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Frequently Asked Questions:
What is factoring?
Factoring is a method of obtaining cash for your services provided in a much quicker time-frame, usually 24-48 hours. After providing services to your customers, factoring is a transaction between you and a “factor” whereby you sell your receivables to a financial company. The factor then collects payments on those receivables over their normal payment terms, i.e. 30, 60, 90 days.
How will I get my money?
The payment from the factor to you is done by a cash advance? The advance amount can range between 80 – 95%, depending on a number of factors, including customer base, payment terms, and customer payment history. Once the factor receives full payment from your customer, the remaining balance will be paid to you, minus fees and transactions costs.
Why factor? Why not just wait for my customers to pay?
Cash is king! Without cash, no business can be viable for a sustainable time period. Factoring is a way to speed up the cash flow process. For you to make the most money, your truck must be up and running on a consistent basis. Costs such as fuel, payroll, repairs and taxes need to be paid today. They can’t wait for 30 – 60 days. Factoring allows for you to have the cash available to pay such expenses and even have the ability to take advantage of paying within a possible discount period, gaining favorable status with such vendors. You provided the delivery today, you want to be paid. Factoring is a way for you to be paid before the truck even gets home.
Do I have to factor every invoice?
No. You and the factor will go through a process to determine which customers work best for both parties to factor.
Why wouldn’t I just go to the bank and get a loan?
Factoring is a much quicker, easier and more flexible way of getting the cash that is due from your customers. Some of the major differences include:
What is the difference between recourse and non-recourse?
Factoring with recourse is the most common way of factoring receivables. With this method of factoring, you assume the risk of customers not paying the factoring company. You and your factor would agree on a specific period of time that would pass without payment before you were responsible for paying the amount of the invoice. This method really isn’t much different than the risk you assume without factoring, the only difference is that you were paid an amount immediately, of which you would have to return to the factoring company once it was determined that the amount was noncollectable.
Non-recourse factoring may be a better option in terms of risk management, but with it comes different stipulations. Non-recourse will charge a higher rate for assuming the full risk of the receivables and may not buy 100% of your receivables, only choosing your customers most likely to pay.
Either method of factoring you choose, the team at Boyd Factoring will do all they can to collect as quickly as possible. Talk with a client service representative to find out which method is best for your company.
How do I get started?
Contact Logan Graber at 800-999-2693 to discuss options.
© 2017 Boyd Grain
Site design by CanoltyCreations.com