Since factoring is all about timely cash flow, the best factoring companies will be able to quote on the deal, or decline it, within 24 – 48 hours of a fully complete application being submitted. Note the operative words “fully complete application”. The author has seen enough companies whining to disclose the required information on the application form. It doesn’t help their case or the speed at which they might get the cash.
If a factoring company purports to charge an application fee when you’re submitting the initial paperwork, watch out. There are no grounds for it.
When the client accepts the quote, the factoring company will respond with a contract and supporting documents for the client’s signature. The contract is subject to due diligence. At that point, it is perfectly legitimate for the factor to request the due diligence fee from the client.
Some factors have preferred industries and will specifically exclude others. Others are more broadly based. Generally construction industry related factoring is a specialized niche and not all factors handle it – the risk element is highest in this sector.
Some factors have a monthly minimum value for a deal, below which, they will not fund. This is because the administrative costs of servicing the small account outweigh their returns on it. Hey, it’s business. Besides, there is a specialist market of “small factors” who will fund monthly amounts between $US2,000 – US$20,000. The author knows of some of them.
By contrast, other factors may not have monthly minimum values, but may have maximum monthly volumes, which can be increased on a case-by-case basis, or, syndicated between 2 or more factors.
© 2007 Sanjeev Aaron Williams & Cashwerks All Rights Reserved
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