Letter Of Credit Financing

The example involves a grain trader in Minnesota, who buys a shipment of grain from a producer and who plans to then resell the same grain to a buyer in the Middle East.

The example involves a grain trader in Minnesota, who buys a shipment of grain from a producer and who plans to then resell the same grain to a buyer in the Middle East. Using what is called the "warehouse receipts financing" method, the Minnesota trader acquires the grain and "deposits" it in a recognized public warehouse and, in return, receives a warehouse receipt, identifying - among other things - the type of grain, its quality, the quantity, and the date it was received into the warehouse.

The trader takes this warehouse receipt to his/her bank as evidence of his ownership and assuming everything is in order, the bank will then extend a loan to the trader a loan based on the estimated market value of the grain, less some percentage amount (sometimes called a “haircut”). The trader then contacts the buyer in the Middle East, who agrees to buy the goods in the public warehouse from the seller in Minnesota.

The L/C mechanism in this case is as follows:-1. The sales contract between the Minnesota seller and the Middle East buyer is agreed and both sides agree to do business on an L/C basis.

2. The buyer requests his/her bank to issue an L/C. This bank is the issuing bank. The L/C specifies that the seller must present certain documents to the bank before receiving payment and in this case the primary documentary requirement is the warehouse receipt.

3. The issuing bank notifies the seller through the correspondent bank (notifying bank ) by SWIFT and then sends the original L/C to the seller.

4. The seller presents his bank with a bill of exchange (draft) based on the conditions of the L/C together with the warehouse receipt and he/she applies for negotiation.

5. The seller’s bank checks the conditions of L/C and the warehouse receipt document. If the conditions of the L/C are found to be consistent with the documents, the seller’s bank pays the seller. However, the seller has to be very careful as the bank is not able to honour the bill of exchange if there is any discrepancy between the conditions of the L/C and the documents provided by the seller. If a discrepancy occurs, the seller has to inform the buyer and have him request the issuing bank for an amendment to the L/C accordingly.

The rules for letter of credit transactions are comprehensively dealt with under the International Chamber of Commerce (ICC) rules called “UCP 600”, which were updated this year.

Getting More Working Capital for Your Business

Lanette Tucker has been with Paragon Financial for 2 years and knows all things factoring.   Paragon Financial was founded in 1994 with the initiative to afford growing businesses an alternative to conventional bank financing. When banks either couldn't grant funds or bestowed too little, Paragon could promptly offer them a steady stream of cash through the factoring of their account receivables.

A common scenario today in business is having a low credit line from your bank.  Lets say you have a $50,000 dollar line of credit with your bank.  You have a long-standing, excellent relationship with your bank but in today's economy it is simply just not enough.   Your credit line is maxed out and the true need of your business is financing of $200,000 or $300,000 dollars to keep your business growing.  What can you do in this situation?  Your business has good credit, the orders are coming in and you are growing at a steady pace.  The only way to take your business to the next level is to secure that much larger line of credit.  What is the solution?

Your business can leverage against your receivables through invoice factoring or purchase order financing through a factoring company.  An experienced factor can work directly with your bank on a subordination agreement allowing you to leverage receivables financing to get the working capital you need to grow your business.

First, what is bank subordination?   A subordination is when a 2nd lender, in this case the factor, asks the 1st lender, the bank, if they will allow the business to take on an additional lender.   Bank subordination agreements are commonly done when leveraging accounts receivable and purchase orders. The accounts receivable or PO's are assets that are used to secure a working capital line of credit.   One of the most common ways lenders will work with each other is through subordination.  Allowing the business to take on both a traditional line of credit and a factoring line of credit

A factoring company can work with your bank and create a bank subordination agreement where their $50,000 dollars is covered by other assets and then a factor can fund against your accounts receivable or purchase orders up to 95%.  This allows the business to take on larger jobs, fund payroll each week and pay for other expenses.  The key is working with a factoring company that has existing relationships with banks and has the experience necessary to compete the transaction. 

Factors are often able to finance your business when a bank will turn you down.   Your bank needs to keep the depository relationship.  Factors do not concern themselves with this because they are not a bank.  Factors simply buy your existing accounts receivables or purchase orders in order for that business to obtain immediate cash payment of the accounts.  They just want to get your the critical cash your company needs to grow your business.

High Risk Borrowers Resort to Unsecured Loans

High risk borrowers can make use of funds for meeting important financial obligations such as consolidating debts, financing education, home renovation, buying car, or even for business expansion. Loans can had up to $25,000.

