With factoring, the client will get immediate cash advance for their invoices with a small percentage of retention sum upon perfection of all documents. While conventional loan might take weeks or longer for the disbursement due to multiple approving level and they might require additional collateral. With factoring, you can choose which invoice and when you want to factor as it is a short-term finance solution. Instead, you are committed to a longer repayment period with conventional loan.
Generally, factoring companies accepts current, unpaid invoices due to you from acceptable Private Limited and Public Listed Companies, Federal and State Government, Government Agencies and Government Linked Companies (GLCs) as long as they allow the payment to be assign to the factoring companies.
The fees and charges imposed by a factoring company are fairly competitive as it is a short-term finance solution. Depends on the type of factoring agreement, some charges are deducted from the cash advance, while some in arrears.
Upon submission and verification process of the invoices and subject to the confirmation of the payment assignment to the factoring company, client will receive cash advance within 3 to 5 working days once all documents are perfected.
Factoring company can only factor an invoice with confirmation on the payment assignment to them. Hence, they will accept invoices which the payment has been assigned to either banks or another factoring company.
You decide which invoice you want to factor according to your financial needs as there is no requirement for you to factor all invoices.
It is common for a vendor or contractor performing multiple contracts at the same time with either the same or different customer. They can enter into multiple factoring agreement for different contracts with the same or another factoring company as long as the customer confirmed on the payment assignment to the respective factoring company.
All original invoices submitted to the factoring company were stamped with notation for the payment instruction. Then, the customer will acknowledge for the confirmation of the payment assignment to the factoring company. Hence, the payment will be remitted to the factoring company.
Interested client may contact any of MFA members for more information as the requirement is differ depending on the factoring company.
You are still eligible subject to certain terms and conditions as most factoring companies usually evaluates on the creditworthiness of the customer as they are the paymaster.
A Personal, Joint or Several Guarantee is required for factoring facility as it is recourse to the client.