Frequently Asked Questions (FAQs)
To help our clients and those new to factoring, here are some of the most commonly asked questions and brief answers to get you started.
- What is factoring (accounts receivable financing)?
Investopedia defines accounts receivable financing as “a type of financing arrangement in which a company receives financing capital related to a portion of its accounts receivable.”
- What is the difference between a factor and a broker?
A factor is a funding source that uses its own capital to purchase accounts receivables from its clients. A broker does not provide funding. Instead, the broker works as a middleman, connecting businesses with lenders for a fee. United Capital Funding is a factor.
- How is factoring different from a traditional bank loan?
As a verb, to factor is the act of buying or selling accounts receivables. This is the defining difference between a bank loan backed by accounts receivables or other collateral. Since factoring is not a loan, no debt is recorded on your balance sheet.
- Can I factor if I have an outstanding bank loan or line of credit?
In most cases, yes. If you currently have an outstanding loan, you may have pledged your accounts receivables as collateral. If this is the case, United Capital Funding will work with you and your current lender to structure a subordination agreement.
- Who is United Capital Funding owned by?
United Capital Funding is a wholly owned subsidiary of Gulf Coast Bank & Trust Company, an FDIC-insured bank headquartered in New Orleans, Louisiana.
- What is United Capital Funding’s source of capital?
Our single source of capital is through our parent company, Gulf Coast Bank & Trust Company, an FDIC-insured bank headquartered in New Orleans, Louisiana. We also provide updated financial information published by our company.
- What industries does United Capital Funding work in?
United Capital Funding provides accounts receivable financing to businesses nationwide with over $25,000 in monthly sales volume. We specialize in the following industries: staffing (temporary employment agencies), manufacturing, service, information technology (IT), security, consulting, distribution, government contracting, and telecommunications.
- What are your fees?
Each proposal features custom pricing, and we are proud to offer our proposals at no cost. This means you will encounter no application, documentation, due diligence or closing fee. You will typically only encounter two types of fees that begin at the start of funding – a fee for the cost of the capital and a banking fee (ACH or wire transfer charge).
- Will you check my credit?
Our soft inquiry credit check has no impact on your credit score. Yes, we do check your credit using a method called a “soft inquiry.” Soft inquiry credit checks are typically used in seeking preapproval on a credit card or checking your own credit. Soft inquiries do not have an impact on your credit score.
Whereas a hard credit inquiry is used to apply for credit like a mortgage or car loan. We do not process hard inquiry credit checks.
- Do you work with startups (new businesses)?
Yes, United Capital Funding works with brand new businesses. Any business with non-consumer accounts receivables in place has the right structure to consider factoring. We do ask that a business has at least $25,000 in monthly sales volume prior to completing an application – keep in mind, a business is not required to factor this volume every month.
- My company is not in financial trouble; can I still use a factor?
Yes, a majority of our clients sought factoring because of growth and either could not secure a bank line or its bank would not amend its credit limits. Factoring has helped our clients better manage its cash flow and secure new business. Click here to read our case studies.
- How long does it take to begin factoring?
Typically, onboarding takes 7 to 10 business days. This can depend on the information that a business has prepared. The approval process lays out the onboarding process into four simple steps. As a fully onboarded client, funding can occur on a next-day basis.
- Do I need to factor every month?
No, there is no requirement to factor every month.
- Do I need to sell all of my accounts receivables?
No, you do not need to sell all of your accounts receivables. As a client, you elect which customers and invoices you wish to factor.
- Will my customer know that I’m factoring?
The need to verify your accounts receivable is essential to the factoring process, that is why we work with you to form an introduction to your customer’s billing department together. We are very sensitive when verifying your invoices, which is why establishing this connection is necessary through notification. Once notification is established, the verification of invoices typically moves along quickly for the life of the relationship. This is standard operating procedure in the factoring industry and we have refined this process since we began helping businesses in 1997. Since then, we’ve worked with hundreds of companies as debtors including major retailers and a majority of Fortune 500 companies.
- What is notification?
Notification is the process of informing a client’s customer that payments should be directed to our secure lockbox facility. Notification is completed by our operations team during the onboarding process and any time a new customer is added. This is considered ‘full notification.’
- What is verification?
The verification process occurs after a client submits an invoice for factoring. We review the invoice and request that the customer that owes this invoice confirms the information on the invoice is correct and is approved for future payment to United Capital Funding. This ensures accuracy during the funding process.
- What is a debtor?
A debtor is a client’s customer. For example, if Bill’s Bait Shop LLC sells fishing lures to Walmart, the client is Bill’s Bait Shop LLC and the debtor (and customer) is Walmart.
- Where do the payments go after we begin?
Customer payments are routed to a secure lockbox and not handled inhouse. This transition occurs near the end of client onboarding. This allows us to maintain a high level of integrity in the payment remittance process.
- What happens if I get a check sent to me by mistake?
We ask that you do not deposit this check and forward it to our lockbox as soon as possible.
- How do I know if one of my customers has paid?
As a client, you will have access to CADENCE ClientWeb, an online platform that allows you to view customer payments and run various reports.
- What happens if my customer doesn’t pay an invoice?
Reimbursement would occur if a customer does not pay the full invoice amount by the agreed date. This would occur either by having the amount (advance plus related fees) deducted from your next invoice advance or from your reserves.