Q: What is A/R Financing (aka factoring)?
A: A/R Financing is the purchase of accounts receivable for immediate cash. A/R Financing gives businesses the power to ensure growth without diluting equity and incurring debt.
Q: What does TAB Bank look at when deciding whether or not a company's accounts receivable can be financed?
A: Making sure that your accounts receivable is healthy is good for your business, and will help you get the financing you need. The following three FAQs are items TAB Bank considers when evaluating A/R.
Q: Do you have a concentration risk? (Are you putting all of your eggs in one basket?)
A: TAB Bank generally does not want to see any more than 20-25% of your A/R owed by any one customer. There are many justifiable concerns that TAB may have if too much of your business is dependent upon any one customer.
Q: What is the credit worthiness of your customers?
A: When TAB Bank considers financing your accounts receivable we look at the credit worthiness of your customers, rather than your credit strength. Just like you, TAB wants to ensure themselves that they will be paid. No one wants to spend time, effort, and considerable expense in providing goods and services to someone that can't or won't pay their bills. TAB 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 customer.
Q: What is your dilution percentage?
A: TAB Bank will also want to know for each $100 that you bill, how much do you actually collect. Do you typically collect $98, $88, $70, or the full $100? TAB 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. TAB needs to feel confident that when you bill $100, you will collect $100.
Q: Do I have to be an established business, operating a minimum number of years, to be approved?
A: No. TAB Bank prides itself on catering to the financial needs of small- to medium- size businesses that are recently founded. Even pure start-ups are not a problem in most cases, as long as they have commercial accounts receivable.
Q: What types of businesses do you finance?
A: TAB Bank serves a wide range of industries including trucking and freight services, temporary staffing agencies, printing companies, manufacturers, wholesalers, IT consulting firms, government contractors, asset-based lenders, specialty finance companies, and many service industries. Most any business that sells a product on terms can use our program.
Q: How do you normally structure a program?
A: There are typically two components to our program. The first is the administration component that covers the cost of the account management as well as the credit and collections functions. The second component is based on the money cost and the length of time the advanced funds are utilized.
Q: How much will TAB Bank advance me on my commercial accounts receivable?
A: TAB Bank will estimate the anticipated advance rate at the time we issue a proposal. Upon completion of the final due diligence process, TAB will commit to you an acceptable advance rate that will meet the needs of your business. Typical advance rates will range from 70% to 90% of eligible receivables.
Q: Can I outsource my entire A/R operations to TAB Bank?
A: Many companies will utilize us as their total A/R solution. It is possible that you can shift the responsibilities of current personnel to focus on more profitable aspects of your business, and we will take care of the accounts receivable, credit evaluation, and collections.
Q: Do I have to finance all of my invoices?
A: No. You are always free to decide which invoices to finance and which to keep in-house. However, if you choose not to finance all of your invoices, your available cash flow may not be as great.
Q: Do I have to pay a fee to get started or for you to process my application?
A: No. TAB Bank requires no start-up fees to process your application. However, upon receipt and acceptance of our proposal, TAB may require a documentation and due diligence fee to cover our underwriting costs.
Q: How long does it take to process my application?
A: Normally between three and five working days is enough to get a client approval. We are generally able to give preliminary approvals within 24-48 hours via a proposal that details the basic terms of our agreement.
Q: Who will help me complete the application?
A: TAB Bank has several experienced Business Development Officers that will assist you with the application and will walk you through the process. Upon acceptance of our proposal and completion of the underwriting process, your Business Development Officer will introduce you to the Account Manager that will ultimately be your daily contact.