Frequently Asked Questions
What is accounts receivable factoring? How do I receive financing for Government contracts?
Accounts receivable factoring, often referred to, as accounts receivable financing, is the sale of an organization's accounts receivable to a finance company at a discount to the invoice value.
In 1940, Congress recognized that Federal Contractors may need access to additional working capital and passed the Assignment of Claims Act. This law permits U.S. Government receivables to be assigned to an accounts receivable lender, allowing the needed funds to be advanced to your company when the receivable is created.
Do I need accounts receivable financing?
Government work is good business, but it does not always pay quick enough to meet your needs. For instance, if your company is not bidding on all available contracts because it cannot afford to wait for payment, then your organization is probably turning away good business. Accounts receivable financing can provide you with a timely working capital advance so you don't have to wait for payment.
How does accounts receivable financing help my business?
We advance up to 90% of the invoice value to you usually within 24 to 48 hours after you present the invoice. This advance enhances your company's working capital; particularly if it takes the various Government Agencies you work with 30 days or more to pay your invoices.
If you advance up to 90% of the invoice, what happens with the remaining 10%?
The unfunded part of the invoice (i.e. the remaining 10%) is called the reserve. We use the reserve to cover our fees as well as mitigate risk associated with the transaction. Any unused reserve amount is remitted to your company when the Government pays the invoices and the transactions are completed.
What fees will my company be charged?
We charge the following fees:
Setup Fee: 0.75% - 1.50% of the invoice's face value.
Monthly Interest Rate: 1.5% - 2.5% on outstanding advances.
How long does it take to setup and receive funding?
We can advance funds in as little as 3 to 5 days. The first step is for you to fill out an application and to provide us with some basic financial information on your company. Upon receiving the completed application and the requested financial information, we perform our due diligence and account setup process. Once your account is setup, we can advance against presented invoices within 24 to 48 hours.
What invoice volume must my company have to use accounts receivable financing?
Unlike other finance companies that require monthly volumes, we look for a minimum annual invoice volume of $250,000.
If it has a bank loan or line of credit, will my company be eligible for accounts receivable funding?
Yes. Our number one referrals come from loan officers who are familiar with this kind of financing. If your bank has a lien on all of your company's accounts receivable, we work with your loan officer to enable your company to use our Government financing.
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