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Freight Factoring Frequently Asked Questions

Q: WHAT IS A FACTORING COMPANY?
A: A commercial finance company that specializes in the purchase of invoices for cash.

Q: WHY WOULD A COMPANY SELL THEIR RECEIVABLES?
A: Companies that find cash flow as a recurring problem often can't afford to have cash tied up in receivables 30-45 days. They need the cash to meet immediate present financial demands of their business.

Q: IS FACTORING A TYPE OF LOAN?
A: NO! Factoring is defined as the purchase of a company's receivables as opposed to a loan using the receivables as collateral.

Q: WOULDN'T A BANK LOAN MAKE MORE SENSE?
A: Banks often have restrictive lending requirements relating to, cash flow, profitability, equity and years in business which prohibit them from making loans. Factoring companies are not in the lending business. The decision to purchase invoices is influenced by the quality of your customer base and their performance as opposed to years in business or financial strength.

Q: IF A FACTOR BUYS MY INVOICES, WHO ACTUALLY BILLS MY CUSTOMER?
A: You prepare your customer's invoice and forward it to the factor for an immediate cash advance. The factor bills the invoice to your customer and then follows-up on it to ensure receipt of payment.

Q: HOW QUICKLY DO I GET PAID?
A: Most factors pay within 24 to 48 hours of receipt of the invoice and any required supporting documentation.

Q: HOW ARE THE FEES FOR FACTORING SERVICES DETERMINED?
A: Fees vary from company to company and from client to client. They are determined by a combination of your customer base creditworthiness, average payment cycle, invoice size and factoring volume.

Q: DO I NEED TO SELL ALL OF MY INVOICES?
A: NO! You decide the which invoices you need to sell to manage your cash flow needs. However, there are monthly minimum requirements, which vary from factor to factor.

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