Finance & Advisory
What is Factoring?
With FACTORING you sell receivables to Tortugas Finance Corp. We take over managing the payments for your. You don't incur bank debt. You don't have to worry about getting paid from your customer.
How it Works Factoring is not a loan with interest due, but the purchase of an asset at a discounted rate from the asset's face value. Therefore, factoring clients are not paying an interest rate as they would for a bank loan, but a discount, as they would if they were giving terms to a customer for early payment. It works something like this: You have a number of invoices submitted to customers, however, need the cash sooner than the 30 to 60 days delay to receive payment. Working with a factor, you bundle a number of receivables, and present for immediate payment. After verifying the receivables, the factor gives you an immediate payment for the receivables, generally discounted (between 75% to 90% of the receivable value. The factor then holds the receivables and relieves you of the burden of follow-up. In 30-60 days the invoice is paid by your client. They pay directly to the factor, who advises you immediately. The factor then pays you balance of the discounted receivable; less his fee. Why Do Companies use Factoring?
Factoring is the purchase of accounts receivable at a discount. That is, a factor pays a client immediate cash for the client’s invoices for which payment is due in the future.
Start-up Company - little or no credit history or financial performance. Usually this means no access to bank loans. However, you still need money to pay bills and buy inventory. Having to wait for invoices to be paid can have a significant cost on your business.
Fast Growing - lots of customer demand and increasing sales. However, not enough money to fulfill orders. If it were possible to get cash quicker from sales, you could buy more inventory and make even more sales.
Eliminate Headaches - someone else to take over invoice follow-up. As a small business, you may not have time to chase down every customer invoice. Assigning receivables to a factor eliminates this distraction and allows you to focus on new sales.
Specific Opportunity - something came up that is too good to pass up. Perhaps an opportunity to expand into a new market, buy a competitor or pick up a really big customer. However, there isn't enough money to do it. By selling off one of your biggest assets, RECEIVABLES, you will have the money now to make that deal.
Liquidity Problems - something unforeseen came up and you need cash now. Perhaps you got behind on some bills, need to pay employees or pay off that important vendor. Selling receivables can put money in your hands in a day or two to meet these needs and keep your business going.
Questions?: contact us at info@tortugasfinance.com