United States

Maine Receivable Factoring

The mechanics of Account Receivable Factoring

There are three main participants involved in a factoring transaction in Maine ME. There is the factor, the seller and the payer. The factor is the party purchasing the receivables, the seller is the business that is selling the receivables and the payer is the seller’s customer or, the business that owes the money. When a business factors its receivables, they are receiving a predetermined percentage of the face value of the receivable upon invoicing their customer. Unlike Accounts Receivable Financing, factoring is on an invoice by invoice basis. A company may factor some of their receivables or all of their receivables.

Once the invoice has been verified and payer notified to write the check out to the factor and send payment to the factor, the factor then will advance to seller the pre-determined advance rate against the face value of the receivable. (Up to 90%)

Our typical clients:
Short time in business in Maine ME.
Have some operating losses.
Have some personal credit issues.
Have been turned down by bank(s) for bank financing.
Have SBA loans that are not large enough to support growth.
Financial ratios not in-line for traditional line of credit.
Are currently with finance or factoring company.
Are turn-around businesses showing at least one quarter of profitability and projections to continue quarterly profitability.

When the payment of the invoice is received by the factor, the factor deducts their fees and passes the remaining funds (known as the hold-back or reserve) back to the seller. Note: the reserve is normally paid out at the end of the month regardless of when the payment was received.

Just because a Maine business begins its life without support from a bank, it is not unusual for a business to eventually position itself to attract some form of bank financing. Knowing that a bank will not even consider financing until a business is at least two years old, the question becomes, what do we do along the way?

Franklin Financial Company has simple leasing and financing of business and professional equipment from $5,000 to $3,000,000 at very competitive effective rates. Franklin Financial offers an educative approach to offering you its Account Receivable Factoring Services. We look forward to assisting you with your lending needs.

After our initial consultation, you will know exactly what we can do for you and your business. Complete either our online Pre-Application or Quick Contact Form.
Just because you have been turned down by another bank should not stop you from speaking to us....

Factor your Accounts Receivable Today!

Quick Contact Form

First Name:
Last Name:
Company:
State:
Phone:
Mobile:
Email:
Type of Loan Desired:
Industry:
Outstanding Accounts Receivable:
Cost of Equipment:
Monthly Sales Volume:
Description:

Common Concerns of Factoring

There are 3 common concerns that business owners raise when considering factoring:

1. Factoring is expensive.

2. I can’t afford to factor, my bottom line is only 2%.

3. I don’t want my customers to know I’m factoring. It shows my customers that I am having problems or that my business is weak.

Let’s take a close look as to these concerns:

1. Factoring is expensive.

No doubt about it. There is no way of getting around this fact. If a business has other financing options, those options should be explored. Most businesses that utilize factoring have explored and or, have already exhausted other forms of financing.

2. I can’t afford to factor, my bottom line is only 2%.

If your business would increase by a sudden influx of cash and your bottom line would improve then the real question should be can your business afford not to factor its accounts receivable?

Let’s assume for a moment that a business doubles its sales by the use of factoring. As a business grows the cost of goods percentage and the gross profit percentage remain the same regardless of the increase in sales. The actual overhead cost percentage will actually decrease because fixed costs will not double if sales double (rent does not double, equipment payments do not double, utility payments do not double, payroll does not double, etc…).

Study the chart below and note that with financing the net profits improved:

	Before		With
	Factoring		Factoring
Revenues	$100,000	100%	$200,000	100%
Cost of Goods	$60,000	60%	$120,000	60%

Gross Profit	$40,000	40%	$80,000	40%
Overhead/Operating Expenses	$38,000	38%	$38,000	19%
Cost of Factoring	no cost	0%	$6,000	3%
Net Profits	$2,000	2%	$32,000	16%

3. I don’t want my customers to know that I am factoring. It shows my customers that I am having problems or that my business is weak.

There is no way of getting around the verification and notification process of factoring. If you factor your accounts receivable, your customers are going to know. Pre-notifying your customers can often times eliminate this problem. Also, many large companies prefer that their smaller vendors do factor because it assures them that the smaller vendors have cash flow support for their business. If growing your company and becoming more profitable is an offset to your customers knowing your factoring then does it matter what your customers know?