The paragon factor: FAQ.
Paragon does it all so you can focus on what you do best - running and growing your business.
How is factoring different than a loan from a bank?
Factoring is the purchase of a company's accounts receivable as opposed to a loan that creates debt on the balance sheet. You are simply speeding up your cash flow with factoring by utilizing an asset your company already had. Factoring focuses on the creditworthiness of your customers while banks focus on your company's financial history and cash flow. Accounts receivable funding is not a loan, therefore provides you with less debt on your company's balance sheet. Paragon Financial can make a quick funding decision, while banks may take weeks—even months—to approve a loan.
How long does it take to receive the first funding?
The initial funding takes between 3-10 business days after we receive your signed agreement. If you wish, you can send some invoices to be funded with the signed contract in order to expedite your funding.
What information will you need from my company to begin the accounts receivable
funding process?
A short application, your company's most recent accounts receivable and accounts payable aging reports, articles of Incorporation or d/b/a filing, a master customer list and a sample invoice.
Do I have to factor all of my invoices when I start factoring?
No. You decide which invoices you want to factor and which invoices you want to keep as your own. There is no requirement to factor all of your invoices.
How much of my company's accounts receivable can be funded?
We can fund up to 100 percent of your company's creditworthy accounts receivable and depending on the industry, we may fund up to 92% advance.
Which customers would be good candidates for accounts receivable funding?
Usually 80% of your business comes from 20% of your customers and these would be the most likely to factor, however, we will factor 100% of your customer base so long as they are credit worthy. In order to approve your customer base, we will need their names, addresses, phone numbers and the amounts of credit desired for each client. This will save you time when submitting invoices to us.
Will my company be eligible for accounts receivable funding if it has a bank loan
or line of credit?
If a bank has a lien on your company's accounts receivable, you should let us know right away. We will ask the bank to subordinate that lien. Some banks will accommodate the request and others may decline depending on your circumstances. Our number one referrals come from loan officers willing to help out the client in cash flow needs. They are very familiar with this kind of interim financing. The other alternative is to pay off the loan if there are plenty of receivables to leverage the buy out.
How can I be certain that your company will treat my customers well?
The last thing we want is for you to lose a customer. We are not a collection agency. We will never harass your customers for money. Maintaining your customers' goodwill and confidence are of utmost importance to us!
What will my customers think?
Factoring has become very common and most companies realize that rapidly growing companies require more working capital than traditional banks can provide. It's very likely that your customers have already sent payment to a factor in the past.
How will my customers know where to send payment for invoices that I have chosen to factor?
Your customer will be notified to pay us directly. When invoices are factored they will be stamped with the address to send payment to prior to being mailed to your customer. Your company should never deposit invoice checks that were already purchased by a factor.
Are my receivables held as collateral?
Yes. A first position on all accounts receivable is required while you are factoring.
Is additional collateral required?
No. Unlike traditional bank financing, factoring does not require that all assets of the business be offered as collateral.
What if we no longer need factoring?
With most factoring companies you can terminate the agreement with a 30 to 45 day notice. You should estimate your needs in advance to determine which term length meets your needs best to avoid any early termination penalties. We currently offer: month to month, 3 month, 6 month, and 12 month options. Never sign a deal with a factor for term length over 12 months.
