But at least these cookie-cutter explanations present an accurate definition of receivables factoring and the basic strategies involved. The same can’t be said for the information that I read about business factoring on the website and in some distributed articles from Innuity Funding. In fact, I don’t believe that I have ever read a more erroneous explanation of factoring.

On their website, Innuity basically defines factoring as:

“…a way for businesses to sell off unpaid receipts to a collection agency so the business is able to retain a portion of the sale. Factoring usually takes place when a small business doesn’t have the time or resources to pursue a customer who does not want to pay for services rendered by your company.”

Huh?! I think when you sell off receivables to a collection agency it’s called “being turned over to collections.” And you don’t sell off your receipts. A collection agency keeps a portion of the collected amount as compensation for their services. I used to work in the grocery industry and when you had damaged product or product that was close to being ou-of-date, you sold it off for whatever you could get and wrote off the difference. We called this “salvage.”

Factoring is not salvaging. Factoring is putting your assets to work proactively and productively. It is not a fire sale on uncollectable bills.

Perhaps it is part of Innuity Funding’s strategy to misrepresent receivables factoring. I actually don’t believe that they offer factoring services. They apparently offer commercial loans and lines of-credit for businesses. If anyone was considering factoring and read the Innuity definition, they would likely run away… to a commercial loan.

A method to the madness?

So, while their are a million elementary explanations of factoring out there, Innuity’s certainly is not one of them.

I am always looking out for the shining stars of the accounts receivable factoring industry. I don’t know how Mr. Eutsey eluded me until now. I stumbled across his website and was overwhelmed by the scope of this man’s empire. I’m not quite sure what that empire is, but I can tell you that there are gold mines, oil and natural gas exploration, harvesting glaciers for fresh water, an entertainment division (which may supply music and movies to the workers in the mines and on the glaciers) and some kind of consulting service that costs $7,500 for the honor of Mr. Eutsey reading your proposal. There are more costs after that but it depends on whether Mr. Eutsey deems your proposal worthy of charging you more money so he can proceed incurring expenses on your behalf.

It makes my head spin. Here I am just trying to put together a few measly resources that will help business owners identify methods of leveraging existing assets to move their businesses forward and Will Eutsey is doing it all for everyone. I am humbled to even have this man’s name featured on my blog.

Visit Mr. Eutsey’s site and read his FAQs and if you can make head or tail of what in the world this man actually does I will be most grateful. In the meantime, I will remain in awe of the asset factoring prowess and musical talent assessment capabilities of this inspiring human being.

Here’s to you, Will Eutsey…whatever you do!

The release was to announce that a company called China Security and Surveillance Technology (CSST) had reached an agreement with the Industrial and Commercial Bank of China (ICBC) for accounts receivable factoring. CSST won the bid to supply security and surveillance equipment for what is called the Kunming Safe City Project. The deal is worth 204.9 million RMB which is the equivalent of about 30 million U.S. dollars.

Essentially, the bank will acquire all of the receivables from CSST and pay CSST the entire amount due (less fee of course) upon completion of the project. The Kunming Municipal Government will then pay ICBC over a period of 5 years.

It is interesting to see factoring handled at this level. Still, the concept is identical to even the small business transactions we see. The company (CSST) sells receivables to a factor (ICBC) and gets their cash much faster than they would if they had to wait for the government of the city of Kunming to pay them. And, obviously, the bank has determined that the fee plus the value of the receivables assett allows it to make a profit. Seems to me that everyone wins.

I am going to be paying more attention to factoring assets and receivables at the international level.

When a company acquires a business loan, they present company assets as collateral for that loan. These assets are insurance for the lending organization that, should the company receiving the loan default for any reason, the lender can recoup the amount loaned by acquiring company assets.

When a company uses invoice factoring, it is a means of receiving what is essentially an advance on income that is anticipated anyway. It puts your own money in your hands faster. With a loan, it puts someone else’s money in your hands and you guarantee repayment.

I think that it can be somewhat misleading to represent revenues received from receivables factoring as the equivalent of a loan. While factoring does give you money to work with that you wouldn’t ordinarily have, it is still your money.

Gregg describes three factoring processes:

1. Purchase order financing

2. Receivables financing

3. Inventory financing

Of course, all these are forms of factoring in that they anticipate revenue and leverage that future income.

There is a lot of information out there and I’m trying to keep up with it all.

One very appropriate concern that is raised is the perception that clients may develop about your business based on the use of invoice factoring. All of a sudden there ia a third party in the mix and that may send the wrong message about the solvency of your enterprise to clients whose invoices are being factored. I believe that communication with clients is critical in this instance and a call or email to a client letting them know that you are leveraging the strength of your receivables by factoring is appropriate. It may also prompt a speedier response to clients that realize the effect that their payment process is having on a key supplier.

But don’t count on it.

What I liked about this blog post was that it expalined the concept of invoice factoring in a manner that speaks right to the experience of a real small business owner. The article take a problem/solution approach and offers a scenario which may be only too familiar to an independent business person. What do you do when you need cash quickly to keep your business solvent and viable. The team offers the concept of invoice factoring as a means of leveraging an asset and expedite the flow of cash back into the business.

Good to see that the local education community is looking out for the local business community in Corpus Christi.

It is obvious that factoring invoices, or at least the concept behind the practice, has been around for centuries. Now I’ll have to do a little digging and come up with a more detailed overview of the long history of leveraging receivables in the form of factoring.

Sounds fascinating, doesn’t it?

A look at their website provides insights into the way that a company of this size views factoring of receivables. I did not find one mention of the word “factoring” on the GEHFS website although the site did mention that, “Our underwriting expertise in valuing real estate, receivables, inventory and cash flow ensures that our customers obtain the optimal financing structure and maximum leverage capability for any given situation.”

So factoring receivables is essentially providing financing against another asset. This is correct but it is interesting that it is not referred to as factoring. Guess that the big boys view themselves as more complex and sophisticated than firms specializing in factoring.

Snobs!