If you have a less than sterling credit history, you can still land a large unsecured loan. Because of these financially turbulent times, many people have had to take some bad hits on their credit records, often due to a period of unemployment or a financial investment gone awry because of restricted markets.

Arrears, late payments, missed payments, defaults, and even bankruptcies cloud the credit records of some of these folks, making them high risk borrowers. Many people have had these financial pangs and tend to be rejected by many lenders when they attempt to secure a high risk unsecured loan.

Online Lenders Ready for High Risk Unsecured Loans

Traditional brick and mortar lenders such as banks and credit unions have tightened their credit requirements since the housing bust and even good credit borrowers can have a tough time wresting an unsecured loan from them. So, a good place to start your search would be to go online. Private lending companies have stepped in to fill the gap left by the traditional lenders and many of them have set up shop online. As with any online transaction, check the security of the sites and the reputation of the lenders.

In fact, the market for high risk unsecured loans is so great that the many lenders offering such loans have to face some tough competition. You will be able to shop around for lenders with the lowest interest rates and the most comfortable repayment terms. You will even find brokers who will take your general information and provide you with a list of lenders who will probably lend to you based on the information given. Compare quotes and terms to find the most suitable deal.

Facts on High Risk Unsecured Loans

Since no collateral is required for these loans, and since the borrower already has a poor history regarding repayment, the lenders have to adjust their rates to cover the risk. Secured loans offer collateral which the lender can seize should the borrower default. Thus those loans tend to have lower interest rate because of the security offered to the lender. With the high risk of unsecured loans, you will find interest rates to be considerably higher than what the loan market usually offers.

Online application for high risk borrowers in need of unsecured loans is wonderfully easy and quick. You will need to offer documentation regarding your identification, your job history and present salary, proof of residency, and access to an active bank account (usually a checking account with direct deposit), and of course, your social security number. Often approvals are made in a matter of minutes and funds can be in a bank account within 24 hours, sometimes sooner.

Using Your High Risk Unsecured Loan

Hopefully you will have done your budget homework and requested just the amount you need with payments that are comfortable. These loans can range from $1,000 to $25,000, depending on your salary and your financial situation. The terms of repayment can range from 1-10 years. Remember that the longer the time and the lower the payments, the more interest you will be paying. Since you are a high risk borrower, repaying such a loan can improve your credit history to a great degree. Timely and regular payments will also make it easier for you to get such a loan in the future should you need it.

Unsecured Credit Line for Businesses

Starting up a business is a bit of challenge in financing. Sometimes emergency cash is not enough, that's why business owners must consider acquiring an unsecured line of credit.

Financing the business is one of the toughest challenges a business owner must face.  Whether you are running a new business, a start-up one, or even an established company, there will always be the need for financing.

Indeed, the need for cash will always arise and at times, the business owner will be confronted with this challenge when it is least expected.  For this reason, business owners are advised to seek an unsecured line of credit with a trusted lending company, to make sure that there is a reliable financial resource that they can turn to at any time.

Many lending companies in the market offer various types of business financing, including an unsecured line of credit.  Some lenders require the business to be at least two years in existence to be given this type of financing.  Another important factor is credit history. Good personal and business credit standing are important in order to qualify for an unsecured line of credit.

An unsecured credit line can be used to cover for various expenses such as purchasing additional equipment, stocks or raw materials, improving the office space, and other unexpected expenses.  Once approved for a business line of credit, the business owner can make cash advances at any time without the need to go through the whole process of reapplication.  There is no need to wait for months for the approval of your loan application. 

Business Credit Cards – Unsecured Credit Line for Businesses

Small business credit cards are a great example of an unsecured credit line for business.  Unlike business loans, it is much easier to get approved for a small business credit card even for those with no business credit.  In fact, small business credit cards are the exact tools you need to start building corporate credit.

In the absence of business credit, the personal credit history of the business owner will be closely evaluated.  Of course, the higher your credit score is, the more you are likely to get approved for an unsecured small business credit card with good rates.

On the other hand, for those with bad credit rating, secured small business credit cards can be used to rebuild bad credit.  To get a secured credit card for business, you only need to submit a security cash deposit to your account.  Generally, the value of your security cash deposit will also determine the amount of your credit line.

Another essential factor to consider is to find a business credit card that will report your payments to major business credit trackers like Dun & Bradstreet- the leading business credit tracker in the country.  This way, you can build up your business credit as you pay your bills using your small business credit card.

