What is factoring?
Factoring is the sale of your accounts receivables or invoices to a
funding source or investor at a discount price in return for immediate
cash. The funding source is known as a factor. Factoring is not a loan,
line-of-credit, or other debt-producing service, nor does it require
inventory or other company assets as collateral. Accounts receivables are
the only vehicle used during the transaction.
Factoring allows a company to leverage its assets, in the form of accounts
receivables or invoices, for immediate cash during growth and/or survival
periods. It provides the company with immediate cash when it is needed
most without having to pursue a loan, line-of-credit, or collateralizing
inventory or other assets in a way that might restrict your business.
Furthermore, you, as a company, and your employees will no longer need to
dedicate time to collecting and processing payments on the invoices you
choose to submit. The factor assumes control of this process, including
debt collection and credit administration. This factoring benefit will
free your employees to concentrate on other areas of concern, as they will
no longer spend hours sending invoices, depositing checks, logging
payments, producing reports, and handling payor requests. This burden will
now rest solely on the shoulders of the factor for the accounts
receivables you submit. How much do you currently spend managing these
How does a typical factoring scenario work?
In a typical factoring situation, once an invoice has been submitted, you
will immediately receive 70% to 95% of the invoice value in the form of a
wire-transfer, direct deposit, or other method. When that invoice is paid
in full by the payor, the remaining percentage minus the factoring fee is
dispersed to your account.
How do I get started?
You must complete and submit to Universal Financial Solutions an
Application for Commercial Accounts Receivable Funding. You may download
the form from our website or complete the online form. If you choose to
download a hardcopy, please fax or mail it to us according to the
information in the contact section of this website. The application is
then reviewed by our account managers. Once reviewal begins, you will be
contacted so that we may introduce ourselves to you and ask any questions
that we encounter regarding the application. If approved, UFS will request
a few more documents from you that will begin solidifying your account
Is there a account setup fee or monthly charge?
No, your account setup is absolutely free of charge, and there are no
monthly maintenance or other retaining fees once your account is
Can we factor if I or my company has an existing loan or line-of-credit with a
bank or other financial institution?
Yes. However, you must inform UFS of any and all current loans and
lines-of-credit. This allows us to consider the liens involved in your
company's reviewal process. If a bank has a lien against your accounts
receivables, the factor will ask the bank to subordinate that lien in
favor of themselves. Although this is a common occurence and most bank
will accomodate the request, it is important to disclose such information
at the time of account registration.
Is factoring the same as a loan?
Absolutely not. Factoring is not a loan. Factoring does not create debt, nor does it require any amount of debt repayment. Furthermore, contrary to the typical reprecussions of receiving a loan, there is no compromise to your balance sheet, no long-term agreements, or delays in receiving cash. Simply put, factoring allows you to obtain the cash that is held by your receivables for the needs of your business today.
Why factor instead of borrowing from a bank?
Factoring requires no collateral to receive funding. As you are probably familiar, the vast majority of lending institutions, if not all, require company assets, including inventory, operations hardware, etc, before approving and funding their loans. This process and loan contract demands a significant amount of time to procure and restricts your company's operational flexibility. Likewise, the lien created by the loan ultimately restricts your company from pursuing future capital if the time were to arise. On the other hand, factoring creates instant cash from your receivables without requiring a loan, pledging assets, or extensive paperwork.