What is Factoring?

Factoring is the selling of accounts receivable payments due at a later date for cash now.

Factoring has been used by businesses around the world for more than four centuries as a respected way to manage cash flow. For example, nearly all of the financing performed in the garment industry is achieved through factoring. Additionally, every time a restaurant processes a payment by credit card, it is engaging in a process similar to factoring, since the credit card processing company advances the restaurant the payment immediately and then collects the money. Today, it is estimated that factoring is a $100-billion-a-year industry in the United States.  Morgan Capital Funding works with the most respected funding sources across the country in order to identify the best short or long term options for your business. 

Example of how Factoring can help your business continue to grow:

John's office equipment manufacturing business has been growing rapidly. He is in the middle of completing an order for one of his larger companies in the amount of $100,000.  Last week, he agreed to terms for the production of another $120,000 worth of equipment to be delivered in 60 days.  Due to the limited size of his company, John does not have the cash to start production until he receives at least partial payment for his $100,000 order.  John contacts Morgan Capital Funding and after a brief due diligence of John's business and his customers creditworthiness, Morgan identifies a funding source who is willing to purchase the $100,000 invoices and wires $75,000 to John within 48 hours. The remaining $25,000 is wired to John once the invoices are paid in full less a discount, which is dependent upon the time it took for the invoice to be paid.    As a result, John is no longer reliant upon when his customers pay him to generate additional sales. The value of his product allows sales to continue to grow and his credit line strengthens as he has the cash flow to pay his suppliers on time.        

Example of how Factoring can assist you through the fluctuations of your business:

It's July and Mark's toy manufacturing business is gearing up for the holiday season. The first six months' sales have been below expectations and Mark is concerned about having the cash flow to meet the production demands for the upcoming holiday season. Mark contacts Morgan Capital Funding and the two agree to have Mark sell $200,000 of his outstanding invoices so that he has the cash flow to meet his short -term production demands.  In a few days, Mark is wired $150,000 from the funding source and receives the other $50,000 less the discount when the invoices are paid to the funding source.  Mark now has the cash to recoup the companies' poor performance for the first six months and exceed revenue expectations for the second half of the year.  Without factoring the company would not have the ability to meet the demands of customers nor attain its performance objectives.   

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