Compound Profit Blog

Factoring Training Information

Compound Profit offers factoring training through its Profit Advisors, who start by providing a complimentary analysis of your businesses. Factoring is the purchase of some or all of the valid Accounts Receivables for goods and services that have been completed in business to business, or business to government transactions, at a discount. In many ways, factoring (also known as Accounts Receivable Funding) is similar to improving your working capital cash-flow by offering your customers a cash discount for paying their invoices more quickly.

Factoring gives your business the power to grow, without giving away equity or taking on debt. Contrary to what you may have heard, factoring is not a tool used only by struggling companies. Financially smart companies of all sizes use factoring as a powerful tool to release capital tied up in accounts receivables waiting to be paid. And unlike many other lines of credit, you do not have to have been in business for a couple of years. Compound Profit can fund start-up businesses, those seeking to grow more quickly, and those needing cash for particular business purposes.

Compound Profit is a Factor and will factor invoices totaling $1,000 or more. We do not require you to factor all of your invoices; there is no minimum per month and no fee if you choose not to factor for some time period - in other words, you get to pick when and what invoices you factor. Fees for factoring typically run 2% to 5% for invoices that are paid within 30 days.

Let's consider a factoring training example: a client has $1,000 in Accounts Receivable that will be paid in less than 30 days, but needs capital today to meet payroll. Compound Profit purchases the invoice from the client and provides $800 immediately. When the invoice is paid, and assuming a worst case, high risk 5% fee, the client is paid the remaining $150 and Compound Profit earns a fee of $50.

So why would anyone want to using factoring? Because it will allow you to grow your business and allow you to accept contracts that you normally couldn't fund because you don't have the cash reserves to make payroll or purchase the needed equipment or supplies.

Let's use the following example of a real world client. The client has 50 employees and has an annual payroll of $208,200. Everything is going along fine and the client is meeting payroll on a 2 week payroll cycle. Because of the client's good work, the client's customers want to increase the number of employees under contract to 150 employees. With the changes the client's customers are asking, the client's payroll will balloon to $624,600.

Understanding the need to make payroll before most invoices are paid, the client has a few choices. The first choice is to approach a bank for a line of credit. Assuming his loan is approved, he will have to show the loan on his books as a liability. His second choice is to find someone to invest in his company, but this means that it is no longer just his company and he will need to deal with his partner. The third choice is to turn away some or all of the additional business based on his available cash.

A fourth (and best) choice would be to factor his invoices in order to receive cash as you need it. With factoring, you get the capital you need, when you need it. By using Factoring, you can create an unlimited line of credit using your quality receivables.

To summarize the benefits of Factoring:
- Factoring is not a loan and doesn't show up as a debt owned by your company.
- Factoring is much faster to fund than loans. Invoices are paid on a weekly basis.
- It is not dependent on the credit rating of your company.
- It is not dependent of the assets of your company.
- It is not dependent on the number of years you have been in business.
- Your balance sheet is strengthened.
- You can create a source of unlimited capital.
- You become more "bankable" allowing you to get that bank line of credit.

Find out more about our factoring training & services at http://www.cprofit.com