Factoring is a financial service that provides businesses with immediate working capital by purchasing their accounts receivables, or unpaid invoices, at a discount. This allows businesses to access funds that they would otherwise have to wait for from their customers, helping to improve cash flow and facilitate growth.
altLINE, a division of The Southern Bank Company, offers factoring services specifically tailored for small to mid-size businesses. Here’s how altLINE factoring works in four simple steps:
- Application Process: The first step is to fill out an online application and provide necessary documents, such as customer invoices, financial statements, and credit reports.
- Approval and Setup: Once approved, altLINE will set up an account and provide a funding limit for your business.
- Invoice Submission and Verification: As you generate new invoices, you can submit them to altLINE for verification and funding.
- Funding and Collections: altLINE will advance a percentage of the invoice value, typically 80-90%, to your business within 24 hours. They will then collect payment from your customers and provide the remaining amount, minus fees, once the invoice is paid.
One of the main benefits of using altLINE factoring is improved cash flow. By accessing funds from unpaid invoices, businesses can cover expenses and invest in growth opportunities without waiting for payment. Additionally, altLINE’s factoring services do not incur debt, which can be a relief for businesses seeking alternative funding options.
altLINE also offers flexible funding options, with the ability to choose which invoices to factor and when. This allows businesses to stay in control of their cash flow. Additionally, altLINE provides credit protection by assuming responsibility for collecting payment from customers, allowing businesses to mitigate the risk of non-payment.
To qualify for altLINE factoring, businesses must have a minimum monthly revenue of $10,000 and creditworthy customers. Their customers must also be other businesses or government entities (B2B or B2G).
The fees and rates for altLINE factoring include a discount fee, which is a percentage of the invoice value, a reserve fee, which is a small percentage held back for potential non-payment, and other fees such as origination and monthly maintenance fees. These fees and rates may vary depending on the specific needs and circumstances of each business.
What is Factoring?
Factoring is a financial transaction where a company sells its accounts receivable to a third party at a discount. Essentially, it is a way for businesses to receive immediate funds instead of waiting for customers to pay their invoices. This process not only helps improve cash flow, but also provides the business with working capital to cover operational expenses or invest in growth.
How Does altLINE Factoring Work?
For many businesses, managing cash flow can be a constant struggle. That’s where altLINE factoring comes in. This alternative financing solution allows businesses to sell their accounts receivable for immediate cash, providing a much-needed boost to their working capital. But how does altLINE factoring actually work? In this section, we will break down the step-by-step process, from the initial application to the final funding and collections, so you can have a better understanding of how this financing option can benefit your business.
Step 1: Application Process
- Initial Information: Begin the application process by filling out the form and providing basic company details.
- Submission: Submit the application through the altLINE platform online.
- Review: The altLINE team will carefully review your application and may ask for additional information if necessary.
- Approval: Once approved, the setup process will begin and funding options will be discussed.
Be sure to have all required documents prepared for a seamless application process. Double-check the provided information for accuracy.
Step 2: Approval and Setup
- Submit Required Documents: Provide business details, customer invoices, and credit reports.
- Underwriting Process: altLINE reviews the documents and business creditworthiness.
- Upon approval, set up your account and funding process.
- Integration: Connect altLINE with your accounting software for seamless invoice submission.
After completing the approval and setup process with altLINE, a small construction company experienced a significant improvement in cash flow, enabling them to take on larger projects and expand their business operations.
Step 3: Invoice Submission and Verification
- Submit Invoices: Once approved, submit your invoices to altLINE for verification.
- Verification Process: The submitted invoices undergo a thorough verification process to ensure accuracy and legitimacy.
- Validation: The validity of the invoices is confirmed, and the corresponding creditworthiness of the customers is assessed during the Step 3: Invoice Submission and Verification process.
Step 4: Funding and Collections
- After receiving approval, your invoices will undergo verification to ensure accuracy and legitimacy before being processed.
- Upon verification, funding will be released to your business and altLINE will handle the collections process directly with your customers.
What Are The Benefits of Using altLINE Factoring?
altLINE factoring is a financial solution that can provide numerous benefits for businesses. In this section, we will discuss the advantages of using altLINE factoring, including improved cash flow, no debt incurred, flexible funding options, and credit protection. By utilizing altLINE factoring, businesses can experience a variety of benefits that can positively impact their operations and overall financial health. Let’s take a closer look at each of these benefits and how they can contribute to the success of a business.
1. Improved Cash Flow
- Factoring accelerates cash flow by converting outstanding invoices into immediate working capital.
- Companies submit invoices to altLINE for verification.
- Approved invoices are funded, providing improved cash flow.
- altLINE manages collections, reducing the burden on businesses.
In the late 1800s, American businesses used factoring to boost their cash flow during times of economic instability, laying the groundwork for contemporary factoring practices.
2. No Debt Incurred
- Debt-free financing: AltLINE factoring provides funding without incurring debt, helping businesses avoid increasing their liabilities.
- Improved credit position: Since factoring does not create debt, it does not impact the balance sheet or debt-to-equity ratio, enhancing financial standing.
3. Flexible Funding Options
- Revolving Line of Credit: Provides businesses with flexible funding options, similar to a business credit card, allowing them to use funds as needed.
- Spot Factoring: Gives businesses the ability to select which specific invoices to factor, giving them control over the funding process.
- Contract Factoring: Offers long-term funding for consistent cash flow, making it a suitable option for businesses with steady invoicing needs.
