frequently asked questions
Factoring is a financial tool that businesses can use to convert accounts receivable into immediate working capital, without diluting equity or incurring new debt. Essentially, factoring is the sale of a business’s accounts receivable and invoices at a slight discount in return for immediate cash.
CapFlow can still help. We can connect you to other forms of alternative financing, such as asset-based lending, purchase order financing, and merchant cash advance. And we will work with you to get your accounts receivable organized and your cash flow maximized.
Most CapFlow clients are manufacturers, distributors, service providers, consultants and contract employees with annual revenues ranging from $250,000 to $25 million and 5-50 clients. These clients can range from large, national companies to small local businesses. Keep in mind that exceptions are always worth exploring.
CapFlow Funding provides factoring services to small and medium-sized businesses nationwide. While virtually any business can use factoring, you are an ideal candidate if your business fits one of these typical profiles:
- You are a start-up or have a relatively short operating history
- You are experiencing or anticipating rapid growth
- You have been negatively impacted by the economy or industry events
ABOUT THE PROCESS
Once you become a CapFlow client, all you have to do is send us a schedule of the invoices you wish to finance. We’ll verify the invoices and pay you 75% – 90% of the invoice face amount within 24 hours, wiring you capital directly to your business bank account.
When CapFlow purchases an invoice, we ensure that payment is made directly to our lockbox. Once we receive payment from your customer, we forward the balance to you, less a small fee.
There are three ways a customer will know to pay us for a particular invoice:
- Notice of Assignment – You will provide a letter to your clients explaining that you have entered into a new liquidity facility that will enable you to grow and meet your increasing demand. That letter will mention our relationship.
- Verification – With certain invoices, CapFlow may contact your customer to confirm that he or she has received the invoice and understands that payment should be made directly to us.
- Information on the invoice – The “Remit To:” section will show our name and lockbox mailing details.
ABOUT THE BENEFITS
Your business will be able to:
- Access working capital immediately without layering on expensive and dilutive equity and without the need to repay principal and interest.
- Have someone collect your receivables on your behalf, thereby freeing up your staff and resources to increase sales and grow your business.
- Take advantage of supplier discounts offered for rapid payment.
- Work with a partner that has access to credit and fraud databases that can assist in vetting new customers and establishing customer credit.
From the start, factoring facilities are easier to establish. Because factoring is based only on your accounts receivable, it is faster, simpler and easier to qualify. Because CapFlow is purchasing your receivables, we are more concerned with your customers’ ability to pay than we are with your financial statements. Plus, CapFlow makes every funding decision locally, without large credit committees and with an eye toward flexibility. If there is a workable way to get you a working capital advance, we will find it. Most importantly, because there is no loan associated with a factoring transaction, there are also no cumbersome paperwork, no ongoing reporting, and no future obligation to repay principal and interest.
Absolutely! One of the biggest benefits of factoring with CapFlow is that we can help you evenly match your cash inflows and outflows. Slow paying customers can cause a working capital mismatch, especially when your suppliers need to be paid quickly. With immediate advances from a factor, you can pay your suppliers or meet payroll without having to wait for your customers to pay you.