediately in our industry that really eliminates the need for a huge amount of working capital.

We are growing quite a bit over the last couple of months and this could be beneficial for us.

Thoughts?
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post #2 of 23 (permalink) Old 01-18-2012, 09:51 AM
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What's your borrowing cost at the bank? I'd start by comparing both and going with the least expensive option.

10 day payment makes for good cash flow if you don't finance the jobs your self...
post #3 of 23 (permalink) Old 01-18-2012, 09:57 AM Thread Starter
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Well you get paid on the invoice in two days and for every ten days it takes a national to pay you get 1% fee taken off that factoring company keeps.

Its somewhat higher interest but this doesn't use you're credit ad its based on your customers, aka the nationals, credit worthiness
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post #4 of 23 (permalink) Old 01-18-2012, 10:28 AM
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A factoring company will only factor until you get your first charge back.
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post #5 of 23 (permalink) Old 01-18-2012, 10:31 AM Thread Starter
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Depends on the national. My main customer is not doing guideline work. 120 in chargebacks in four years, and they were my fault.
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post #6 of 23 (permalink) Old 01-21-2012, 05:32 AM
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Quote:
Originally Posted by SwiftRes
Hello,
Do any of you guys have experience in using invoice factoring in our industry? The cost seems a little high, 1%/10 days, but that means for every $100k/yr if your average time to pay is 40 days, you'd be paying $4k/year. A little expensive, but to receive invoice payments immediately in our industry that really eliminates the need for a huge amount of working capital.

We are growing quite a bit over the last couple of months and this could be beneficial for us.

Thoughts?
Working in this industry... with chargebacks, no-pays, and short pays... for Nationals... I would be leary of factoring ...especially at the rates they charge. You could get yourself in a hole that would be difficult in getting out of.
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post #7 of 23 (permalink) Old 11-29-2012, 09:19 AM
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Sorry to resurrect an old thread, but can anyone recommend a good factoring company?
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post #8 of 23 (permalink) Old 11-29-2012, 03:15 PM
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Direct Capitol had a factoring division but dropped ALL P&P invoicing due to the "inherent risk of the business model".
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post #9 of 23 (permalink) Old 11-29-2012, 04:47 PM Thread Starter
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Originally Posted by Wannabe View Post
Direct Capitol had a factoring division but dropped ALL P&P invoicing due to the "inherent risk of the business model".
Winston Financial Group didn't have any problem doing it. I explained the issues with chargebacks, and since generally they are only no more than a couple thousand dollars(sure, could be higher) and that makes it only a couple of percentage of total AR that it's not a big deal. They gave me an example of a large clothes wholesaler that sells to retail outlets, and then the retail outlets end up returning a lot of the clothes in which the wholesaler credits back. They compared a chargeback to a retail return.

On a side note, never ended up doing it. Did it the all natural way instead, toughed it out.
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post #10 of 23 (permalink) Old 11-29-2012, 04:49 PM Thread Starter
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Looking back through my emails, Direct Capital would only do factoring/AR loans on businesses that received credit card transactions, not invoicing.
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