| Factoring is a very effective financing mechanism that | | | | (Sellers) in control of their cash flow, letting them sell |
| allows many small and midsize businesses to improve | | | | their invoices on their terms, without personal |
| their cash flow by selling their account receivables. | | | | guarantees or all-asset liens. Companies can choose |
| Now, these companies have another option for | | | | which invoice to sell, control the terms and timing by |
| improving their cash flow and lowering their cost of | | | | setting auction length, minimum advance amount and |
| capital-an online auction site. | | | | maximum discount fee and maintain the relationship |
| This online auction site is not a factoring company. It is | | | | with their customer. |
| an electronic marketplace where Sellers list their | | | | The Seller can watch the auction in real-time and |
| invoices and Buyers compete against each other, | | | | monitor the activity as investment entities from around |
| bidding on the ones they want to purchase. While the | | | | the world compete to purchase these invoices. The |
| underlying asset, accounts receivable, is the same, and | | | | competition drives down the cost of capital. The best |
| both allow businesses to improve cash flow, the | | | | bid that meets or beats the Seller's terms wins the |
| transaction is entirely different, making it a flexible, | | | | auction. Sellers can also set a "Buy Out Price" which |
| transparent working capital management solution. | | | | when met instantly closes the auction and awards it to |
| Because it is online, it is convenient and accessible | | | | the Buyer who offered the Buy Out Price. If there is |
| from anywhere. Investment entities in New York can | | | | no winning bid, the auction is not sold. |
| bid in real-time to purchase receivables from a | | | | Once the auction is closed the advance amount is |
| mid-sized business in San Francisco or Cleveland. This | | | | transferred to the Seller the very next day. This |
| electronic marketplace solution opens up the | | | | makes such a site an attractive, flexible finance option |
| possibilities on a global scale for small and midsized | | | | that allows a business to immediately take advantage |
| business to not only quickly access liquidity, but to no | | | | of opportunities that require quick action and capital. |
| longer be reliant on one source of funding. | | | | This cash flow flexibility is essential to growing a small |
| A factoring company puts most of the control in the | | | | to mid-sized business. In a world of big box stores and |
| hands of the Buyer. They decide how much they will | | | | huge franchises, the smaller businesses have to be |
| pay for an invoice. Also, the business often has to list | | | | able to compete. |
| all of his accounts receivable with the factoring | | | | While they don't have the kind of working capital that a |
| company. The factoring company buys the invoices | | | | huge corporation does, they will never get there if they |
| and the account debtor makes payment directly to the | | | | can't take some risks and grasp the opportunities that |
| factor. | | | | improve their position.This accounts receivable |
| Unlike the traditional factoring company, this new | | | | marketplace gives them the much needed advantage |
| marketplace provides flexibility and puts the businesses | | | | to compete on a larger scale. |