Factoring is a corporate finance technique that enables a company to either:
- Transfer the credit risk of its accounts receivable to a third party and/or;
- Leverage its accounts receivable to accelerate its working capital through the sale of its accounts receivable to a third party.
Single Invoice Factoring (Spot Factoring)
- Ideal solution for start-ups or firms simply in need of immediate cash
- Does not require a multi-year contract
- Provides the company with the flexibility of selling invoices to Capstone, only
when working capital is needed
- No obligation to sell a minimum number of invoices per year or over the term of a
Structured for development-stage companies, discount factoring involves the selling of invoices at an advance amount less a commission. Typically, Capstone purchases each invoice or assignment schedule from the client and then pays out a working capital advance each time a schedule of accounts receivable is sold to Capstone. The reserve amount is disbursed to the client after the account debtor pays the amount due under the factored invoices to Capstone. The reserve account is the difference between the amount
paid and the amount advanced by Capstone, less any commissions earned.
More commonly known as Factoring, this structured transaction has two components.
1. A factoring commission is charged against the face value of the invoice amount in exchange for Capstone taking on the credit risk on the accounts receivable
2. An interest rate is charged against the advance, if one is requested.
The interest charges run through the date the account debtor pays the invoice and is deducted from the invoice payment along with the commission charged for guaranteeing the creditworthiness of the account debtor. Companies with a positive net worth and profitable operations qualify for this type of factoring.
With flexible factoring structures, Capstone will customize a program specific to your business that will help achieve your growth goals.