Frequently asked questions

What is factoring (cashflow financing)?

Would my business qualify for factoring?

What about new businesses? Can they qualify for factoring?

I already have an overdraft, so why would I consider factoring?

 How else will factoring (cashflow financing) help my business?

What are the  costs of factoring? How are the fees calculated?

      

      What is factoring (cashflow financing)?

 Factoring (commonly called cashflow financing) is simply a method of business finance, which releases the cash, already tied up in accounts receivable for immediate use in your business. 

When applied to business, factoring is simply the use of the company’s outstanding invoices, to raise capital. This facility bridges the gap between the time the invoice is raised to the time payment is received.

In fact, the most widely used example is consumer factoring, where the retail industry uses credit facilities for consumer sales, via credit card companies. (back to top)

 Would my business qualify for factoring?

 Almost any business can use BCFG’s factoring facilities. The guidelines are simple; the transaction must be on credit terms for a business-to-business transaction. Any invoice may be funded, provided the product/service has been completed and delivered. We fund businesses with growth potential. (back to top)

What about new businesses? Can they qualify for factoring?

Start-up businesses are actually regular clients, since the majority of new businesses are undercapitalised. Any available cash is tied up in debtors and stock. Due to a lack of security and trading history, many institutions are unable to help them. In assessing the application, we look at the consistency of turnover since start-up and the quality of debtors.

If the business has been operating for at least 6 months and can demonstrate consistent growth in orders, work and turnover,  we may be able to assist. (back to top)

 

I already have an overdraft, so why would I consider factoring?

Overdrafts are restrictive; and are usually based on real estate security. As a result they are not flexible to increase with  the growth of your business. Overdraft facilities are often unable to respond to sudden increases in orders unless you provide additional Real Estate as security.  

BCFG’s cashflow financing facility has greater flexibility and fewer restrictions. There is no need to have bricks and  mortar security. As the business grows, and there are more invoices to factor, so your funding is able to increase in accordance with cash needs.

When you use BCFG’s services, you are not incurring debt – you are simply releasing your own assets to be used back in your own business – just as if your clients were paying on COD terms. Since you are not borrowing money, THERE ARE NO REPAYMENTS.

 In conjunction with innovative funding, the company will also benefit by receiving a full receivables management and administration service for the account receivables that are funded. This involves the administration, confirmation, and collection of invoices, fortnightly reserve reports and monthly ageing reports on all accounts processed. (back to top)

 How else will factoring (cashflow financing) help my business?

The benefits received through factoring vary from business to business, however the increased cash flow is the one factor common to all of them, and therefore, the business may experience the following:

• Increased sales through increased production

• Reduction in administration overheads

• Carry more finished stock

• Increased profit through increased sales and overhead reduction

• Aggressively seek new business

• Increase orders by offering your clients credit terms

• Receive supplier discounts for paying COD (Discount for cash)

• Increased buying power, bulk buy and order by the box-full and receive further discounts.

• Enhanced credit rating, through paying creditors on time

• With discounts on supplies, you can have the competitive edge on your opposition

• Be cash ready to fund unusually large orders

• Have the confidence to take on new accounts

• Tax deductible – all fees are fully tax deductible

• Effective time management – no need to waste your valuable time chasing accounts.       

• Enhanced credibility with customers – they now know you have the ability to fulfill orders consistently (very useful when working with blue chip companies) (back to top)

What are the  costs of factoring? how are the fees calculated?

 With Business Capital Financial Group there are no hidden expenses. Many factoring companies charge additional fees for postage, photocopying, credit reporting, telephone calls, etc. These hidden charges can be used to disguise the real costs and yet have a large impact on the final costs.

 Obviously, the fees vary from business to business due to such variable factors as the volumes funded per month, the number of debtors serviced and the time taken by debtors to pay the invoice.

 After assessing the benefits that the business will receive; you will soon realize that cashflow financing can increase profits. The business may qualify for prompt payment discounts, discounts for bulk purchases as well as savings in your own administration expenses.

 When considering fees charged and the cost effective debtor administration service provided, factoring becomes very affordable. In fact, clients report that they are better off as the savings outweigh the costs.  All fees are, of course, tax-deductible expenses.

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