Orange Commercial Credit

Frequently Asked Questions

WHY FACTOR?

A steady and predictable cash flow is crucial to the success and profitability of every business. All too often a business will find the majority of their working capital tied up in the accounts receivable. Listed are just some of the ways your company can benefit from factoring:

Immediate Cash

OCC offers funding of your qualified receivables in less than 24 hours.

No Set-Up Fees

There are no charges to process your application to qualify you for our program.

Working Capital

Factoring is the only financing mechanism directly linked to your company’s sales. As sales increase more money becomes immediately available to you. This allows you to meet increasing demand for your products and/or services.

No Debt Incurred

Factoring is not a loan, therefore no debt is incurred. It is your money being advanced to you before your customer pays the invoice. This keeps your balance sheet looking good making it easier for you to obtain other types of financing.

Builds Credit

Factoring protects and improves credit ratings by providing your business with the adequate cash flow to pay vendors promptly and even take advantage of trade discounts.

No Geographical Limits

OCC can work with a client in any part of the country and factor any account within the United States or Canada.

Credit Management and Consulting

Our extensive credit and accounts receivable management assistance is available at no charge and is often less costly than maintaining your own in-house credit department. We serve as your credit department, accounts receivable department, and collection department.

Invoice Processing

OCC handles all the work associated with processing your invoices including mailing them and paying for the postage, posting invoices to a computer, depositing checks, entering payments and producing regular reports.


FACTORING COSTS

When you extend credit to your customer by offering payment terms, you become their BANKER! In effect, you loan your customer money for 30 days or more, INTEREST FREE, and lose the use of that money while waiting to be paid.

EXTENDING CREDIT impacts your company in three major ways:

  1. You lose the ability to earn interest on the money you are effectively loaning to your customers.
  2. You can’t take advantage of purchase discounts from your vendors when funds are not available.
  3. You lack the capital to produce new, or larger jobs.

OCC offers both a fixed rate and variable rate program. Full advance, no reserve programs are available. Fees will vary depending on industry conditions, the credit strength of your customers and their payment history.

Orange Commercial Credit recognizes expenses must be kept to a minimum in every organization. However, it is interesting to note most businesses that utilize Factoring find their revenues increase considerably more than the cost of the factoring service. You have a ready source of predictable cash when you need it the most and all the benefits of a well-trained staff without the overhead.

Our cash funding will help to ensure you never lose business to a competitor who is better financed. Why not make the investment today and turn your invoices into immediate cash?


GET THE FACTS

Shopping for the right financing program for your company can be a challenge. Each Finance Company operates differently, therefore fees and services may vary considerably. The following information has been developed as a guideline to help you in the decision making process. Take a moment to carefully read this information. Whether you ultimately decide to utilize our services or the services of another Finance Company, please be sure you have answers to the following questions before you sign any letter of commitment or Security Agreement. We hope this makes the challenge of shopping for the best possible finance program easier.

UCC-1 Filings/Proposals

Some factors will present what appears to be a “non-binding” proposal to your company to get the ball rolling, so to speak. Do not sign a proposal which contains language authorizing the factor to record a UCC-1 Financing Statement on you and your company. This effectively means that you have just legally allowed the factor to take a secured position on all the assets of your business (equivalent to recording a deed of trust on a piece of property). In the event you change your mind, and do not wish to pursue a business relationship with this particular factor, you will be faced with the unpleasant task of getting the lien released. Often times, the factor will charge you a fee to release the UCC filing.

Proposal/Security Agreement

Do not accept a Proposal as being the underlying document to your Security Agreement. Proposals typically present the bare minimum facts and will not emphasis the more unpleasant parts of the actual Security Agreement such as guaranteed minimum fees, actual contract terms, audit fees, line renewal fees, etc. The factor is betting you will simply sign their Security Agreement and assume that all the pertinent contract details were outlined in your proposal.

Master Agreement

Do not sign any agreement which states you agree to “the terms and conditions” posted on an internet site if you cannot access the referenced internet site, view, and print out a written copy of said “terms and conditions” for you to carefully review. Recently we have seen many trucking companies fall into this trap. Certainly you have heard the expression, “Moving the goal post”. Without a written, physical copy of an executed Security Agreement signed by all parties, how can you be sure the rules of the game don’t change?

Length of Contract

Be sure to read the termination clause in your contract, do not take the word of the factor’s salesperson. The term “90 day minimum” may be used. But if you read the actual contract terms you only have a 30 day window from the date you sign your contract to terminate, otherwise you are locked in for up to another year and a half. Many contracts provide a very small window in which to terminate. In the event your funding becomes less reliable, or there is a breakdown in your relationship with the factor, can you go somewhere else without paying unreasonable termination fees? If a factor has confidence in the level of service they provide, there is no need to lock customers in to long term contracts with a limited 30 day window each year in which to terminate.

