Financial Services Guide ( More on Factoring )

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Welcome to the Financial Services Guide Facts on Factoring

Income Streams

Description:
        The buying and selling of accounts receivable or invoices is called factoring. The process is fairly common as a reason of cash flow      problems for small, growing businesses.
       The reason companies sell their invoices is they do not want to wait (or can't afford to wait) for their customers to pay them in 30, 60, or 90 days. They need the money now. Sometimes they need the money to meet payroll expenses, rent, or other operating expenses. Sometimes they need the money to buy supplies needed to fill incoming orders, or they want advanced funds to take advantage of cash discounts offered by their suppliers.

We purchase accounts receivable (invoices) in this manner:

100,000 Invoice
-75,000 Advance
25,000 Reserve
-5,000 Fee
$20,000 Upon Payment

2% 1-10 Days
2% 11-20 Days
1% 21-30 Days
5%

Companies Currently Using Factoring

Georgia Pacific
Honeywell
IMC
Pittson Co.
POHR Industries
Scott Paper Co.

$850 Million
$ 75 Million
$ 50 Million
$ 25 Million
$120 Million
$100 Million

Before Factoring

With Factoring

Revenues

Cost of Goods

Gross Profit

Overhead

Cost of Factoring

Net Profits

$100,000

$60,000 (60%)

$40,000 (40)%

$38,000 (38%)

N/A

$2,000 (2%)

$200,000

$120,000 (60%)

$80,000 (40%)

$48,000 (24%)

$4,000 (4%)

$28,000 (14%)

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