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  • FAQ’s

    Frequently Asked Questions:

    What is asset based lending?

    Money is loaned on a revolving basis secured by accounts receivable and other assets. We can also assist in collecting and administering the receivables to optimize the turn on receivables and the client’s cash flow. The client controls the extension of customer credit. Annual clean-ups, compensating balances and other bank requirements are unnecessary.

    What is factoring?

    Factoring is a way for business owners to get working capital to run their business and peace of mind to know they’ll get paid.

    Traditional or old-line factoring is fairly straightforward and is designed for long-term relationships. Factoring is an agreement between a factor and a supplier, in which the factor purchases the business’s accounts receivable and, in non-recourse arrangements, assumes responsibility for the business’s customers financial inablility to pay. (The customer is typically a retailer, but it could be a wholesaler or a manufacturer as well.) If a customer is financially unable to pay , the factor makes the payment on undisputed, approved invoices. The factor approves the extension of credit to the customers, collects the accounts receivable from the customers and performs the related bookkeeping functions. As needed, the factor may also provide cash advances against open receivables prior to collection.

    Is there a difference between factoring and accounts receivable financing?

    Accounts receivable financing is borrowing money against your accounts receivable and factoring is a more complete service which includes a purchase of the accounts, credit checking on customers along with guarantees (without recourse) on pre-approved accounts.

    What does factoring cost?

    There are two costs typically associated with factoring: the factoring commission and, if applicable, the interest charged on advances made against receivables. The factoring commission is based on a percentage of factored volume and ranges between 1% and 2.5% percent of sales. It is based upon these variables:
    • Factored sales volume
    • Average invoice size
    • Terms of sale
    • Number of customers
    • The credit worthiness of your customers

    If advances are made: the interest rate is competitive with other short term revolving credit interest rates. Interest is charged monthly at a rate typically tied to prime, with the addition of a margin, based on the average daily amount advanced during that month.

    How much volume do we have to do?

    The minimum requirement is $500,000 annually. However, we are flexible especially with start-ups.

    What will our advance rate be?

    Advance rates average between 70% and 80%.

    Do I have to sign a contract?

    Our typical contract is for a 12 month period.

    What type of information do you need from me?

    We will need a current and prior year-end financial statement on the business, accounts receivable and payable agings and your backlog.

    What size companies use factoring?

    Factoring can be used by companies of all sizes, from small privately-owned companies to large multi-national corporations. Most companies that use factoring tend to be privately-held and have annual sales between $500,000 thousand and $100 million.

    What industries typically use factoring?

    Factoring is typically used by consumer product companies. That is, companies that sell products that ultimately end up in retail channels. Industries we service:
    • Accessories
    • Apparel
    • Consumer electronics and accessories
    • Consumer goods
    • Cosmetics
    • Eyewear
    • Footwear
    • Handbags, luggage, leather goods
    • Hardware items
    • Home furnishings
    • Housewares
    • Pet supplies
    • Sporting goods
    • Toys

    What industries don’t use factoring?

    Factoring is not used for products sold on consignment where the payment process involves progress or percentage of completion billings like construction, software development, and medical billing.

    What are the benefits of factoring?

    Factoring can help companies of all sizes, from start-ups to mature companies:
    • Allows you access to working capital to grow your business
    • Improves cash flow
    • Improves collections
    • Controls your exposure to customer bad debts and allows you to broaden your customer base
    • Outsource credit and accounts receivable management function
    • Reduce overhead costs

    What prompts a company to use factoring?

    Companies that choose to use factoring include those that are:
    • Rapidly growing
    • Undercapitalized
    • Concerned about adding fixed costs or additional overhead
    • Seasonal
    • Hurt by bad debt losses
    • Saddled with large customer concentration
    • Strained by slow turnover of receivables

    What prompts a company to use factoring?

    Companies that choose to use factoring include those that are:
    • Rapidly growing
    • Undercapitalized
    • Concerned about adding fixed costs or additional overhead
    • Seasonal
    • Hurt by bad debt losses
    • Saddled with large customer concentration
    • Strained by slow turnover of receivables

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    Contact Continental Business Credit

    15303 Ventura Blvd., Suite 1000
    Sherman Oaks, CA 91403
    Phone: (818) 737-3700
    Email:
    jcarmona@cbcredit.com
    lhirsch@cbcredit.com
    jschnel@cbcredit.com
    mbegley@cbcredit.com

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