By obtaining an unsecured business line of credit, the business owner is given the flexibility to manage debts and repayment in an efficient way.  However, it is important to remember that managing a revolving credit can also be a challenge that can make or break your business credit standing.

Personal Loans Financing

Many consulters suggest that one should resort to personal loans for financing trips or vacations instead of other financial products like credit cards. Such suggestion is undoubtedly well founded but...

Many consulters suggest that one should resort to personal loans for financing trips or vacations instead of other financial products like credit cards. Such suggestion is undoubtedly well founded but not everybody knows the reasons that justify the advice. The costs of financing should be measured both by comparing the overall amounts spent on interests but also by how the monthly payments affect the borrower’s budget.

Personal loans present significant advantages when compared to credit cards for financing trips. However, there are many considerations to be taken into account, especially when there are certain promotions by credit card companies that can offer more benefits than paying the whole trip in cash and in advance. Therefore, there is no general answer to the question: should I pay with credit card or take a personal loan? It will all depend on the particular case.

The Interest Rate Issue

Personal loans tend to charge lower interest rates than those charged by financing unpaid credit card balances. While credit cards can charge up to 20% APR or even more, personal unsecured loans rarely exceed 10% or 12% APR. Thus, financing your trip by taking a personal loan will end up being significantly cheaper unless you repay your credit card balance within a short period of time.

Moreover, personal loans come either with a variable interest rate or a fixed interest rate. By requesting a variable interest rate personal loan you can get significantly lower rates. However, you need to bear in mind that variable rates can increase suddenly due to market variations and you might end up paying more than what you would have paid if you selected a fixed interest rate personal loan.

The Monthly Payment Issue

The advantage of personal loans when it comes to monthly payments is that the installments are fixed which is perfect for those with little discipline that always feel tempted to pay only the minimum payments on their credit cards and keep spending without control. This way you will know exactly how much you owe every month and you will be able to repay your debt sooner. Obviously, some will prefer the flexibility that credit cards provide. It all depends on how much self-control you have.

But, besides the discipline issue, fixed personal loan monthly payments are a lot easier to budget and since as explained above, the interest rate is lower, smart borrowers will prefer it over credit card financing. The monthly payments can be easily included in the budget and calculated as an additional expense letting the applicant to make the necessary previsions to afford the payments without hassles.

Credit Card Offers From Time To Time

Often, agencies agree with credit card issuers and present offers for credit card holders that excel the advantages that can be obtained by financing with a personal loan. In such cases, after you have considered the offer carefully and watched for any hidden cost that agencies like to conceal on the fine print of the contracts, you can assuredly choose credit card financing over taking a personal loan. Other than that, it is always advisable to use a personal loan unless you can not afford the monthly payments or you do not meet the requirements for approval.

Ten Ways Of Financing Real Estate

Do you remember when real estate financing meant you saved up enough to put 20% down on a house, and then you got a mortgage loan for the other 80%? Well, you can still do that, but there are many more options now. Here are ten of them.

1. Gifting programs. In some parts of the country, builders fund foundations that give you a portion of the downpayment, so you can get into a home with as little as 3% downpayment from your own pocket. FHA and other lenders have so far approved of or allowed this.

2. No-doc loans. These and "low-doc" loans, meaning no or low documentation requirements, are back, and you can find them through online banks. These are for those of you with bad credit but 20% to 30% to put down on a home. You don't even have to have a job.

3. FHA loans. The Farm Home Administration doesn't actually loan the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, depending on the particular FHA program.

4. VA loans. If you have been in the armed services, have a decent job, and can save two or three paychecks, you can probably get a home with a VA loan.

5. Land contract. Also called "contract for sale" and other names depending on the part of the country you are in, this just means that you make payments to the seller instead of a bank. It's up to you and them to negotiate downpayment amount, interest rate, and the term of the loan.

6. Seller-carried second mortgages. Some banks will allow you to have as little as 5% into a home purchase, but will then only loan you 80%. The seller can take payments on a second mortgage from you for the other 15%.

7. State housing programs. Almost all states have some sort of financing help in the form of a loan-guarantee program or outright loans for low-income buyers.

8. Family loans. It may not be out of charity that a brother or a friend lends you the money to buy a home. A 7% return might look awfully good if their money is sitting in the bank at 2%.

9. Manufacturer loans. Some manufactured-home companies are arranging financing with 5% or less down for their buyers. They must feel their money is secure, since a good modular on a piece of property is nothing like a mobile home on a rental lot.

