Factoring

Factoring Program Brochure

FACTORING

Factoring is the preferred method of working capital financing for companies that cannot afford to have cash tied up in receivables for more than 30 days.

Factoring is typically used when a company cannot qualify for a more traditional type of financing as in the case of start ups, turn-a-rounds, and companies with little net worth.

Because factoring is based on the strength of the receivables rather than the company, it is ideal in these situations. Factoring eliminates the time and expense of collecting receivables.

Factoring differs from traditional accounts receivable financing in that the lender (factor) actually purchases the invoices directly from the company on either a recourse or non-recourse basis.

After the sale, the receivables, balances are carried on the factor's balance sheet since title has passed. Because the factor then owns the receivables, it generally provides all the required credit, collection, and accounting services necessary to collect the receivables.

The important difference between factoring and traditional accounts receivable financing is ownership.

In factoring, the receivables are purchased and owned by the factor. In a traditional accounts receivable lending arrangements, accounts receivable are pledged to the lender as security for the loan, but the borrower retains ownership and complete control of the receivables and the value of the receivables remains on the borrower's financial statement.

CREDIT CRITERIA

Start-ups, turn around situations, companies in chapter 11 and companies with little to net worth that have accounts receivables less than 90 days old from credit worth customers will be considered.

FAQ's ON FACTORING

What is Factoring?
The sale of a company's accounts receivable invoices to a factor, in order to obtain working capital.

What are Aquila Business Services, LLC's basic requirements for factoring?
That prospective clients provide goods or services to credit worthy customers and that we can verify that the invoices being considered for factoring are accurate.

Does Aquila Business Services, LLC offer factoring in all U.S. states?
Yes

Does Aquila Business Services, LLC require certified financial statements in the application process?
No, there are no financial statement requirements.

Does a company have to be profitable to qualify for factoring?
Not always, some clients are new companies that have not yet turned a profit, or they have suffered recent financial losses. Aquila Business Services, LLC looks at the quality of a company's customers rather than its specific financial condition.

How long does the closing process take?
A typical deal can be closed and funded within two weeks of the initial referral - in some cases a closing can be expedited.

What industries will Aquila Business Services, LLC purchase accounts receivable from?
Almost all industries - except medical and construction – where clients sell a service or goods and their account debtors (customers) have good credit.

Does Aquila Business Services, LLC require personal guarantees?
No – this is because Aquila Business Services, LLC takes the credit risk based on the factored invoices. Aquila Business Services, LLC does require a Performance Guarantee to assure that the invoices are valid. The principals may be responsible for loss suffered by Aquila Business Services, LLC if there is a non credit problem with the accounts receivable.

Who qualifies for factoring?
A wide range of companies in a multitude of industries, including some with a negative net worth, that are losing money, and often even companies in Chapter 11 Bankruptcy. Companies that have a bank loan secured by its accounts receivable may not qualify for factoring unless the bank agrees to release its lien on the accounts receivable.

Can a company with little or no credit history qualify for factoring?
Yes, as long as they have credit worthy customers.

Will a company seeking factoring be viewed negatively by its customers?
No, factoring is used by many large corporations in the U.S. and globally to improve cash flow, support growth and increase profits. In fact, more than 300 billion worth of factoring is done every year in the U.S.

Do a company's customers always know when a company is seeking financing through factoring?
Yes, Aquila Business Services, LLC must notify the account debtor to pay the amounts due to Aquila Business Services, LLC.

Is there a minimum volume of receivables that needs to be committed to in order to qualify for factoring?
In most cases, Aquila Business Services, LLC will look for a minimum monthly volume of no less that $100,000 per month.