Allegiant Business Finance, Frequently Asked Questions

Allegiant Business Finance

FAQ's

	FACTORING
	ACCOUNTS RECEIVABLE LINE OF CREDIT
	REFERRALS

	FACTORING:
	What constitutes a factorable business? We consider a factorable business to be any company that provides goods or services to a credit-worthy commercial customers.
	What is a customer? This is your customer. If you are a trucking company, your customer is the party who hired you to transport their goods. If you are a publication, your customer is the party who has paid for advertising space. If you are an employment agency, your customer is the party who is looking for new employees and has hired you to find them.
	What is a factoring Company? This is a party that will provide factoring services.
	What is a lender? This is a financial institution that underwrites and funds loans.
	What is factoring? The sale of accounts receivable invoice(s) to a factoring company by a business in return for immediate funds.

	How does factoring work? Factoring companies buy invoices from their client. A factoring company will then pay the client up to 95% of the face value of the invoice(s). The factoring company collects the total invoice amount due from the client's customer (the debtor), and passes on the remainder of the funds, less a fee back to the client.
	Are factoring companies the same as collection agencies? No. Collection agencies work with businesses that have customers who have not paid their bills. Factoring companies generally work with businesses that have customers who pay on time.
	How do I qualify for factoring? Does my business need to have good credit? Since your customers will be paying for their invoices directly to the factoring company, not you; factor approval is based on their credit and their ability to pay.
	What kind of companies do factoring companies work with? Factoring is a great fit for manufacturers, distributors, trucking companies, technology based businesses, business services, and employment agencies. Factoring can also work well with other types of business.
	Can start-up business qualify for factoring with little or no credit history? Yes. A start-up business is a good fit as long as its customers have good payment history.

	What do we need to provide to get started factoring? First fill out the online application. Once you have been contacted and referred to a factoring company they will need a detailed account schedule, a copy of all invoices to be factored, and a copy of the customer credit application for review.
	Is there a minimum dollar amount to qualify for factoring? Most factoring companies are looking to work with businesses that generate between $10,000 and $1,000,000 per month in receivables.
	Is there a minimum dollar amount required to factor? No. You can factor as little or as much as necessary, given, that your customers qualify and their invoices meet underwriting guidelines.
	What determines which invoices a factor company will accept? This depends on the factoring company. Underwriting requirements are set by the factoring company, itself, and may differ from one to another.
	What happens if an invoice does not meet the requirements? If an invoice does not meet the requirements you will be informed, immediately. The invoice will be returned to you and the factoring company will not buy it.
	May I include past due invoices to be factored? No. Only current business invoices will be considered.
	When my customers are paying for factored invoices, where do they send payments? All payments for factored invoices are sent to the factoring company, directly.
	How quickly do we get funding? Most factoring companies fund within 24 to 48 hours of invoice approval.
	Do factoring companies work with out of state businesses? Yes. Location is not an obstacle.

	Do we need collateral? No. Factoring is based on the invoice's face value and the customer's ability to pay.
	How are fees determined? Generally, fees are based on a projected volume of business the factoring company will receive. This can differ from one factoring company to another.
	Do factoring companies require minimum contract periods? Generally, the minimum contract period is 6 months to a year. This can differ from one factoring company to another.
	Do factoring companies require notice to cancel contracts? Generally, minimum notice is 30 days. This can differ from one factoring company to another
	How much of the accounts receivable paperwork do factoring companies handle? Generally, the factoring company will handle the invoice mailing, collection of monies, and notification to the business that the invoice has been paid. This can differ from one factoring company to another.
	Will the factor company need to contact our customers? Yes and No. This really depends on the factoring company, itself, and may differ from company to company. For instance, sometimes the customer will need copies of missing invoices or have questions. In some cases, the factoring company will provide of this information.

	What if one of my customers does not pay an invoice? What if a factored invoice goes unpaid for more than 90 days? Invoices that are unpaid are charged back to you. Once an invoice has been charged back, it is no longer the factoring company’s responsibility. It has now become your responsibility to collect the monies.
	ACCOUNTS RECEIVABLE LINE OF CREDIT:
	What is the difference between factoring and an accounts receivable line of credit? An accounts receivable line of credit is a revolving loan and has a maximum loan amount. This amount is based on the businesses credit and ability to pay. Factoring is based on the invoice face value and the businesses credit and ability to pay.
	What is an accounts receivable line of credit? A revolving loan based on the calculated value of a company’s accounts receivable, and their ability to pay the minimum interest and taxes on the long term debt.
	What is considered accounts receivable? Money that is owed to a business by its customers for services or goods provided. Money that has been invoiced and is not yet paid.
	How do I qualify for an accounts receivable line of credit? Most financial institutions will require an up to date profit and loss statement, the past 2 years of tax returns, and a detailed breakdown of account receivables to be considered.
	What happens if I “pay off” my accounts receivable line of credit loan balance? Because a line of credit is revolving, it is not considered “paid” unless it is officially closed and there is no remaining balance due.

	What happens if I cannot pay the required minimum loan payment? Your business credit score will be affected negatively. You will incur late fees.
	Can I get an accounts receivable line of credit based only on inventory? Yes. As long as the inventory has been qualified as eligible you may receive up to 50% of the value depending on the lender’s underwriting guidelines.
	What is considered to be eligible inventory? All inventories that meet the lender’s underwriting guidelines.
	What is considered ineligible inventory? Such ineligible may items include obsolete items, exotic goods that might be hard to liquidate, or perishable goods that might spoil before they could be liquidated.

	What happens if I have an accounts receivable line of credit based only on inventory and I increase my inventory? First, an evaluation and value assessment of the inventory and its eligibility will be necessary. Once the eligible inventory value has been determined and combined with the pre-existing eligible inventory value; the entire loan can be re-underwritten to determine a new loan amount. This will depend on the lender’s underwriting guidelines.
	What is collateral? A guarantee by a security pledged against the performance of an obligation, property acceptable as security for a loan or other obligation.
	What is security? Something deposited or given as assurance of the fulfillment of an obligation, evidence of indebtedness, ownership, or the right to ownership.
	REFERRALS:
	What is a Broker? One that acts as an agent for others, an individual or firm that brings together two separate parties for a common interest, as in negotiating contracts, purchases, or sales and in return for a fee or commission.
	What is a referral? The passing on of a specific source for information and/or aid from one party to another.
	What is a referral fee? A fee paid to the first party given when the second party completes businesses with the suggested source.
	If I refer another business to you, will I be paid a referral fee? Yes. As long as the referred business completes qualified business you will be paid a referral fee.
	What is considered a qualified business transaction? This depends on the type of referral. For factoring referrals - a signed contract with a factoring company and an approved customer list will qualify. For an accounts receivable line of credit referral– an approved and completed loan will qualify.

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