10. Credit cards. This is a risky one, but if you have a low-interest credit card, you can use it to come up with the downpayment, especially if you can pay it off soon with a coming tax refund, for example. Banks generally won't allow this, but you can combine this with seller financing.

Are there more ways to approach real estate financing? You bet. This was just to get you thinking.

Can't get a business loan? Look into these two alternatives

Sooner or later every business will need financing to be able to survive and grow to the next level. This is true for every company, regardless of size. If you are a business owner and you need money,...

Sooner or later every business will need financing to be able to survive and grow to the next level. This is true for every company, regardless of size. If you are a business owner and you need money, your first stop is likely to be your bank.

Banks offer a number of financial products, but business owners generally try to get business loans or lines of credit. While both can help you grow your business, they are also very hard to qualify for. Banks usually require that the business have significant assets, collateral and 3 years of audited financial statements.

What if you don’t meet these tough criteria? Are there any alternatives?

There are two financial products that may be able to help you significantly. Let’s look at two statements:

a) I have a lot of money tied up in slow paying invoices - and/or -
b) I have a big purchase order and cannot afford to pay my suppliers

If you can answer yes to either of these statements, you can benefit from either factoring or purchase order financing. Both are great alternatives to bank loans.

Factoring provides you with financing based solely on your slow paying invoices. The financing is determined by your invoicing. If your invoicing grows, so does your financing.

Purchase order financing is ideal for distributors, wholesalers and resellers who work with large purchase orders but cannot afford to pay their suppliers. The purchase order financing company pays your suppliers and helps you deliver the sales. They get paid once the end client pays the invoice for the delivered products.

Both invoice factoring and purchase order financing are easy to qualify for and available to businesses regardless of size. They are ideal products for businesses that are growing.

7 Ways to Build and Improve Your Personal Credit Score

In his book The Tax & Legal Playbook, CPA and attorney Mark J. Kohler targets the leading tax and legal questions facing small-business owners, and delivers clear-cut truths, thought-provoking advice, and underutilized solutions to save you time, money, and heartache. In this edited excerpt, the author offers quick tips you can use to start improving your personal credit score, which has a direct impact on whether you can obtain corporate credit. Corporate credit is the ability of a company to obtain its own loans under its own credit score. Thus, a company (such as an S corp or LLC) can apply for a line of credit and, without the owner’s personal guarantee, use the money to expand its business. The owner of the company isn't personally liable for the credit line, and their personal credit score has nothing to do with the company’s ability to obtain credit. However, in some instances, having a good personal credit score can expedite the process of obtaining corporate credit. Continue..

Get to Know Your Unsecured Business Loan Options

For many small business owners, unsecured business loans are the most accessible method of financing available in the market.  Because these loans do not require collateral, it is technically easy even for business owners who do not have valuable assets. 

For many small business owners, unsecured business loans are the most accessible method of financing available in the market.  Because these loans do not require collateral, it is technically easy even for business owners who do not have valuable assets.  This article presents your options when in need of an unsecured business loan.

What to Expect

Lending companies extend business loans without requiring collateral because not everyone can qualify for a secured loan. However, unsecured business loans are often limited only to a small amount of financing ($50,000) and do require the applicant to have good or impressive credit.

If you are an owner of an established business with good business credit, applying for an unsecured business loan should be easy.  Needless to say, lenders are looking for a solid assurance that you are capable of repaying the loan according to your lender’s terms and conditions.  Because no real property has been submitted as guarantee for the debts you owe, lenders would be evaluating your loan application based upon the merits of your credit history.

But what if you are the owner of a new or a start business?  What if you have yet to establish business credit?  In reality, it can be a big challenge to get approved for unsecured business loan.  Without business credit to back you up, it will be more difficult to convince a lender to finance your business needs.

The same is true for businesses with a bad credit history.  Although it is possible to find lending companies that offer unsecured business loans for bad credit, the available loan amount would be limited to a smaller value and the interest rates would be much higher than standard unsecured loans. 

How to Get Approved

If you want to apply for an unsecured business loan, it’s important to do extensive research first and get to know all your possible options.  The only way you can be certain that you are being offered a good deal is by comparing different lenders. 

Look out for predatory lenders who are only after one thing - making profit in the expense of borrowers.  Some lenders may take advantage of you particularly if you have bad credit and cannot qualify for standard loans.  You may be offered instant approval regardless of your credit rating.  Is there a catch? The catch is that you will be charged with expensive interest rate and fees all throughout your repayment term.

