guide to invoice factoring (a.k.a. accounts receivable financing)

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DB Squared Inc.

Business Finance

866.855.3640www.dbsquaredinc.com

Complete Guide to Invoice Factoring

—What is invoice factoring?

—Benefi ts of factoring invoices

—Hidden costs of invoice factoring

—Questions to ask a factoring company

—What types of businesses should consider factoring?


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www.DBSquaredInc.com DB Squared Business Finance 866.855.3640■ ■


Factoring InvoicesEnables you to focus on growing your business rather than chasing invoices or performing collections.



What is invoice factoring?



Invoice factoringis a business finance tool that can give your organization immediate access to money owed to your business by your customers, without waiting 30, 60, 90 days – or even longer – for the invoices to be paid.



How does it work?



1. Complete delivery of goods or provision of services to a customer and generate an invoice.

2. Sell the invoice to DB Squared for a fee (from 1% to 6%).

3. Receive an advance of 80% to 98% of the face value of the invoice from DB Squared on the same day.

4. We collect the full payment from your customer.

5. We return the reserve amount to you.


The invoice factoring process:


Why factor invoices?



Customers with extended terms, who are slow-paying or sometimes take 30 days or more to pay.

Desire to offer longer payment terms to customers as a competitive advantage.

Need for immediate access to working capital to take advantage of new business opportunities, take on new business, serve larger clients or accommodate big orders.

Need to improve cash flow to meet operating expenses or payvendors or suppliers more quickly.

Desire to reinvest in their business more quickly.

Factoring could be the right tool for your business if any of these reasons apply:



Your cash flow isn’t keeping up with operational needs or isn’t letting you grow as quickly as you desire.

You are tired of waiting on payments from all or some of your customers.

You want stronger customers, or need money in order to take on bigger customer accounts or larger orders.

Your company is fairly new, so it is not yet eligible for a line of credit or other types of financing.

Limited resources means you can benefit from expedited cash flow and lower costs for invoicing, accounting and collections.

Factoring could be the right tool for your business if any of these reasons apply:



What are the benefits of factoring invoices?



Create a competitive advantage by offering more appealing credit terms to your customers.

Factoring gives you access to working capital, which you can use to:

Replenish cash flow more quickly in order to more easily manage day to day expenses.

Leverage improved purchasing power to negotiate better terms or to receive volume discounts from your suppliers.

Pursue bigger clients and new business opportunities.

Reduce time and expenses for accounting and collections.

Reduce or eliminate financial risk from bad debt.

Expand or grow your business more quickly.



Why work with a non-recourse factor?



Benefits of Non-Recourse Factoring

As a non-recourse factor, we assume the credit risk for factored invoices. If one of your customers is unable to pay for credit reasons, we absorb the loss – not your business!

By contrast, recourse factors usually require you to repurchase invoices that remain unpaid as well as cover any legal or collections costs incurred.


Hidden

Costs+What sets the best factoring companies apart?



Hidden Costs of Invoice Factoring

When comparing factoring proposals, remember to look for additional costs or add-on fees — not just at the discount rate you are being offered.

These fees and charges may seem small, but when you do the math you can clearly see that they quickly eat into your profits.



Long term contracts with stiff penalties and lots of paperwork to jump through for early release.

Penalties or rate hikes that may be assessed if monthly minimum requirements (number, percentage or dollar amount) are not met. Add-on or administrative fees for: proposals, quotes, credit checks, due diligence, notification, schedules or processing invoices. Introductory rates, fees or other favorable conditions that expire . Lost customers due to poor customer service.

Recourse factoring buy-back stipulations or assessment of collections or legal fees.

Hidden fees that could negatively impact your revenues while factoring:



Traits that set the top invoices factoring companies apart:

• Clients retain control

• No monthly minimums

• No long term contracts

• No hidden fees

• No schedule processing or notification fees

• Professional customer service

• Competitive factoring fees

• High advance rates

• No termination penalties or fees

• No auto-renewal windows

• Non-recourse factoring

• Same and next day funding options

• No-cost, no-obligation quotes

• Free credit checks, no due diligence fees

• No surprises!



Checklist for comparing factoring proposals:

• What is your fee structure?

• What are your terms?

• How long does it take to get set up?

• How quickly will I receive funding on factored invoices?

• How do you evaluate debtors?

• Can I retain control of my invoicing?

• Do you have monthly minimum requirements?

• Will I have to sign a long term contract?

• Is there a penalty for early termination?

• Is there an auto-renewal window?

• Do you charge for processing invoices or schedules for payment?

• Can I get free credit checks on my customers?

• Are you a non-recourse factor?

• Do you have the capital to grow with me?



Why Factor with DB Squared?

Our goal is to help you get from where you are today to where you want to be tomorrow.

To do this, we offer financial tools including: • Invoice factoring

• Business cash advances

• Merchant cash advances

• Equipment leasing, including commercial truck and trailer leasing

• Construction financing including factoring, equipment financing and purchase order financing



We are in business to help your business succeed.

We evaluate each application by looking at the big

picture, not just a credit score or an asset list. This

personalized approach, coupled with one of our

flexible business financing products, can help take

your business to the next level. We would be happy

to provide you with a no-cost, no-obligation quote

for invoice factoring, even if you are already

working with another factoring company.

Work with a leader in invoice factoring!

www.DBSquaredInc.com

Apply at dbsquaredinc.com/apply

Contact us at 866.855.3640or [email protected]
