Dream Team Capital facilitates Accounts Receivable Financing (Factoring), Purchase Order Financing, Inventory Financing and Letters of Credit for Trade Transactions. We have relationships with a variety of financial institutions to help clients obtain the Financing they need to expand their business.
Cash flow in any business is critical, the money tied up to finance the receivables due from your customers, or other assets, is not available to meet current operation requirements. There is significant value in reducing the collection time of your cash. Similar, but contrary to borrowing money to fund current operations, a factor provides immediate cash to your business, and collects on the payment of your accounts for a fee.
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The factoring process can be broken up into two parts: the initial account setup and ongoing funding. Setting up a factoring account typically takes one to two weeks and involves submitting an application, a list of clients, an accounts receivable aging report and a sample invoice. The approval process involves detailed underwriting, during which time the factoring company can ask for additional documents, such as documents of incorporation, financials, and banks statements. If approved, the business will be set up with a maximum credit line from which they can draw. In the case of notification factoring, the arrangement is not confidential and approval is contingent upon successful notification; a process by which factoring companies send the business’s client or account debtor a Notice of Assignment. The Notice of Assignment serves to
- inform debtors that a factoring company is managing all of the business’s receivables,
- stake a claim on the financial rights for the receivables factored, and
- update the payment address – usually a bank lock box.
Once the account is set up, the business is ready to start funding invoices. Invoices are still approved on an individual basis, but most invoices can be funded in a business day or two, as long as they meet the factor’s criteria. Receivables are funded in two parts. The first part is the “advance” and covers 80% to 85% of the invoice value. This is deposited directly to the business’s bank account. The remaining 15% to 20% is rebated, less the factoring fees, as soon as the invoice is paid in full to the factoring company.