4. Credit Protection
- Verify Creditworthiness: Assess the creditworthiness of potential customers through credit checks and analysis.
- Monitor Payment Trends: Keep track of customer payment habits and promptly address any signs of financial distress.
- Insurance Coverage: Consider purchasing credit insurance to safeguard against non-payment due to insolvency or bankruptcy.
When considering Credit Protection, it’s essential to conduct thorough credit checks, stay vigilant about payment patterns, and explore credit insurance options for added financial security.
What Are The Requirements for altLINE Factoring?
In order to utilize the services of altLINE factoring, there are a few key requirements that must be met. These criteria ensure that the business is a suitable candidate for factoring and that the process will be beneficial for both parties involved. First, the business must engage in B2B or B2G transactions, as this is the primary focus of altLINE. Secondly, a minimum monthly revenue of $10,000 is necessary to qualify for factoring.
Finally, altLINE looks for creditworthy customers to ensure a reliable source of income for the factored invoices. Let’s take a closer look at the specific requirements for altLINE factoring.
1. Business Must Be B2B or B2G
- To qualify for altLINE factoring, a business must primarily engage in B2B or B2G transactions, guaranteeing a consistent stream of invoices for funding.
2. Minimum Monthly Revenue of $10,000
For altLINE factoring, companies must meet the requirement of a minimum monthly revenue of $10,000 to qualify for the service. This criterion ensures that businesses seeking factoring services have a monthly revenue of at least $10,000 to support the factoring agreement.
3. Creditworthy Customers
- Evaluate the creditworthiness of potential customers by reviewing credit reports, payment history, and financial stability.
- Set clear credit criteria for customer approval, taking into consideration factors such as credit score and payment patterns.
- Establish appropriate credit limits based on a thorough assessment of customer risk and financial background.
- Regularly review and adjust credit limits to account for any changes in customer creditworthiness.
When evaluating the creditworthiness of customers, it is important to find a balance between mitigating risk and maintaining valuable client relationships.
What Are The Fees and Rates for altLINE Factoring?
In order to understand the true cost of using altLINE’s factoring services, it is important to examine the various fees and rates associated with this financial solution. In this section, we will break down the different fees charged by altLINE, including the discount fee, reserve fee, and any other fees that may apply. By gaining a clear understanding of these fees, businesses can make an informed decision about whether altLINE factoring is the right choice for their financing needs.
1. Discount Fee
- The discount fee, also referred to as the factor fee, is the main cost associated with factoring. Typically, it is a percentage of the invoice amount, ranging from 1% to 5%.
- Factors determine the discount fee based on the risk level of the customer’s credit and the length of the invoice.
- Customers with higher risk or longer invoice terms usually result in a higher discount fee.
- In addition to the discount fee, factors may also charge other fees such as administrative fees or wire transfer fees.
When considering factoring, it is essential to carefully examine the discount fee along with other fees and rates to determine the overall cost. It is important to assess the impact on your cash flow and profitability in order to make an informed decision.
2. Reserve Fee
- Reserve Fee is a percentage withheld from the factored invoices to guard against potential non-payment from customers.
- The reserve amount is released once the customer pays the invoice in full, minus any applicable fees.
- Reserve percentages vary based on factors like industry, customer creditworthiness, and the length of time the customer has been in business.
When evaluating factoring services, compare reserve fee structures to ensure they align with your business’s financial objectives and cash flow needs.
3. Other Fees
- Processing Fee: A one-time fee covering administrative expenses for setting up the account.
- Wire Transfer Fee: Charge for transferring funds to your bank account.
- ACH Transfer Fee: Cost associated with electronic fund transfer for invoice payments.
- Other Fees: Additional charges that may apply to your account.
Did you know? Factoring accelerates cash flow by providing immediate funds against accounts receivables, aiding business growth.
Frequently Asked Questions
1. What is altLINE and what services do they offer?
altLINE is a factoring company owned by The Southern Bank, offering invoice factoring and accounts receivable factoring services for qualifying businesses. These services allow businesses to sell unpaid invoices for a fee in order to access funds ahead of schedule.
2. What are the borrower qualifications for altLINE?
In order to qualify for altLINE’s invoice factoring services, businesses must have contracts in hand, a minimum monthly revenue of $15,000 from factored invoices, and no credit score requirement. Additional qualifications include being a B2B business, no recent bankruptcies or felonies, and no invoices with payment terms longer than 90 days.
3. What are the interest rates and fees for altLINE?
altLINE offers a credit facility size of up to $4 million per month, an advance rate of 80%-90%, and a discount rate of 0.5%-5% (including late fees). Additional fees may apply for expedited funding, and the contract length is 12 months with monthly minimums ranging from $15,000-$20,000.
4. How long does it take to receive funds through altLINE’s invoice factoring services?
altLINE offers fast response times, with next day funding available for qualified businesses. However, the maximum overdue account is 90 days, with a longer limit of 135 days for invoices to large corporations.
5. What are the pros and cons of using altLINE for invoice factoring?
Pros of using altLINE include financing options for qualified startups, no credit score requirements, high factoring amounts, competitive rates, few extra fees, and informative customer service. Cons include limited availability for certain industries, a long-term contract requirement, and potentially longer wait times for funds to disburse.
6. How do customers rate their experiences with altLINE?
Customers have had positive experiences with altLINE, with a total rating of 4.5 out of 5 stars. They have praised the company’s competitive rates, informative customer service, and fast response times. However, some have noted that the services can be a bit pricey for start-up companies.