Discount Vs. Traditional Accounts Receivable Financing

by Crestmark 25. April 2012 06:35

Accounts receivable financing is one option for businesses whose working capital needs exceed what can be obtained through traditional term loans from conventional banks. Whether your enterprise is new, your funding demands unusual, or you're simply having trouble getting credit in a tight economy, accounts receivable financing can be a good choice. But what kind best suits your business? There are two main options: traditional A/R financing or discount financing.

Traditional, Non-Recourse Accounts Receivable Financing

Traditional A/R financing begins with your potential financier checking your customer's credit. This should happen before you invoice to determine approval. Once your client is approved, the financier (known in this case as the factor) will purchase the invoice from you. In this case, the factor actually assumes complete responsibility for the invoice because they now own it. That includes ensuring payment even if your customer is unable to pay.

Discount, Recourse Factoring

Discount factoring is similar to traditional accounts receivable financing. It too involves borrowing against unpaid invoices, but in this situation the factor does not actually purchase the accounts or assume liability for them. Advantages of this system include lower fees and in some cases faster turnaround and greater availability of funds.

Both of these options allow for flexibility and funding that might not otherwise be available. Both also involve your factor working directly with your client, a proven system that shortens the time between invoice and receipt of payment.

To learn more about accounts receivable financing, contact one of Crestmark's experts. We can help you understand the details and differences between discount/recourse and traditional/non-recourse factoring and select the right option for your business.   

Crestmark's Jim Rothman featured in April 2012 "ABF Journal"

by Lisa 24. April 2012 13:48
 
East Region Group President Jim Rothman was interviewed for the April issue of the ABF Journal in an article about how companies who finance the staffing industry are on the forefront of economy shifts, and what that means for their businesses.

Tags:

Accounts Receivable Financing | Asset Based Loans | Types of Factoring | working capital

Crestmark's Pat Haney featured in April 2012 "The Secured Lender"

by Lisa 24. April 2012 13:44
South Region Group President Pat Haney was interviewed for the April 2012 issue of The Secured Lender in an article about how economic shifts affect factoring companies, and how financial service companies are staying competitive. http://www.nxtbook.com/ygsreprints/CFA/p25720_tsl_april_2012/#/26 

Invoice Factoring: A Short Introduction

by Crestmark 18. April 2012 12:22

Invoice factoring allows businesses to collect cash from invoices faster. In some cases, companies may even be able to recover funds from a transaction even if the buyer becomes unable to pay. The premise behind invoice factoring is that accounts receivable can actually be sold. The company that purchases your accounts receivable is known as a factor, hence the term invoice factoring.

There are two types of invoice factoring, The first, non-recourse, involves the complete sale of the invoices. In this situation, the company assumes all responsibilities related to the invoice. You receive cash immediately in exchange for this sale. One of the advantages of this option is that the factor may actually take on the risk of non-payment, meaning that you receive cash even if your client can never meet the bill.

Recourse factoring is the other type of invoice factoring. Also known as discount factoring, it provides much of the same financing options as non-recourse, typically at less of a cost. Both types of factoring require an exchange of information and discussion before approval. You will need to provide information about your top customers to the factor and provide a figure for how much funding you need from each.

One of the biggest benefits that applies to both non-recourse and recourse factoring is that they are flexible. You can finance as much or as little of your accounts receivable as permitted based on client credit and as needed for your business in its current state. This inherent adjustability is rare in term loans and more rigid financial instruments.

Crestmark is proud to provide invoice factoring for a variety of industries. If you would like to learn more about how this non-traditional financing technique can help you make payroll, fund an expansion, or just keep your business running smoothly day to day, our staff will be happy to talk with you. 

Government Contract Financing

by Crestmark 11. April 2012 05:53

As a government contractor, you face a totally different set of restrictions and regulations from your private sector counterparts. If this is your first foray into the field of government contracting, you'll need to take time and understand the basics of what to expect. One of the most important things to understand is that finding a lender who understands the intricacies and complexities of the government and can effectively work within them can be difficult. Be sure that your lender has a solid understanding of the differences that exist between financing a government contractor and financing in the private sector.  

Assignment Of Claims Act

When a government contractor is financed, the government itself must be sent a notice of assignment. This provision was created by the Assignment of Claims Act, designed to protect the government's interest and always ensure clarity about who is receiving payment. The government notice of assignment is a mandatory and common step in government contractor financing.

Federal Acquisition Regulation

This is the comprehensive document specifying exactly how the government gets virtually everything it buys. Ensuring that you adhere to the requirements of this document will help your transaction proceed as smoothly as possible, especially if you plan to obtain some kind of financing.

Big Contracts Need Big Financing

Supplying the Federal government is noble and potentially a major boon to your business, but it can also mean a lot of strain on your cash flow. Government contract financing can help. It is possible to leverage a number of different financing opportunities; just work with a lender that has sufficient experience navigating the complexities of government financing and you're in a good position to succeed.

If you have questions about government contractor financing or would like to learn more about the options available, contact one of Crestmark's government specialists. 


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