FACTORING / BUSINESS CREDIT
Here at Vectra Bank, our goal is to deliver innovative working capital services that support your business and help you achieve full growth potential. To do this, we offer a flexible source of funding such as factoring. This often provides available capital for growing or transitioning businesses, in various industries, as a bridge to conventional bank financing.
WHAT IS FACTORING?
Factoring is working capital financing provided through the discounted purchase of qualified accounts receivable, typically offered to rapidly growing companies or businesses transitioning financially. The factor purchases eligible invoices from a completed service, or accepted product, and essentially transfers the credit risk from the client to the client’s customer.
- Invoice issued by client to customer
- Invoice is sold to ABBC
- Cash is used by client for growth, payroll, and/or other expenses
- Invoice pays through client's lockbox
- ABBC receives payment
- Client receives reserve amount less fees
Great, so you understand the product and basic process. Would you be interested in hearing how we may be able to offer you a better structure and price with a bank managed factoring facility?
It certainly can be more expensive than traditional bank financing but for the additional flexibility, frequently it is a trade-off that many companies are willing to make. Plus, it is viewed as bridge financing, a 6-36 month solution on average.
If you have an existing line of credit and you are happy with the structure and line amount, you should not look at making a change.
Our customers actually prefer using our lockbox as we handle their invoice collection paperwork and all the information is available online wherever/whenever they need to see it.
BENEFITS OF FACTORING
ACCELERATE CASH FLOW
Accelerate cash flow with a business-to-business accounts receivable financing. When a loan or line of credit isn’t quite right for your business, consider factoring finance. You can get up to a 90% advance against the face amount of your chosen business-to-business accounts receivables invoices, and the day after your customer pays, the remaining amount is put in your Vectra Bank® checking account less the fee for financing the invoice.
The only requirement is that the account receivable be for a completed business-to-business service or physical items that the customer has received title for. It’s that easy to get cash in a few days instead of a few months from your customer.
IMMEDIATE CASH WITHOUT DEBT
When you choose factoring you can access immediate short-term cash without taking on short or long-term debt, and, without diluting equity by giving an ownership stake to an investor in exchange for cash. Also, you can quickly access cash to support operations, make payroll, or purchase goods. You don’t lose money by giving discounts to customers to get them to pay more quickly.
EVEN MORE BENEFITS
- No contracts
- No termination notice needed if you move from factoring to another Zions Bank financing solution
- Flexible - you choose which invoices to factor
- No financial performance covenants needed
- Competitive rates and next-day funding available
- Valid with domestic and/or foreign receivables
- Credit assistance and free D&B reports for your new customers
IS FACTORING FINANCE RIGHT FOR YOUR BUSINESS?
Companies that don’t fit traditional lending requirements or whose financial needs are growing faster than a bank’s willingness to lend money benefit from factoring. These include:
- New businesses
- Business owners with lower personal credit scores
- Companies that are highly leveraged or cash-flow-tight
- Seasonal companies
- Companies with tax issues, such as past-due payroll taxes
- Companies that have undergone a recent disruption
- Companies with a high or single customer concentration
- Companies that are highly leveraged or cash-flow-tight
- Companies that can’t support financial performance covenants
- Rapidly growing companies
COMPANIES AND INDUSTRIES SERVICED
- Staffing
- Service Companies
- Trucking
- Energy
- Manufacturing
- Wholesalers / Distributors
- Government Contractors
BUSINESS CHALLENGES
At Vectra Bank, we recognize that business challenges sometimes create non-traditional banking needs. In these situations, a more aggressive source of working capital financing may be the answer but also may be difficult to find. We look at the following challenges as opportunities to explore creative funding solutions for our customers and prospects:
- Newly formed, early stage
- High-growth
- Seasonality
- Acquisitions
- New large orders
- Owners with limited net worth and/or damaged credit
- High debt or inadequate company net worth
- Highly-leveraged
- Leveraged or management buyouts
- Inadequate advance rate
- Turnaround or restructure
- Unhappy with existing factoring or asset based lending relationship
- Payroll tax issues or liens
- Bankruptcy (DIP)
- Non-compliance with required loan covenants
- Inadequate existing revolving loan facility
- Loan facilities anticipating decline
- Concentration
THE VECTRA BANK BUSINESS CREDIT ADVANTAGE
- Years of combined business credit experience
- Unlike independent Business Credit providers, your funds are federally insured
- Our low cost of capital allows for competitive client pricing
- Flexible program compared to big bank structures
- Advance rates up to 95% of the invoice amount
- No exit fees with 60 day notice and no long-term commitments
- Bridge financing that potentially leads to a traditional bank facility
SUCCESS STORIES
Learn more about how the Vectra Bank Business Credit division has provided credit financing to various industries across the country.
DEAL SUMMARY
DATE FUNDED: April 2016
RELATIONSHIP MANAGER: Tia Kavas, A/R Relationship Manager
REFERRAL SOURCE: Downtown Commercial Banking
COMPANY DESCRIPTION
A well-established Denver company involved in the distribution of food products. As a distributor, they operate on thin margins and cash availability is very important to the company. Our factoring facility enables the company to take advantage of cheaper vendor prices, buying in bulk or in advance.
FINANCING DESCRIPTION
FACILITY: $1,750,000
ADVANCE RATE: 85%
TERM: No term, 60 day notice to terminate
NOTABLE ASPECTS
The company had an existing $1,5MM LOC with a competitive bank and were struggling with some of their profitability covenants, due to the rise in commodity prices. The bank posed several restrictions regarding account debtor concentration and cross aging, which restricted the company’s availability and ability to grow. Business Credit was able to approve a larger line of credit, with no concentration restrictions. They also opened up a Vectra Bank lockbox and business checking accounts.
The company will utilize the factoring facility until they qualify for a more substantial conventional line, which is estimated to be in 12-18 months.
DEAL SUMMARY
DATE FUNDED: 2016
RELATIONSHIP MANAGER: Tia Kavas, A/R Relationship Manager
REFERRAL SOURCE: North Metro Business Banking
COMPANY DESCRIPTION
A newly established asphalt maintenance company experiencing rapid growth, doubling in revenues from the first year in business.
FINANCING DESCRIPTION
FACILITY: $750,000
ADVANCE RATE: 85%
TERM: No term, 60 day notice to terminate
NOTABLE ASPECTS
The company had an existing small LOC with Vectra Bank, but quickly needed a larger working capital facility. The company had actually moved to another factor, but the Bank was able to introduce its factoring option. The Business Credit team provided more favorable terms to the client while also moving the entire relationship back to Vectra. The client currently has a small traditional LOC in addition to their factoring facility. The company also opened up a Vectra Bank lockbox and business checking account.
The company will utilize the factoring facility until they qualify for a more substantial conventional line, which is estimated to be in 12-18 months.
FORMS
The following forms are available online:
CONTACT US
For Conventional Working Capital Financing and to start the cash flow process, feel free to contact us.
Rory Jaret
Accounts Receivable Relationship Manager
720-947-8361
Rory.Jaret@amegybank.com