Make sure that you are dealing with a legitimate lending company before submitting your loan application.  Understand the process involved and the necessary paperwork that you need to prepare.  Do not try to use false information in an attempt to get approved as such a move will only complicate your situation. 

Do not submit multiple applications at once.  Instead, weigh your options carefully and submit only an unsecured loan application to the right lender.  Keep in mind the each time you submit an application to a lender, an inquiry will be made in your credit and all inquiries will be reflected in your report.  Such a move can send a negative impression to a potential lender.

Guaranteed Unsecured Loans: Hassle-Free, Affordable Financing For Your Business

Obtaining financing for business, especially in a start-up stage, is a headache for many business owners. A very simple financing scheme allows acquiring guaranteed unsecured loans with competitive interest rates and high amounts.

Unsecured business loans are great for starting or expanding a business, yet are rather difficult to obtain. Banks see unsecured loans that newly formed businesses wish to take as an extremely high risk, and therefore often refuse to grant them. If they do, the loan provisions are often very unattractive as banks assign high interest rates and restrictive terms to limit their risks. However, there is an easy way around it, allowing borrowing large amounts at decent interest rates – guaranteed unsecured loans for business.

How Are Guaranteed Unsecured Loans Different

How are guaranteed unsecured personal loans different from regular unsecured loans? Unsecured loans do not have any collateral requirements, i.e. they do not require the borrower to put up any property to secure a loan. Unsecured loans are purely credit based, and banks give borrowers money just based on their past credit track and on the written promise of repayment. As unsecured loans mean less default protection for banks, they offset their risks by restricting the loan terms by enforcing shorter durations, lower amounts, and higher interest rates.

How Guaranteed Unsecured Loans Work

Guaranteed unsecured loans, while having the same features as regular unsecured loans, are considered as less risk by banks as they have an added layer of safety in form of a third-party guarantee. The way it works is that a borrower asks another party, whether it is an individual or a company, to issue a written guarantee of repayment should a primary borrower fail to honor financial obligations. Simply put, guaranteed unsecured loans are cosigned loans. As these loans pose fewer risks for lenders, they are often willing to offer competitive interest rates and grant higher loans amounts, allowing the borrower to benefit from lower monthly payments and reduced borrowing costs. Another benefit of guaranteed unsecured loans for business is that there are no collateral requirements, making them perfect for people who do not wish to risk their property, or for the ones that do not have any suitable assets to satisfy the collateral requirements set by the bank.

How To Secure Guaranteed Unsecured Loan For Your Business

The problem that many people face when applying for guaranteed unsecured loans is finding a cosigner for the loan. The easiest solution for this problem is to set a guaranteed unsecured loan for your business. In this case, a business is going to be a primary borrowers and a business owner is going to be a cosigner. It is noteworthy that such scenario is only possible when a business entity is completely separate from the business owner; therefore, sole proprietorships do not qualify. Limited liability companies and corporations are the best entity types to set up in case you intend to use guaranteed unsecured loans.

If you need a guaranteed unsecured loan for your business with tolerable interest rates that would not break your bank and decent amounts that would help to finance your business activities, you need to follow simple steps. First, you have to ensure that you have your business accounts set up completely separately from your personal accounts. Second, you have to find several lenders in order to get the loan quotes. Lender search may be easily performed online or through a loan broker who would be able to match you with few lenders. Last, you would have to select a guaranteed unsecured loan offer that best suits you business financing needs.

A Business Financing Alternative - Unsecured Lines of Credit

Sources of unsecured financing still exist for qualified business owners that previously relied on real estate equity to support their business expansions and to provide working capital. Despite recent financing cutbacks by major banks, here's is a strategy for successfully being approved for an unsecured business line of credit.

Unsecured Lines of Credit are an excellent financing alternative that business owners can utilize to replace their frozen home equity lines of credit. These lines of credit will be more advantageous than business loans because, like credit cards, interest is paid only on the outstanding balance. With two years in business and a 680 or above credit score, business owners qualify for up to $1 million with full documentation. Applications can be approved for up to $350,000 with no documentation.

Unsecured Lines of Credit can be obtained in roughly 4 to 6 weeks but should never be applied for directly by the borrowers themselves. The borrower, although qualified, cannot simply walk into a lending institution or bank for an unsecured line of credit and automatically be approved. Companies that specialize in unsecured lines of credit are available and should be contacted to assist with the substantial preparation that is necessary. It is highly recommended that the business owner seek out a professional business finance consulting firm with contacts and affiliations with several banks and financial institutions that offer these programs. The application process is somewhat complicated and documentation must be properly formatted and compiled to avoid unnecessary rejections.

