Frequently Asked Questions
Q: What is Factoring?
Q: What is Recourse Factoring and how does it work?
Q: What is Non-Recourse Factoring and how does it work?
Q: What is involved in the application process?
Q: Am I required to factor all of my invoices?
Q: How soon can I get paid?
Q: How do I get paid?
Q: What are the fees to get set up with Fortified Financial Service for factoring services, and what are the fees to end our relationship?
Q: What if I already factor through another factoring service?
Q: Do you have discount programs in place that would help my company?
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Q: What is Factoring?
A: Invoice factoring, also called accounts receivable factoring, is an effective way to help manage cash flow. It provides an alternative to traditional bank financing. Factoring provides quick liquidity to give your business the capital it needs for growth or on-going operational costs. As a source of funds, factoring is easier than going to a bank for a commercial loan since banks have many financial requirements that most small businesses do not meet. We provide cash flow services to many companies who do not quality for traditional bank financing or have been turned down.
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Q: What is Recourse Factoring and how does it work?
A: The Factor advances to the Company a certain percentage of the invoice up front and holds the balance of the invoice amount in a reserve account. The Factor then provides credit management and collection services to promote timely payment of the invoice. When the invoice is paid, the amount held in reserve is available to the Company to withdraw from their reserve account except for the fee percentage agreed upon with the Factor. If the Factor is unable to collect on the invoice after the agreed upon interval (typically 90 days), that invoice must be repurchased by the Company through either recourse deduction from their next invoice batch or through charge back against the Company’s reserve account.
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Example:
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Company has an invoice for $1,000 in sales to factor
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90% or $900.00 is advanced by the Factor to the Company within 24 hours of receipt of invoice. This up-front payment is an advance on the purchase of accounts receivable.
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10% or $100.00 is held in reserve account
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Factor collects the $1,000 due on the invoice from the Shipper/Consignee/Broker
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When invoice is paid, the Factor deducts it’s agreed upon fee percentage (3% or $30 for this example) from the $100.00 being held in reserve account. The remaining $70 is then available for release from the reserve account to the Company.
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Q: What is Non-Recourse Factoring and how does it work?
A: The Factor advances to the Company an agreed upon percentage of the invoice up front, and retains the agreed upon fee percentage. In this type of factoring the Factor assumes full credit risk for collection of the invoice.
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Example:
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Company has an invoice for $1,000 in sales to factor
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95% or $950.00 is advanced by the Factor to the Company within 24 hours of receipt of invoice to purchase the invoice.
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Factor retains 5% or $50.00 as their fee and assumes full credit risk for collection of the invoice.
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Typically factors will only accept invoices for Non-Recourse factoring on your customers/debtors with an above average credit rating; but, they may accept invoices on your other customers with lower credit ratings on a Recourse basis.
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Q: What is involved in the application process?
A: Our application process is much more streamlined than that of
banks. Simply complete our two page application form and
provide the basic documents required. Our underwriters will
contact you immediately to move the process forward and
with our Sales Team can typically give you a firm proposal
with 24-48 hours. Upon approval of your application and
receipt of required documents, we can typically begin
factoring the next day!
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Q: Am I required to factor all of my invoices?
A: No. We do not require you to factor 100% of your invoices. We do, however, require you to factor all invoices for any particular customer/debtor/broker that you decide you want to factor. This eliminates confusion with your customers since the will be notified that all subsequent payments due on factored invoices for their account must be paid directly to us.
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Q: How soon can I get paid?
A: Most trucking companies submit invoices via an overnight courier to expedite processing and often choose to hold paper work for several loads and consolidate them into one package. You may submit packages daily or at any frequency you desire for funding. We commit to SAME BUSINESS DAY funding of advances on all invoices received by 11:00 am Eastern Time Monday through Friday. All invoices received after that daily cut-off time will be funded next business day.
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Q: How do I get paid?
A: You can elect to be paid on each schedule (batch of bills submitted), once weekly, twice weekly, or at whatever interval you prefer. We can send payment to you by your choice of Wire (credits bank account same day), ACH (credits bank account next day), or by Com-Chek. We can also Wire funds directly to your Fuel Card Provider if you so direct. You pay only a nominal fee that reimburses our expenses dependent on the method of payment you select.
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Q: What are the fees to get set up with Fortified for factoring services, and what are the fees to end our relationship?
A: There is a Client Set Up Fee as outlined in our contract to set everything up for your account. This fee will be rebated by credit to your Reserve Account after one year of continuous service. Our contracts specify a renewable 30 day term and require only a 30 day written termination notice on either party’s side to discontinue the relationship. We do not charge heavy termination or penalty fees like many factors. We do, however, charge a $150.00 Termination Fee to cover the costs of terminating our UCC Filings once all obligations have been settled.
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Q: What if I already factor through another factoring service?
A: No problem as long as your account is in good standing with your current service provider! We will work with your current factoring service to assure a smooth buyout and transition process for open invoices on their books at the time.
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Q: Do you have discount programs in place that would help my company?
A: We currently offer: |
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Discounted rate program with Federal Express that allows you to take
advantage of our lower rates when submitting documents to us for funding.
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Fuel Card Program that provides fuel and cash for repairs or expenses to
your drivers at over 5,000 locations including Flying J®, Pilot®, Petro®, Love’s®
and TA® as well as many independent truck stops.
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Access to our free Load & Equipment Availability Board for Posting/Searching
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Discount Program with TCI that provides discounts on Tires,
repairs, and other services.
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