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 Procedure: Steps Involved in Factoring
1. First, you need to qualify and establish a formal factoring relationship with us. That typically takes a week. A critical part of our due diligence process is doing credit checks on customers whose invoices you want to factor. If their credit rating is good, despite the bad economy, you probably qualify. However, if none of your customers have a decent credit rating; your business will not qualify for factoring. In addition, as part of our due diligence process, we will run a criminal background check on you. Although we really don’t much care about your own credit rating, it is important for us to know what type of person we are potentially getting involved with. Once a factoring relationship is established, you can typically obtain cash from us within a day or two.
2. The customers whose invoices you want to factor will receive a simple one page document (signed by both of us) called a Notice of Assignment. This letter informs your customer that your company has recently established a line of credit with Fuller Business Funding. Subsequently, all payments are to be sent to our PO box.
3. To sell an invoice, you fax or e-mail us a copy along with a signed statement listing the invoices you wish to factor(sell). After a day or two, via the internet, we electronically deposit the bulk of the invoice amount directly into your bank account. In essence, our advance to you functions like a huge down payment on the sale of the invoice. However, the actual sale price of an invoice can’t be determined though until your customer pays. Once we receive payment, our software program will calculate the accrued discount. To determine how much of the payment belongs to us, the software then adds the accrued discount to the advance. That total is subtracted from the payment. Assuming there are no shortages and chargebacks, the remainder belongs to you. Like the advance, the rebate is transferred into your bank account.
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