Business owners can no longer rely on the equity in their real estate holdings to finance their business expansions and growth. Despite the fact that they paid high fees for the availability of home equity lines of credit, even business owners with excellent credit scores and excess equity in their properties are finding it impossible to access their credit lines. The main reason is that banks have virtually stopped providing homeowners access to the equity in their properties as lines of credit. Home Equity Lines of Credit have been frozen by most major lenders because declining property values have made these cutbacks necessary. IndyMac, Washington Mutual and other major mortgage lenders have made decisions to rescind these credit lines, according to the terms of their contracts with borrowers.

These recent eliminations of access to funds for their businesses have hit business owners especially hard. Many of them have used home equity lines for working capital during slow periods or as sources for cash during periods of expansion. The net effect is that the necessary funds for business uses were expected but are not available. The lack of time to make other arrangements because of this sudden policy change can severely impact a business owner's ability to survive a shortage of funds. There are also business owners who paid back their credit lines in the anticipation that they would be able to utilize them again. That option is no longer available, leaving them without their usual funds.

In summary, Unsecured Business Lines of Credit are methods of financing that are still available to qualified borrowers who are also business owners. Firms that specialize in acquiring unsecured lines of credit should always be involved in this application process. The applicant will need assistance in properly preparing and organizing his documentation for submission to lenders. A firm that specializes in this type of financing will be able to present the borrower as the "perfect applicant" because its business is to assure that all aspects of the application adhere to the current credit, submission and underwriting guidelines of each individual bank. This very important initial step in the process will greatly enhance the business owner's potential to be successfully approved for an unsecured line of credit.

Alternative Business Financing

Are you looking for a business financing solution for your company? Does your company have cash flow problems and needs funding? Read this article to learn if factoring financing can help your business.

Finding the right solution to finance a business has always been a challenge for owners. Most are only aware of conventional products, such as business loans or lines of credit, that are offered by financial institutions.  While this products can work very well, they are usually offered by financial institutions that have conservative lending standards which can make the inaccessible.

Not too long ago, getting a business loan was relatively easy, especially if the business owner had a home that could be used as collateral. Nowadays, business loans are much harder to get. Financial institutions will ask for two to three years worth of financial statements and review them very carefully. Likewise, they will only get involved in lending transactions if the business has substantial collateral and if the owner has a significant net worth.  These criteria all but rule out small business. Because of this, alternative business financing solutions have been on the rise.

Most small companies that look for business financing do so because they have cash flow problems. Usually these happen because the company has to give 30 to 60 day payment terms to their customers but has expenses that need to be paid quickly. In effect, they can't afford to wait up to 60 days to get paid. One obvious way to fix this problem is to use a line of credit to cover expenses while waiting to get paid. But if a line of credit is not an option, invoice factoring may be the right alternative solution.

Factoring is an form of business financing that accelerates your cash flow due from slow paying customers. It works by using a financial intermediary, called a factoring company, that advances funds  against your slow paying invoices. The factoring company holds the invoices as collateral, while your company gets a cash infusion that can be used to meet your current business expenses. The transaction is settled once your customers pay the invoices , though many companies establish revolving factoring lines that can be used on a regular basis.

Most factoring transactions are structured so that invoices are funded in two stages. The initial advance is provided  as soon as the work is completed and your customer is invoiced. Most initial advances are for 80% of the invoice, but this can vary based on certain conditions. The second advance is provided once the invoice is paid in full and covers the remaining 20%, less the factoring fee.

Factoring fees usually vary based on a few parameters such as the creditworthiness of your customers, the quality of your invoices, how long it takes for your customers to pay and the size of the factoring line.   Generally the factoring fee will be based on a percentage of the invoice.

One of the main advantages of invoice factoring is that it's easier to obtain than most conventional financing. The most important criteria to qualify is the credit strength of the companies that will pay your invoices - this represents the collateral for the factoring company. Aside from that, your invoices need to be free and clear of any legal or tax encumbrances.  Lawsuits, judgments and tax problems may hinder your company's ability to  get factoring financing. Most factoring companies will check this information during their due diligence process.

The biggest benefit from factoring is its flexibility. Most factoring lines are not based on fixed amount, but rather are tied to your sales. This means that the invoice factoring line can grow with your business, provided that your sales to are to credit worthy companies. This makes factoring an ideal solution for small and medium sized companies that have good potential that is being hindered by cash flow problems.