Posted by James Buster on June 12, 2002 at 23:28:48:
In Reply to: Factoring vs Notes? posted by Ed Eaton on June 12, 2002 at 16:09:12:
Many business owners don't really understand the difference between profit and cash flow, so having a good explanation why taking 3-5% off the top is good for their business is imperative :-)
You will need substantial capital or a large credit line to fund current invoices while waiting for past invoices to be paid.
There are risks besides credit risk of the payor. You may receive fraudulent invoices from the seller. Invoices that are subject to an acceptance clause may allow the payor to refuse payment. If you're doing medical, the payor may refuse payment because they believe the medical services were fraudulent (which may not be the seller's fault) or they want more information to establish medical necessity. Delays in payment will seriously impact capital recovery and cash flow and impair your ability to service the client.
I'm interested in the business, too, but unlike notes there's damn little information available and those who are successful aren't offering more than token information.