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Factoring 101

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The CPI Team

Small Biz Resources

Allow CPI to remove the hassles of balancing cash flow and managing receivables while you focus on developing and enhancing your business.

Factoring 101:

Factoring dates back to the early 1600s where it answered to the needs of the textile, tobacco, and cotton industries. Today, factoring is the fastest and most flexible form of financing available with a range of benefits typically not available through traditional lending sources. Factors provide an opportunity for clients to increase liquidity, reduce overhead, and expand operations while retaining ownership and without incurring debt.

A mutually beneficial factoring partnership is one that allows the client flexibility and support. First and foremost, the Factor serves as your administrative support in providing receivable management, reporting, and collections. Secondly, and quite often the primary reason for partnering with a factor, the Factor provides financing on the invoices approved for advances at a percentage of the invoice value for fees applied based on the number of days the invoice is outstanding. The Factor often offers additional services, such as Billing Services, Fund Sourcing, and Consulting Services. CPI is pleased to offer eligible clients an opportunity to "graduate" into commercial lending through our established relationships within the banking community. Again, if our clients don't succeed, we don't succeed.

What is it?

By definition, Factoring is the business of purchasing and collecting accounts receivable. However, in order to help the client's achieve success, the factoring partner should provide a complete financial package, offering:

• Credit protection and assurance
• Receivable bookkeeping and reporting
• Professional collection services and support
• Access to an unlimited line of credit via advances against the receivable portfolio

How It Works:

• Capital-Plus (CPI) evaluates and pre-approves an appropriate credit limit per customer for client.
• Client copies CPI on all invoices submitted to the customer with supporting documentation.
• CPI loads the invoices, maintains customer records, conducts professional collection efforts, and provides consistent comprehensive reporting.
• CPI advances cash against current receivables to Client. Client's customer remits directly to CPI. CPI remits the balance, less fees, to Client.

An example of a receivable financing transaction:

- Our standard program is an 80% advance with fees normally calculated at 1% discount every 10 days, plus 1% commission.
- Many considerations such as volume, credit worthiness of account debtors, and administrative workload can increase
   or decrease the rate structure.

1. $10,000 invoice x 80% = $8,000 advanced to you immediately.
2. Payment for the invoice is collected between 20 and 29 days (three 10-day periods).
3. Advances and Fees:
• Total advanced = $8,000
• Total fees for period = $300 (1% x $10,000 = $100 x 3*) * = the number of 10 day periods, plus $100 commission
• Remaining $ due client = $1,600

Why Capital-Plus?

• Quick Approval Process
• Flexible financing
• Ease of use
• No minimum
• No additional collateral
• No long-term contract
• Comprehensive Reporting
• Personalized Account Representative

Why Factor?

Factoring provides financing solutions to; companies experiencing rapid growth, companies with no or little established credit history, companies affected by seasonal cycles, slow paying customers, or high concentrations or receivables tying up their cash flow.

Factoring enables a company to focus on developing and enhancing the business rather than the hassles of balancing cash flow, managing credit risks, and collecting receivables. Every business benefits from the financial freedom to grab a new opportunity quickly and decisively, without crippling working capital.

A few of the advantages...

• Improve working capital and finance growth
• Expand operations and improve efficiency
• Increase receivable turnover and reduce bad debt
• Take advantage of supplier discounts
• Eliminate payroll concerns
• Avoid venture capital and equity investors
• Supplement or retire existing bank lines
• Periodic off balance sheet financing

What Companies are Eligible?

Nearly every company is looking for additional cash. Capital-Plus offers financing to all industries selling goods or services business to business, with the exception of medical and agriculture receivables.