Receivable Factoring


1. What is receivable factoring?
A business seeking funds assigns its outstanding invoices to Monetrex in exchange for immediate funds. This assignment/purchase procedure is historically referred to as "factoring."
2. Why would a business use factoring?
The company needs funds now, rather than waiting the typical 30 to 65 days to receive payment from its customers. In a "tight money" economy, the wait can be much longer.
3. Why would a company use factoring, rather than borrowing from a bank?
  • Factoring appears to be more expensive than a bank loan, so most companies will try for bank financing first. However, many companies cannot qualify for bank loans for a variety of reasons. Their next choice could be factoring.


  • Second, even if bank funds are available, a bank loan typically is not good for a new or fast growing company. Most banks approve a fixed line of credit. A new or fast growing company usually utilizes these funds within a short time. Most banks will not consider increasing a new loan for 6 to 12 months. This can stifle the company's growth.


  • Third, a bank requires a full personal guaranty for the borrowed funds, and often requires a lien on the business owner's home. A factor does not require this. The factor looks to the credit strength of your customer for assuring collection, without your having personal liability (except for fraud and misrepresentations).
  • 4. Does Monetrex reject certain new clients based upon their financial condition or poor personal credit history?
    Usually not. Monetrex works with many situations, including companies in very serious financial condition.
    5. What is the advance amount for factored invoices?
    Monetrex usually advances 80% to 90% of each invoice, with the balance (less fees) returned to the client when the invoice is paid by the customer.
    Refer to the Example Regular Factoring Situation.
    Refer to the Example Draw Factoring Situation
    6. How expensive is factoring?
    The cost of factoring typically is a function of the industry involved, as well as the credit risk associated with the company's customers. Factoring costs (including all administrative services) generally run between 2% to 5% of a company's invoices that are factored. This compares with a typical bank loan that costs 1.5% to 2% of a company's total sales, PLUS the company still has additional administrative costs that otherwise would be handled by the factor.
    7. Won't this cost seriously cripple my business?
    Although factoring appears to be expensive, it really is not. In most cases, a Monetrex client is able to increase its gross sales by 30% to 100% within 6 months of starting the factoring, because the funds are now available for growth, and "peace of mind." These extra sales, plus the administrative tasks no longer performed by the client's staff, usually translate into additional, bottom line profits. Taking all this into account, it is possible that the factoring has a net cost of zero, which is better than bank funds! In essence, the factoring funds are a "tool" by which the client can increase its profits.
    8. Are my customers notified of the factoring arrangement?
    Yes, but Monetrex does so in a very professional manner in conjunction with suggested communications signed by the client to its customers.
    9. Won't this hurt my business reputation?
    Typically not. Most of your customers know what factoring is all about, and probably are working with other factored accounts right now. If anything, the presence of factoring suggests that you have financial and administrative strength behind your operation, and that you have used sound judgment for creating a strong customer base. With these credentials, you should be able to get more business out of the same customer base. We acknowledge, however, that there still are some "Neanderthals" out there who dismiss factoring as a legitimate funding vehicle. Our suggestion: tell them you have little choice but to put them on COD or you will need to start charging a fee for payments made beyond your stated terms.
    10.  How fast can a Monetrex factoring be set up?
    Monetrex undertakes due diligence and back ground analysis before entering into a factoring arrangement with a new client. Usually, a transaction can be completed within 5 to 7 business days from receipt of the Preliminary Application (see "Apply Here" on this web site's navigation bar). This also gives the client an opportunity to "think through" the process, rather than rushing into it.
    11.  Is a Monetrex client bound to a minimum contract term?
    No. The client can cancel at any time. Thus, factoring might be a good stop gap financing while the client is attempting to secure investor funds or a possible bank loan. Both of those sources usually take 2 to 4 months to fund.
    12.  Are there regular audit fees or hidden costs?
    No.  Unlike most banks and many private lenders, Monetrex does not charge for routine office audits or associated professional fees.  Also, Monetrex does not require its clients to furnish special acounting reports.   We even reimburse our clients for the cost of overnight delivery of invoice documentation.


    Asset Based Funding

    1. What is asset based funding?
    Monetrex provides funds based upon the value of the client's entire asset base - receivables, inventory, machinery and equipment. Sometimes, real estate is included.
    2. Who determines values?
    Monetrex examines values, and in some instances, uses outside appraisers.
    3. What are the advance rates for the various assets?
    There is not a set formula. Each situation is analyzed on its own merits.
    4. How fast can this be set up?
    Monetrex undertakes due diligence and back ground analysis before entering into an asset based financing arrangement with a new client. Usually, a transaction can be completed within 7 to 10 business days from receipt of the Preliminary Application (see "Apply Here" on this web site's navigation bar), unless outside appraisers are needed.
    5. Is a Monetrex client bound to a minimum contract term?
    No. The client can satisfy all amounts due to Monetrex at any time. Thus, this financing might be a good stop gap while the client is attempting to secure investor funds or a possible bank loan. Both of those sources usually take 2 to 4 months to fund.

    Back to Top


    Equipment Sale-Leaseback

    1. What is it?
    This is a form of financing whereby the client uses its machinery and equipment for obtaining funds. Procedurally, the client sells its machinery and equipment to Monetrex, and then the client agrees to lease it all back for a fixed monthly rent.
    2. Can the Client ever obtain ownership again of its assets?
    Yes. Most leases contain a small buy back price for all these assets at the completion of the lease term.
    3. Who determines values?
    Monetrex examines values, and in most instances, uses outside appraisers.
    4. What is Monetrex's purchase price for the machinery and equipment?
    There is not a set formula. Each situation is analyzed on its own merits.
    5. For how long is the lease?
    This is determined based upon the client's capacity for making the monthly payments. A typical lease is 2 to 5 years in duration.

    Back to Top


    Purchase Order Funding

    1. What is it?
    This is a form of financing whereby the client uses specific contracts or purchase orders from specific customers for obtaining funds in order to complete the contract's requirements. Procedurally, Monetrex and the client analyze the use of funds needed on a contract by contract basis, usually for either material purchases, or labor. Monetrex then provides the necessary funds, sometimes directly to the suppliers.
    2. What is the advance rate?
    There is not a set formula. Each situation is analyzed on its own merits.
    3. For how long is the relationship?
    It is maintained until each financed purchase order is completed, and the client can issue a bonafide invoice for the product or service. This type of funding is best used if the related contract is completed within 60 days of the funding.
    4. Who should use this type of financing?
    Typically, only companies that have a successful track record for completing the work required should look to this form of funding. Additionally, since fees (due to risk) are quite high, the client should be assured of a large gross profit margin from the contract.

    Back to Top

     Application - Online

     Application - Word Document

     Frequently Asked Questions
    - Receivable Factoring
    - Asset Based Funding
    - Equipment Sale-Leaseback
    - Purchase Order Funding



    2000 Monetrex Inc.