Factoring vs. Bank Loans
Is factoring a type of loan?
No. Even though invoice factoring is commonly referred to as " factoring loans", it is a financial practice involving a B2B transaction, but no bank. To further explain, account factoring, it is when a company, like Peacock Capital, purchases your accounts receivable invoices at a discount and provides you with immediate cash. A traditional bank loan uses your company's accounts receivable as collateral, where account receivables factoring looks primarily at the financialsoundness of your customers, not your company. Banks are regulated heavily; large finance companies generally are public and driven by pressures in the financial markets. When times are tough, banks and finance companies limit lending. A small business, too new to have a track record, with a weak balance sheet, with a history of financial problems, in turnaround mode or undergoing big changes, often cannot find a willing lender at any price. That is why factoring is best for small to mid-sized businesses.
Does a bank loan make more sense for my small business than invoice factoring?
No. Banks often have restrictive lending requirements relating to cash flow, profitability, equity, and years in business, which prohibit them from makingloans to small to mid-sized businesses. Since factoring companies are notin the lending business and there is really no such thing as " factoring loans", the decision to purchase invoices is influenced primarily by the quality of yourcustomer base and their financial stability, and not the financial fundamentals of your company.
Do I have to jump through the same hoops for account receivables Factoring as with bank financing?
No. All Peacock Capital needs to produce a proposal is a completed pre-approval form, summary of accounts receivable aging, summary accounts payable aging and some other basic financial information.
Do I have to be an established business operating a minimum number of years to start an account factoring relationship with Peacock Capital?
No. Peacock Capital prides itself on working with companies in all stages of business, including recently developed small to mid-size businesses. Even pure start-ups are usually not a problem for Peacock Capital. If your company has verifiable invoices and creditworthy customers, Peacock Capital will happily speak with you about an account receivables factoring relationship.
Are my receivables held as collateral while my company is factoring?
Yes. Peacock Capital requires a first position on all accounts receivable while youare factoring with us.
Does Peacock Capital require additional collateral when my company is factoring?
No. Within our traditional account factoring programs, a first position on accounts receivable is all that Peacock Capital requires while you are factoring. In some situations, Peacock Capital may take an available security interest in other company's assets.
Afra AmirSanjari is the Principal for Peacock Capital. Peacock Capital specializes in solving the cash flow challenges of Small/Medium Businesses, Government Vendors and Individuals with innovative financial solutions by providing a network for securing operating capital.