Factoring Questions
- What is factoring?
- How can factoring benefit my company?
- Is there a limit on how much I can factor?
- Do I need to sign a long-term agreement?
- How do I get started and how long does it take to get funded?
- Do I have to factor all my invoices?
- How do I know if my accounts are eligible to factor?
- What happens if I sell you an invoice that my customer fails to pay?
- What happens if you receive a payment from my customer that relates to an invoice I did not factor?
- How do I keep track of invoices I have factored and payments you receive from my customers?
- Do I need to tell my customers I'm factoring? And what will they think when they find out?
- How will my customers know that they are supposed to remit payments to you?
- Am I eligible to factor if a UCC is filed against my company?
- Do you factor owner-operators and small fleets?
- My company has a federal tax lien. Am I eligible to factor my accounts receivable?
- Do I have to maintain a reserve?
- How do you approve credit limits for my customers?
- Do you provide loans?
- Can you provide a sample factoring transaction for a manufacturer/wholesaler?
- Can you provide a sample factoring transaction for a small trucking fleet or owner-operator?
- Can you provide a sample factoring transaction for a staffing firm?
What is factoring?
Factoring is the sale of invoices (accounts receivable) at a discount. Factoring is a financing tool used by small and large businesses to increase cash flow and raise working capital without the use of debt.
Factoring has been used by companies in many industries for hundreds of years. It has only been in the past 20 years that the use of factoring became common in nearly every industry.
The most heavily factored industries are transportations (motor carriers and freight brokers), staffing, manufacturing and wholesaling. Most companies that sell goods or services to other companies or to the government can qualify for factoring
A financial institution that provides factoring services is called a factoring company.
How can factoring benefit my company?
Interstate Capital can save you time and money by improving your cash flow, assisting with collections, and providing funds to grow.
Motor carriers: Use our funds for fuel advances and pay drivers.
Staffing companies: Use our funds for payroll.
Manufacturers and wholesalers: Use our funds to pay factories, buy inventory, and cover payroll while we wait for your customer(s) to pay us.
Is there a limit on how much I can factor?
How much money Interstate Capital will make available to you is limited only by the financial strength and payment performance of your customers.
How do I get started and how long does it take to get funded?
Fill out the form on our home page and we will send you a simple, no-nonsense proposal via e-mail. If you like what you see, all you have to do is click on the application link in your proposal. In most cases, Interstate Capital can provide funds within three business days.
Do I have to factor all my invoices?
No. You are free to factor as many invoices as you desire for any period of time within the framework of our service agreement.
How do I know if my accounts are eligible to factor?
Interstate Capital allows you to submit credit inquiries on-line 24/7. In many cases, you will receive an automated approval. Otherwise, you will recieve a quick response from our credit department during normal business hours. For our motor carrier clients, Interstate Capital offers free membership in www.CheckFreightBroker.com. CheckFreightBroker.com offers unlimited free freight broker credit reports on-line 24/7.
What happens if I sell you an invoice that my customer fails to pay?
If your customer fails to pay a factored invoice within a prescribed number of days, 90 days, you are responsible to “repurchase” the invoice unless it was approved to be purchased on a “non-recourse” basis. See our service agreement for details.
What happens if you receive a payment from my customer that relates to an invoice I did not factor?
Subject to terms in our service agreement, we give you your money back without a fee.
How do I keep track of invoices I have factored and payments you receive from my customers?
Interstate Capital provides 24/7 on-line access to all your invoice images and reports at www.interstatecapital.com. All reports are available in PDF and Excel formats for easy portability, viewing, and printing.
Do I need to tell my customers I'm factoring? And what will they think when they find out?
If your customers are located in Canada or US, It is very likely they have many vendors who are factoring.
How will my customers know that they are supposed to remit payments to you?
We mail a letter to your customer. The letter instructs your customer to remit payments on your account to Interstate Capital. We also require your invoice to contain our remittance address or wire instructions.
