Champion Swift Funding: Factoring

Factoring also known as Accounts Receivable Financing is the process of selling your invoices (accounts receivable) at a discount in return for immediate cash. Factoring is one of the world's oldest methods of finance. Total factoring volume in the United States exceeds 200 billion. More and more businesses are discovering factoring as a tool for capitalizing their growth.

Factoring vs. Bank Loans

Many businesses that apply for bank financing, especially small to midsized companies, are turned down. Bank loans generally consider the amount of assets or collateral that a business has to secure a loan. Banks base their financing on the strength of the business applying for the loan, usually not on the business's accounts receivable. If a bank is willing to lend against accounts receivable, the bank may structure the loan based on the size of the businesses accounts receivable. For example, if a business has $100,000 worth of outstanding invoices, the bank typically would only lend 30 percent to 50 percent of the total amount or $30,000 to $50, 000.

Factoring is not a lending service. Because factoring is an outright purchase, investors, also known as factors are not subject to the same regulations that banks are. Factors may advance up to 90 percent or more of a business's accounts receivable. Factoring does not create debt. The factor simply buys invoices at a discount and collects a fee.
When a business enters a factoring arrangement, the factor bases the purchase on the credit of the business's customers, not on the credit of the business itself. You have access to unlimited capital. Your credit line grows with your business.

What type of Business can factor?

Any business providing a verifiable product or service to a credit-worthy business or government entity and generates invoices can benefit from factoring. Converting accounts receivable into immediate cash is almost like running your business as a "COD" operation. New accounts can be opened within 5-7 days and future advances can be funded within 24-48 hours.

Benefits of Factoring

Fund expansion and growth plans
Purchase additional inventory to increase sales volume and ultimately profits
Meet current expenses including payroll, payroll taxes and other operating costs.
Meet seasonal demands
Obtain volume discounts
Maintain credit rating
Continuous cash flow
Accessible-even to "unbankable" businesses

Medical Accounts Receivable Funding

Medical accounts receivable are accounts receivable owed to a medical provider by a patient's third party payer (Medicare, HMOs or other health insurance) for a service provided to the patient. Factoring medical accounts receivable offers the same benefits as regular factoring because third -party payers are typically slow payers.

Healthcare Vendor Accounts Receivable Funding

Healthcare vendor accounts receivable funding is a different side of medical factoring. When medical providers such as a hospitals, nursing homes, or physicians' office purchase products or outside services they typically use healthcare vendors.. An example of a healthcare vendor is a temporary nursing staffing agency. With this type of factoring, the factor purchases the healthcare vendor's accounts receivable in exchange for cash payment.