Ozarks Capital Funding

Invoice factoring gives your company much-needed working capital. Call us today at (417) 849-7394 to get started!

Ozarks Capital Funding header image 2

Your Company In the Role of Banker

May 1st, 2010 · No Comments

Even though your company may manufacture products, distribute goods, or provider services, you will also be, in effect, a lending institution when you offer credit to your customers.  This is of course a normal practice.  In fact, to not do so would probably cost your company market share because your competitors most likely offer credit terms to their customers.

Invoice factoring allows your company to monetize the amounts due from customers by granting an advance on invoices.  BUT factoring companies are very careful to review the credit standing of your customers as well as their payment history.   Since accounts receivable factoring is based on your customer’s ability to pay in a timely manner and the receivables are the only collateral, factors must perfrom an adequate amount of due diligence.

When you are considering offering credit terms to a new customer, a similar amount of care should be given.  There are some important steps you should take before becoming the customer’s “banker”.

  • Make sure to get a fully completed credit application
  • Check the credit references listed
  • Acquire a Dun & Bradstreet report and learn to understand the language on the report
  • Set a reasonable credit limit until the new customer has shown they can pay their bills within your terms
  • Don’t be shy about asking for financial statements
  • Require the majority owner(s) to sign a personal guaranty

Remember, getting a new customer who does a lot of business with you is meaningless if they are extremely slow payers.  That’s the way a factoring company would look at it.  Most factoring companies expect you to refund the advance when the invoice aging goes over 90 days.

Tags: Accounts Receivable Factoring by Ozarks Capital Funding · accounts receivable factoring · cash flow · factoring accounts receivable · factoring invoices · factoring receivables · invoice factoring · receivables financing

0 responses so far ↓

  • There are no comments yet...Kick things off by filling out the form below.

Leave a Comment