Am I eligible to factor if a UCC is filed against my company?
Factoring companies are often able to fund against your existing accounts receivable even if a UCC is filed before ours. Often, we are able to obtain a subordination agreement from other lien holders. In many cases, Interstate Capital can get consent from your lender or bank that will allow you to factor your accounts receivable with Interstate Capital.
Do you factor owner-operators and small fleets?
Interstate Capital is a leader in factoring small motor carriers and owner-operators. Our White Glove Service for small fleets offers services unmatched by other transportation factoring companies.
For one low fee, we offer fuel advances when you pick up load, 100% advance upon delivery, invoice preparation, invoice mailing, free use of TripPak envelopes, free money transfers, and 24/7 on-line access to images and thousands of free freight broker credit reports.
My company has a federal tax lien. Am I eligible to factor my accounts receivable?
Yes, if we obtain a subordination agreement from the Internal Revenue Service or Revenue Canada.
Do I have to maintain a reserve?
No. Interstate Capital has “zero reserve requirement." This means that within one banking day of our receipt of payment from youwe customer, we will make available to you deposit the unadvanced portion of your invoice, minus our fee, less any deductions taken by your customer. We disburse reserve funds daily upon request at no charge.
How do you approve credit limits for my customers?
Interstate Capital provides 24/7 on-line credit department availability. In many cases, you will receive an automated approval before, during, and after our normal business hours.
Motor Carriers may also use our own free transportation credit bureau, www.CheckFreightBroker.com, where you can get thousands of free freight broker credit reports. CheckFreightBroker.com is always free.
Do you provide loans?
Interstate Capital provides loans for plate and insurance renewals for its motor carrier clients. Other loan requests are evaluated on a case-by-case basis and/or handled by an ICC affiliate that provides funds for inventory finance and purchase order financing.
Can you provide a sample factoring transaction for a manufacturer/wholesaler?
Let’s say you have a purchase order for a $1,000 worth of product, issued by a credit worthy customer like Target. The terms of purchase are Net 30 days. ICC agrees to purchase your Target invoices at a rate of 0.59% per invoice every 10 days.
Let’s say we advance you $850 by electronic money transfer upon our confirmation that Target has received the product at their distribution center. Target is notified to remit payment on your invoice to Interstate Capital.
Upon our receipt of payment from Target, you will receive a second disbursement from ICC of $150, minus our fee of $17.70. There is no charge for money transfers via ACH.
Can you provide a sample factoring transaction for a small trucking fleet or owner-operator?
You log into our Client Web or visit www.CheckFreightBroker.com to obtain an instant on-line approval for your load.
As soon as your driver picks up the load, fax us your load confirmation. You are eligible for a fuel advance up to 40% when we confirm pick up.
When your driver delivers, he places the original, signed bill of lading in a special TripPak envelope that we provide for you. Your driver places the TripPak envelope in any TripPak receptacle at participating truck stops by 3:00 p.m.
The following day, you will receive 100% advance and we will prepare and mail an invoice for you. You have 24/7 online access to all your invoices, bills of lading, and load confirmation forms for your records.
Can you provide a sample factoring transaction for a staffing firm?
Let’s say you place a temporary or contract employee at your client’s office and ICC has approved a sufficient credit limit for your client. You provide us a copy of the invoice, work order and time sheet signed by the supervising manager.
ICC agrees to purchase your invoices at a rate of 0.59% per invoice every 10 days.
Let’s say we advance you $900 by electronic money transfer upon our receipt of your documents via e-mail. Your client is notified to remit payment on your invoice to Interstate Capital.
Upon our receipt of payment from your client, you will receive a second disbursement from ICC of $100, minus our fee of $17.70 if we are paid within 30 days of the date of your initial advance. We would subtract $5.90 for each additional 10-day period under this pricing scenario. There is no charge for money transfers via ACH.