[Tim Bastian]

Hi Mike,

Have from time to time bumped into factoring arrangements.  My understanding is that there are some industries where factoring is very common, such the clothing business.  Essentially factors will discount the AR you are owed and pay you more promptly,  there are many larger companies that tend to try and force this on vendors, even if they are doing internally and profiting from it. When we receive a notice from a factoring company who has a deal with a vendor, we often begin looking for other vendors, the cost of factoring is relatively high compared to other forms of finance, there maybe recourse for past due amount, it is a red flag of sorts. It all depends on the terms of the agreement, at the end of the day you are inserting a third party into the equation with your customer or in some instances re-negotiating terms of sale after the fact.

You may want to speak to your banker about EXIM bank products that could do the same thing. A lot depends on the transaction size and frequency along with strength of your AR as to whether they will do single account deals or want to consider portfolio program. your banker should be able to advise as to other companies that may buy the AR on a go forward basis. Your own financing agreements that may pledge AR  as collateral could be a stumbling block to some products or programs.

There are options out there that may give you better control for lower cost.

 

Thank a great day.

 

Tim Bastian