Bank Financing vs. Receivables Factoring

www.driveyoursu... Costs of financing receivables with a bank versus receivables factoring. The video breaks down how to compare costs and how to use a sample excel spreadsheet on www.driveyoursuccess.com that compares financing with a bank versus financing with receivables financing.

[@saelaird]

I’m due to start my first start up in April next year, a business model focusing on deliberately paying suppliers early in order to get a commercial edge on the competition (lower fees, improved reputation etc) and have been researching the purchasing of receivables for a few weeks. Your final summary echoed my own thoughts, ‘’keep some accounting in-house (for those debtors who pay on terms... and use factoring for the rest). By doing this as a startup (being able to survive on lower gross profits per project than hey can) I think we can compete against larger organisations who are stuck in highly traditional cash-flow models. Very well explained in this video, fascinating stuff.

[@Driveyoursuccess]

Thanks for your feedback. Much appreciated. Banks aren't the only source of financing and combining financing options and sources is often the best alternative to maintaining positive cash flow. .

[@WarDaddyTrades]

How was it been?

[@saelaird]

@Mingtye Really good thank you. It was not easy to begin with as we had a handful of clients. But we've grown well without overextending ourselves. We only factor one large US client, the rest (all Europe) we handle in-house.

[@LoutouEirini]

​@saelaird can you please share your contact info ? Maybe there is a possibility of collaboration

[@madelinevetrano2372]

Awesome Video! Thank you for taking the time to post!

[@Abbdullaziz]

I work with a commercial bank for SME and we do the factoring for some of the gov projects to finance 80% of projects proceeds including acknowledgment of assignment proceeds + mang fees + floating interest rates

[@Walleggwp]

Ian, good job mate! I'm considering in factorize the next night out with them lads.

[@bryangordon5569]

Great explanation. Good job explaining the differences. Thanks!

[@Driveyoursuccess]

Thanks Bryan.

[@traceywilliams8733]

What happened to the 3000.00 leftover from the 15k?

[@kumarebo4030]

I am factoring my invoices but don't have a clue how to do the journal entries to reflect the advance, the reserve and the finance fee. Can someone help me? Thanks in advance.

[@Driveyoursuccess]

You need an accountant for that.

[@kumarebo4030]

@@Driveyoursuccess Thanks ! 👍

[@ramaswamyvenkatesh7639]

Would be an-opener for many . One doubt ? Customer pays 12000 $ advance which is with the supplier and is earning interest . To be factual , the difference between earned interest from advance( $ 12000) and interest for amount to be paid ( 3000 $) need only to be taken . Appears to have an anomaly . Please clarify . Thanks for the video . Credit control has become very vital as oustanding are ever increasing and risk is always present .

[@JustMahy]

I would like to learn about factorising receivable yet it too complicated to me, what would be a bridge topic to study before going into this topic. Many thx

[@Walleggwp]

I would start with the basics of finance. You gotta understand what are accounts payables, accounts receivables, and their implication to working capital first.

[@thomasmathew7511]

I did not like the calculation. 10000*.0164=164 12000*.0164=1.97 Would u pls clear the confusion?.

[@FirdaniAdam]

great explanation!

[@ev.e.8371]

Why is COGS $10 000 on the left, but the recievable is 15 000 on the right?

[@rememberntsako5712]

Receivables are sold at selling price not cost

[@pankajbhugra4426]

Receivable better be higher than the COGS. The delta is your “gross profit”. ROI May vary...8%, 12%, etc.

[@omowaleaiyenuro7107]

Great job with the video

[@Martha-cz1sg]

great info

[@alexanderlevchenko7604]

Data manipulation. Be carefull. 1. Compared COGS of 10k with 12k (0.8*100%recievables). In this case margin is 50% and I am wandering what is this business type do we speak about? Average margins for FMCG (who are the most common users of factoring) 10-15% max. So the basis for calculation is uncomparable. 2. Banks charges admin fees by default. it is not 1% of course, but it is one time shot fees for any loan facility given (Credit Line, OVD, etc.,), that have to be allocated to each money use case. And 1% for Factoring is to high, 0.2% whould be ok. Again, uncomparible stuff... 3. Banks in 80% ask for collateral, insurance, etc., and there is no expences shown for this items, so manipulation!

[@claudinevantonder4961]

Thanks!! This helped a lot!! :-)

[@Driveyoursuccess]

No problem. Take care

[@labyrinthfootwear1]

please i will love if you can give me a company for my shoes business i have sent my samples to the sales person from australia to nyc i have stores placing orders and the orders are pretty big so help me out whats next i am looking for factor company if you can help will be great give me your number

[@Driveyoursuccess]

Leonel Gonzalez Hi Leonel. send me an email at [e-mail]

[@rajdbzman]

Great