Frequently Asked
A/R Financing is the purchase of accounts receivable at a discount for immediate cash. A/R Financing gives businesses the power to ensure growth without diluting equity or incurring debt.
The Contract Financing Facility (CFF) is not Factoring, we do not purchase your invoice(s) at a discount, we do however, use the accounts’ receivables as collateral. Additionally, we do not engage your General Contractor or Project Owner(s) as in the case of factoring. The Contract Financing Facility can be used on both Public and Privately owned projects.
- The CFF can be used for Bonded and Non-Bonded Projects.
- The CFF supports both Sub-Contractors and General Contractors.
- The CFF is underwritten in house: Financially and Technically. Technical underwriting for project and project owner is done by a Third Party Engineering Company.
- The CFF is monitored by specific project use and by product design, and does not allow the client to be in default.
- In addition to regular cash flow, funds can be used for pass through stored materials and equipment specifically being used for that project.
- The CFF may be used only for the time needed. There is no obligation to use minimum amounts or for a specific time period.
- All funds are managed by a controlled account at JP Morgan Chase.
The overall financing cost per project may range from 1.5% to 3% of the total cost of the project.
A proposal (Pre-qualified ) means that the company has been evaluated and we are 90% sure that the facility line extended is accurate. All we need to do is the final due diligence; to confirm that information presented by client is accurate and correct. The Technical underwriting is not done at this phase, therefore, if for any reason a project or owner is not approved, we will just have to move on to the next project—the crucial thing here is that the company is approved financially and that the projects are viable. From receipt of the requested information it will take 24-72 hours to issue a proposal (pre-qualification).
We can finance multiple, on going projects, as long as their completion percentage is not greater than 30%. We can finance all new projects.
Yes, we can pay off your existing credit facilities with a bank or any other financial group.
THE WORK YOU PERFORM IS THE COLLATERAL:
1. Our only collateral we require is an “assignment of proceeds” from the project owner.
2. No personal guaranty’s required.
3. No additional collateral required.
CASH FLOW BENEFITS:
4. Buy supply materials in bulk and pay your suppliers early for a discount.
5. Pay your subcontractors, labor costs and employees on time.
6. The positive cash flow from the project(s) we finance can be used for any purpose.
INCREASE REVENUE GROWTH AND PROFITABILITY:
7. “Bid to Win” more and larger projects once our pre-approved line of credit is in place.
8. Winning one more project increases your profitability and pays for all borrowing costs.
9. Origination fees in year 2 are cut in half which further reduces borrowing costs.
Making sure that your accounts receivable is healthy is good for your business, and will help you get the financing you need. Here are three items that lenders consider when they evaluate your A/R.
Lenders shy away from business that has more than 20-25% of its A/R owed by any one customer. The risk factor greatly increases when a company has all its eggs in one basket. A default by one customer could bring down a business and cost the factor greatly. Lenders prefer receivables being spread out over a fairly even number of clients.
A lender must consider whether or not your business could survive if your largest customer goes bankrupt, finds another supplier of goods or services, or refuses to pay because of a dispute. The lender will want to feel certain that you will be able to find enough additional customers to keep your company in business. The less you are dependent upon any one customer, the more attractive your A/R will be to a lender.
Lenders look to the credit worthiness of your customers, rather than your credit strength. Just like you, they want to ensure that they will be paid. A lender will want to understand the credit check process your company utilizes in determining whether or not it is willing to do business with a new company.
Lenders also want to know for each $100 that you bill, how much do you actually collect – $98, $88, $70? The lender will want to know whether your customers generally pay you the face amount of your invoices, or rather are there often offsets, short pays, disputes, processing fees, etc. This may indicate problems in your operations such as billing or paperwork problems. Lenders need to feel confident that when you bill $100, you will collect $100. If a lender gives you a 90% advance rate, but you only collect $88 on the $100 billed, the lender will be unwilling to continue to advance you funds.