Invoice Factoring Earn More Money Win More Sales Get More Customers Run Your Business More Effectively

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1 Invoice Factoring Earn More Money Win More Sales Get More Customers Run Your Business More Effectively Change Capital USA Tel:

2 INVOICE FACTORING WHAT IS IT? Invoice Factoring is the practice of selling your accounts receivable (invoices), at a discount, to an invoice factoring company (also known as a factor). The factoring company provides you with an immediate cash advance and receives payment from your customers for the invoices. The financial impact is very similar to giving a customer a discount for early payment. Factoring insures a predictable and continuous flow of cash without adding debt to the balance sheet and without chasing customers for invoice payments. Cash advances from a factor can be used any way you choose without restrictions. HOW DOES IT WORK? Instead waiting 30, 60, 90 days or more for customers to pay, the business sells the invoice to a factor and receives an immediate cash advance (usually in 24 hours or less). The Usual Factoring Process 2 Change Capital USA Tel:

3 Factors charge a nominal factoring fee which is deducted from the reserve amount after payment is received from your customer. You do not have to modify your billing procedures except for the payment address. Your customers normally send payments to a bank lockbox in your name but this can vary depending on the factor. Of course, you do not have to factor all your invoices. In fact, it s a good idea to select the customers whose invoices you intend to factor, inform those customers where to send payment and maintain the billing consistency with the selected customers to avoid potential errors and mistakes. WHY DO IT? Factoring creates a predictable and dependable source of working capital that grows with your business. Cash advances increase in line with your sales. So, as your business expands, so does the amount of funding available to you. No re negotiation is required. Cash advances from a factor are unrestricted and do not add debt to your balance sheet. Since the factor is buying your receivables, factoring fees are a purchase discount NOT interest. Factoring is really an unlimited credit line that is directly related to your sales. Eleven Compelling Reasons To Use Factoring: 1. Immediate increases in cash flow and availability of working capital. 2. Available to established businesses, start ups and companies with credit issues. 3. No restrictive covenants regarding the use of funds. 4. No new debt on your balance sheet. 5. No long term commitments. 6. Extend persuasive terms to customers without limiting cash flow. 7. Feel more confident about having the cash to grow at YOUR pace. 8. Reduce risk. If your client bankrupts, you still get paid. 9. Additional funds to take advantage of buying opportunities and discounts. 10. Unlimited capital. The only financing source that grows with your sales. 11. Pay suppliers on time to enhance your company s reputation and help you take advantage of every possible trade discount. REQUIREMENTS Invoice factoring can be used by most companies that engage in commercial or government sales. The three most important requirements are: 1. Your company must sell to other businesses or to government entities 2. Your customers must be credit worthy 3 Change Capital USA Tel:

4 3. Your invoices must be free of liens FACTORING AND YOUR BOTTOM LINE Attempting to multiply and annualize a factor s discount rate, as if you were borrowing money, can lead to misleading conclusions. Consider this example: If a financial institution loans you $100,000 at 12%, you could make monthly payments of $1000 and in 12 months you will pay $12,000. However, you still owe $100,000. If you factor $100,000 worth of invoices each month at a 2% discount rate, in 12 months your fees would total $24,000 ($2,000 X 12). However, you would have received $1,176,000 (12 X $100,000 $24,000 in fees) and your cost for $1.2 million dollars in cash advances from the factoring company would only be $24,000 with NO debt added to your balance sheet. The key question is: Can you grow your business with better cash flow? Studies have shown that most businesses have the capacity to increase revenue by at least 25% without increasing their fixed costs. For many companies, growth can catapult exponentially while overhead and fixed expenses remain disproportionately constant, resulting in significant increases in profitability. For example, consider a packaging company with monthly revenues of around $8,350 ($100,200 a year) without the benefit of factoring. Now, let s assume that with cash advances to buy supplies with better discounts, improve marketing and pay bills on time, sales double. Here s a probable impact on profitability: Without Factoring With Factoring Sales Revenue $100,200 $200,400 Cost of Goods 60,120 (60%) 120,240 Gross Profit 40,080 80,160 Overhead 36,072 (36%) 48,096 (24%) Cost of Factoring 0 4,008 (2% of $200,400) NET PROFIT 4,008 (4%) 28,056 (14%) NEXT STEPS? Please give us a call. We ll connect you with an experienced, professional factoring company that understands your business. The approval process is simple and painless. 4 Change Capital USA Tel:

5 There is no charge to you for our service. companies to use their service. Factors gladly pay us to find qualified While money is just ONE of the elements needed to grow a business, you ll soon discover that by eliminating working capital constraints, the only limits to your organization s success is your ability to sell. CONTACT Alex Logan Tel: alogan@changecapitalusa.com 5 Change Capital USA Tel: