Factoring is selling a company’s invoices (Accounts Receivable) today so you can get cash now instead of waiting 30 or 60 days or more. A bank loan is a liability since you owe that money back to the bank, which makes it a debt on your balance sheet. In factoring we focus on two main things: the validity of your invoices and the creditworthiness of your customers. On the other hand, a bank has stringent requirements that focus on several things including: financial history, cash flow, leverage, sales trends, etc. In addition, factoring requires little or no ongoing financial reporting, while bank loans typically include covenants and ongoing financial reporting. Primary Funding’s contracts are month-to-month and automatically renew, whereas a bank requires annual review, underwriting approval. Primary Funding can get you funded in just a few days, as opposed to the lengthy bank approval process that can take weeks or months.
Factoring fees are generally based on 3 criteria:
- Credit risk of your industry and customers.
- Expected Accounts Receivable Volume.
- Typical sizes of invoices.
In the end, most of our clients end up paying a TOTAL of 2-3% of the invoices they factor.
We want to make this process simple for you. All we need to begin the application process is a short 2 page application, current accounts receivable aging, and a list of your clients you may want to factor. We can generally get you approved in 24 – 48 hours and funded in a week or less.
We need to have clear title to your company’s Accounts Receivables. Factoring can be used to pay off other outstanding loans or lines of credit. There are some cases where we may be able to get your bank to subordinate as well.
You have the control over which invoices you factor. When you choose to factor invoices, your customer will send payments to Primary Funding’s lockbox. For invoices you factor with us, we function as your outsourced Accounts Receivable department. This takes the burden off you and frees up your resources to focus on other areas.
Factoring has become very common and it’s likely your customers are already paying factoring companies for other vendors they are working with. Companies understand that providing payment terms to your customers requires working capital and they know how tight bank lending criteria is.
As long as we are provided the invoice along with the corresponding documents in the morning, we can fund same day through wire or ACH.
No. You have the ability to pick and choose which invoices you want to factor and when you want to factor them. One month you may need us, the next month you may not. You have the flexibility to use us when you have a cash need.
Yes. Primary Funding provides credit and collection services. Our credit services include providing you with credit information on customers you want to factor. At Primary Funding, we will also provide credit risk information for customers you don’t necessarily want to factor, but you still want information in order to make your decision to provide payment terms to a customer. We also function as your outsourced accounts receivable department for invoices factored with us. This can free up company resources so you can focus on sales and managing your business. In some cases we may be willing to provide collection services for all of your accounts receivable, even if you don’t factor them.
ASSET BASED LINES
For Asset Based Lending, we generally work with companies that have a need of $250,000 or more. Generally companies need to be somewhat established and have been in business for two or more years. These companies do not need to be profitable, but need to show stable or growing sales trends.
Yes. We will consider both inventory and equipment advances. Each situation is unique and we will look at each individual situation.
Advance rates on your accounts receivable will be determined based on your individual situation and will include an analysis of your company including: customer concentrations, size of invoices, and the industry you’re in. You can expect your typical advance rate to range from 75-85% of your eligible accounts receivable. Eligible accounts receivable generally include domestic accounts that are less than 90 days past due. Inventory and equipment advances have a wider range of advance rates and are dependent on the inventory and equipment we are looking at. Each situation is looked at individually.
Initially, we will need an application, current accounts receivable aging and accounts payable aging, and 2 – 3 years tax returns and/or financial statements. We may also request to have a field exam completed that will audit your accounts receivable and possibly inventory and/or equipment, if you need an advance against either.
Payments will go to you. Asset Based Lending is non-notification, so you manage your own cash flow. We can offer collection services for you if you would like us to manage your Accounts Receivable.
It will generally require monthly (or sometimes weekly) borrowing base certificates, accounts receivable agings, account payable agings, as well as periodic financial statements and/or tax returns. Depending on the situation it may require annual audit exams.
You can finance just about any type of equipment. However, advance rates and terms will depend on the type of equipment.
We generally will not charge an upfront fee for your equipment loan. Our normal rates, will be between 1 ½ – 2% a month based on the outstanding balance of your loan. You have the ability to pay-down or pay-off your loan with no prepayment penalty. Your rate will be determined by the type of equipment, advance rate, size of the loan, credit history, and repayment terms. Most repayment terms are between 12 to 24 months, but we can go up to 36 months depending on the equipment and underwriting.
Yes. If you own the equipment free and clear, we can provide cash out based on the value of the equipment, which can include one piece of equipment or several.
We would need an application, 2 year financial statements and/or tax returns, as well as a listing of the new or existing piece of equipment you want to use as collateral.
CASH ADVANCE ASSIGNMENT LOAN
We offer two different types of cash advance loans. The first is Merchant Cash Advance, or MCA. With an MCA loan you repay the loan through assigning a percentage of your future credit card sales to us. The second type of cash advance we offer is ACH Cash Advance. This type of loan is repaid through a weekly ACH debit from your checking account.
No. We have a very different model than other MCA and Cash Advance companies. Our cash advance product has a much lower rate and offers longer repayment terms than other companies. Most other companies add a fee at the beginning of your funding. For example, if you need $100,000 they will provide you with the $100,000 today but you now owe them $135,000 or more. So if you pay their loan off early, you still pay a total of $135,000. At Primary Funding we charge a monthly rate based on the average outstanding balance of the amount you borrow. In the end, you save a lot of money AND you can pay off the loan early with no downside.
There is a tradeoff. We actually want to underwrite your company. While other companies only care about the last 3 – 6 months of your merchant or bank statements, we want to look at tax returns, sales trends, years in business, etc.
We work with companies that cannot get traditional bank financing due to historical losses, not enough equity, low credit score and other challenges. However, in order to qualify you must be showing stable or growing sales trends. Your company has to be in a position where you are working through your historical challenges. In fact, that is what we want to help you accomplish.
You can start by calling us for a 10 – 15 minute conversation about your situation and what you need. We have an extensive business banking background and we have worked with hundreds of small and mid-sized companies. We are happy to discuss your needs and see how we may be able to help. We should be your first choice to see if you can qualify for lower cost and better terms.
We generally fund Cash Advance loans from $10,000 to $100,000, but we will go up to $250,000 in some cases.
Our Cash Advance rates range from 1.5% to 3.0% per month on the average outstanding balance of your loan. In order to compare to other Cash Advance providers, we have provided this explanation; If you borrow $100,000 from us and pay it off over the course of one year you would pay between $9,000 and $18,000 total for the loan over the year. Because your loan balance is going down every month, the amount of interest you pay also goes down with us. Other Cash Advance providers charge an upfront fee of $30,000; $40,000 or even $50,000. You owe them that fee from Day 1, while with Primary Funding you can pay down the loan to reduce interest or pay it off completely with no downside.