Line of Credit

What is your maximum line of credit and will it be sufficient? In the event you experience an unexpected growth spurt and require additional funding, how long can you expect it to take to increase your line? Will it have to go to a loan committee where your request can sit for several weeks or months?

Covenants

Are there specific financial requirements your company must meet in order to maintain this line of credit? If your company does not meet one or all of these requirements, will funding cease immediately?

Flexibility

Are you required to sell all of your invoices or can you select the accounts yourself? How much control of your business do you keep?

Funding Policies

How long will the factor need to process and fund your invoices? How will these funds be transferred to you? Are there any charges associated with a wire transfer? Will your bank charge you when they receive the wire transfer?

Advance Rate

This number can vary anywhere between 75%-95%. Be sure your advance provides you with enough cash to operate your business.

Fees

Make sure you understand exactly what you will be paying for the factoring line. Are there any ambiguous references with respect to fees you do not clearly understand? Are you obligated to pay fees to the factoring company monthly even if you do not utilize their services? Does the factor have different rate structures? For example, will your rate double when a payment is received by the factor on day 16 instead of day 15? Get any necessary clarifications in writing.

Fee Statements

Request sample copies of fee statements from your factor. Do you understand these reports? You don’t make money trying to analyze your month end fee statements from your factor. These reports should be easy to read and uncomplicated.

Credit Checking and Analysis

Will the factoring company run credit reports for new or existing customers? If credit agencies have limited information, are they willing to call on credit references themselves to help accommodate you? Are you charged any additional fees for this service?

Credit Approval

How does the factoring company determine which customers of yours they will accept? Are your customers required to have a Dun and Bradstreet rating in order to be approved? Be sure to confirm they will accept the customers you want to factor at the volume you need in order to operate your business.

Collection

Who is responsible for handling calls on delinquent accounts? Are you charged additional fees for these services such as long distance telephone charges, faxes sent on your behalf, etc.?

Lock Box

Sometimes a lock box system is used for payment processing. Your customers’ checks are mailed to a special post office box-referred to as a lock box-where they are immediately deposited into the factoring company’s bank account. When will you receive credit for these payments? Often there is a two or three day “float” or delay.

Float Days

Some factors will deposit your customers’ checks and wait to give you credit for these monies for an additional two to four days. While they are collecting interest at the bank on these funds, your fees are still accumulating if you are not on a flat rate.

Miscellaneous Fees

Here are a few examples of some fees which may be hidden somewhere within your contract.

    Audit Fees: Your contract may require an annual audit to ensure the financial stability of your company. The cost of this audit is most likely your responsibility.

    Invoice Fees : You may be charged an additional fee for every invoice you submit for funding. If you are charged invoice fees be sure to calculate your costs.

    Report Fees: Sometimes there will be a charge for report information on your own account.
    Filing Fees: Some companies pass along all charges they incur with respect to perfecting their security interest with the Secretary of State.

Service and Experience

Does the factor offer value added services to the funding they provide? Do you have to pay for any of these services? Will there be personalized attention to your account whenever you need it, or do you always have to leave a message in someone’s voicemail? What is the depth of the factor’s knowledge and experience in your industry?


FACTORING VS. BANKING

Conventional bank borrowing is generally more difficult to secure and takes much longer to consummate than factoring. Many small to medium sized companies are often turned down by banks due to the regulatory environment of the commercial banking industry. One reason, of course, is that banks must approve loan applicants on the basis of historical financial performance rather than potential for success.

At OCC, we offer a non-competitive alternative to traditional bank loans providing businesses with a reliable source of working capital through accounts receivable factoring.

Qualifying for Factoring is much easier than traditional bank financing. This is because we do not extend credit to our clients directly; we extend credit to our client’s customers . This means a company with credit-worthy customers may be eligible to factor even though they do not qualify for a bank loan.

With a minimum of processing time, you are able to discount your trade receivables as an immediate source of cash to meet current operating needs or other capital requirements. OCC’s Factoring programs allow businesses to establish a level of funding based on sales activity that is consistent with daily cash flow requirements.

Here are a few examples of businesses OCC can offer immediate assistance:

    • Undercapitalized companies
    • Startup companies
    • Companies experiencing seasonal or rapid growth
    • Highly leveraged companies
    • Companies with poor credit history or a bankruptcy in their past

OCC has worked closely with the banking community for many years to create a secondary source of funding for promising companies.