What is Factoring?
Factoring is working capital financing provided through the discounted purchase of qualified accounts receivable, typically offered to rapidly growing companies or businesses in financial transition. The factor purchases eligible invoices from a completed service or accepted product and essentially transfers the credit risk from the client to the client’s customer.
How does the process work?
- Invoice issued by client to customer
- Invoice is sold to ABBC
- Cash is used by client for growth, payroll, and/or other expenses
- Invoice pays through client's lockbox
- ABBC receives payment
- Client receives reserve amount less fees
What if I'm already factoring?
- Great, so you understand the product and basic process. Would you be interested in hearing how Amegy may be able to offer you a better structure and price with a bank managed factoring facility?
Isn't factoring expensive?
- It certainly can be more expensive than traditional bank financing but for the additional flexibility, frequently it is a trade-off that many companies are willing to make. Plus, it is viewed as bridge financing, a 6-36 month solution on average.
What if I already have an existing line of credit?
- If you have an existing line of credit and you are happy with the structure and line amount, you should not look at making a change.
What if I don't want my customers to know that I'm factoring?
- Much of our contact is transparent to the customer. We will need to have invoice payments sent to the Bank lockbox and notification is made to the customer, usually the AP department, regarding the payment redirect. We also verify a certain percentage of outstanding invoices. This can be done via portal, email, or phone call. Every situation is different. Plus, having a Bank managed working capital facility gives a business credibility with its customers.
What if I don't want to send my checks to a lockbox?
- Our customers actually prefer using our lockbox as we handle their invoice collection paperwork and all the information is available online wherever/whenever they need to see it.