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FAQ
Does my company have to be profitable to factor?
What if we are a new business with limited or no credit history?
Am I required to provide Certified Financial Statements?
How long is your contract term?
What types of businesses qualify for factoring?
Do you have any geographic restrictions?
What is "recourse?"
Do you require personal guarantees?
What if my company has an outstanding tax problem or is in bankruptcy.
Do you offer purchase order financing?
Who do our customers pay?
What is a "UCC" why do you need one?
- Does my company have to be profitable to factor?
Not necessarily. Factoring allows you to leverage the credit standing and financial strength of your customers to your advantage. If analysis proves your company has the ability to grow and improve profitability by factoring and your customer base is creditworthy, you will qualify even when reporting negative profits. - What if we are a new business with limited or no credit history?
Same situation. The decision is largely dependent upon the strength of your customer base. You may be asked to provide your business plan, financial projections and/or resumes of the owners showing the qualifications to run the new business but if your company is selling quality goods or services to credit worthy customers, we can help.
- Am I required to provide Certified Financial Statements?
No! We love it when your CPA can provide certified financials but they are not required. In limited cases where questions arise on the financials, we may ask to see corresponding tax returns to validate or confirm some information.
- How long is your contract term?
Typically one year. If you have a need for a shorter term, we are open to discussions. The term is another of the items stipulated in the written proposal you receive. Factoring is considered by most to be a short-term financial solution with the typical relationship extending 18 to 24 months. At the end of a successful factoring relationship, your business will have progressed to the point you qualify for more mainstream methods of finance. We'll even introduce you to financial sources when you are ready.
- What types of businesses qualify for factoring?
It is easier to tell you the companies we don't factor. We do not work with companies dealing in third-party medical payment and certain kinds of construction. Other than that, PCG purchases valid accounts receivable from all manner of manufacturers and service companies doing business with credit worthy customers.
- Do you have any geographic restrictions?
No. We have the ability to work with clients across the country.
- What is "recourse?"
Most clients agree to repurchase any invoice that has not paid at the end of 90-days and this is known as factoring with recourse. The client becomes responsible for collecting any amounts unpaid after 90-days. PCG offers both full recourse and non-recourse factoring. In non-recourse factoring, PCG assumes all the credit risk and if an invoice does not pay, the client has no obligation to repurchase it. The non-recourse option is generally available only to those doing business with large, credit worthy companies and generally commands a higher factor rate. Even non-recourse items are subject to client repurchase if an order is returned, disputed or fraud is involved.
- Do you require personal guarantees?
Most of our clients are required to sign personal guarantees and this provision extends to any individual holding 10% or more ownership in the company. In certain situations, such as a public company in which management holds little or no ownership, we accept Validity Guarantees from management in lieu of personal guarantees.
- What if my company has an outstanding tax problem or is in bankruptcy.
PCG works with both situations. Your taxing authority can be encouraged to put a pay agreement in place or, if a lien has been filed, to obtain a written order approving your funding. PCG may be required to remit the agreed payments directly to the taxing authority on your behalf. With bankruptcies, we work directly with your attorney to obtain the courts' permission to fund your company post petition. In both instances, there are costs involved with these extra steps and your initial funding could be delayed pending resolution of your particular situation.
- Do you offer purchase order financing?
We do not offer PO financing as a stand alone product. We sometimes accommodate established clients with occasional requests for PO financing provided we can verify every facet of the transaction and the time required to bring it to convert the PO to an invoice is of a limited duration.
- Who do our customers pay?
PCG owns the factored invoices so, while your client can continue making remittances payable in the name of your company, they will be instructed to send the payments directly to PCG. Customers needing to wire or ACH funds will be provided with new instructions for sending payment to PCG. Because PCG reports your customer's payment history to the credit bureaus, many times your customer will pay PCG quicker than normal to protect their ratings.
- What is a "UCC" why do you need one?
The Uniform Commercial Code is a standardized set of state laws governing a wide range of commercial transactions, such as factoring, that was adopted in the 1950s. It legally puts others on notice that PCG has a lien on your accounts receivables. Industry practice is to file a "blanket" UCC on all customer receivables due to the sheer impracticality of filing on each individual invoice that is funded. After our initial filing, PCG periodically checks the UCC records for new filings to determine is anyone else has filed liens or judgements, including the IRS or bankruptcy courts.