Factoring 101, The Process For Factoring

Factoring 101
The Process For Factoring

Complete Underwriting

- With applicant’s attentiveness
- Ten days to two weeks
- Moderate Attentiveness
- Three Weeks
- Not very attentive
- Six to eight weeks

Primary Underwriting

- Client Application
- Articles of Incorporation (CORP)
- Articles of Organization (LLC)
- Driver's License from all Owners
- A/R Aging Summary By Debtor

Term Sheet Proposal

Term Sheet Issued and Returned with:
- Two Years Tax Returns
- Financials
- Three months bank statements
- Signed IRS 8821 form
- Sample Invoice
- Sample PO
- Sample debtor payment
- Sample remittance advice

Closing Documents

These items are issued and returned:
- MPSA
- Validity Guaranty
- Corporate resolution
- Signed notices of assignment
- Voided check from operating account

Example of a Factoring Transaction

- Invoice for $1,000.00 for goods or services
- Faxed to the Factor
- Verified by Factor
- First installment payment (70% - 85%) 80% = $800.00
- Discount fee starts (typically .90% -1.0% per 10 days)
- Invoice pays in 40 days
- Factor owes client $200.00
- Factor computes discount fee (1.0% X 40 X $1,000.00) = $40.00
- Factor sends balance less discount fee to client ($160.00)