The Bao Lyon Group, LLCFactoring & Financing

What is the Financial Factoring?

The factoring* is a financial instrument through which a company, especially a Small and Medium Business, assigns its invoices for sales of products or services to a financial institution, to take charge of collecting, receiving an advance or the total amount stated on the invoices, except the commission that the financial institution will charge as their commission. This type of financing provides the added benefit of having more working capital to continue operating. Often, this tool allows small businesses to pay their workers on time, especially when payment terms are extended several months to their clientele.

In a typical factoring arrangement, the client (you) makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) buys the right to collect on that invoice by agreeing to pay you the invoice's face value less a discount- typically 10 to 20 percent**. The factor pays 65 percent to 75 percent of the face value immediately and forwards the remainder (less the discount) when your customer pays.

Because factors extend credit, not to their clients but their clients' customers, they are more concerned about the customers' ability to pay than the client's financial status. That means a company with creditworthy customers may be able to factor even if it can't qualify for a loan.

Factoring is not a loan; it does not create a liability on the balance sheet or encumber assets. It is the sale of an asset--in this case, the invoice. And while factoring is considered one of the most expensive forms of financing, that's not always true. Yes, when you compare the discount rate factors charge against the interest rate banks charge, factoring costs more. But if you can't qualify for a loan, it doesn't matter what the interest rate is. Factors also provide services banks do not: They typically take over a significant portion of the accounting work for their clients, help with credit checks, and generate financial reports to let you know where you stand.

What are the functions of the factoring company?

- Assume the credit risk.
- Assume currency risk (if the invoice is in foreign currency).
- Perform collection management.
- Make effective recovery of the claim and advise your own insurer.
- Advise customers about the financial health of borrowers (debtors).

Advantages and disadvantages

Advantage

Time savings, cost savings, and obtaining accurate reports.
It allows maximum mobilization of the portfolio of debtors and guarantees the payment of all of them.
You can receive advances on receivables.
Reduces the indebtedness of the contracting company. No debt: outright purchase without recourse.
Simplifies accounting, factoring contract by the user happens to have one customer, who pays cash.
Sanitation customer base.
It can be used as a source of funding and obtaining resources circulating.
Invoices provide collateral for a loan that otherwise the company would not be able to get.

Disadvantages

The factor can not accept some documents from his client.
It is not a form of long-term financing.
The factor will only buy the Accounts Receivable you want, so the selection will depend on the quality of them, ie, their timing, amount and recoverability.
The customer is subject to the discretion of society factor to assess the risk of individual buyers.

(*) Not available on all markets, please consult with our offices for details.
(**) The percentage will fluctuate according to the geographical location of the debtor and its financial situation. Please consult with our offices for details.

Project Handling

If your organization has a domestic or international project that needs management, we can help. From the initiation/planning phase through its execution/implementation we can assure that there are monitoring tools in place to complete your endeavor. If your company wants to expand to new markets, The Bao Lyon Group, LLC can provide compliance with the Rules, Standards, and Regulations needed to warranty the return on your investment. Call us for details!

International Receivables Support

Selling your products in foreign markets is a great way to expand your reach and boost your customer base. It is essential for every company to grow but requires expert surveillance of the newly developed market to assure the risks are minimized, and all investments are guaranteed. Our experience on the international field will be a great asset to your organization. Contact us for a free assessment of your accounts!

Import / Export Management

If your company manufactures a product that wants to commercialize internationally, we can provide an expert brokerage service finding new markets, clients, suppliers & customs agents to fulfill your need every step of the way. After the export/import process is complete, we could also monitor the international transaction assuring a prompt payment for the exported/imported materials. We can help you to maintain your cash flow in optimal condition; just let us know!

Mergers & Acquisitions / Mining & Exploration

The critical principle behind an M&A is that two companies together are more valuable than two separate entities -at least, that's the reasoning, especially when times are tough. Reliable companies will act to buy other organizations to create a more competitive, cost-efficient and, theoretically, more shareholder value. The Bao Lyon Group, LLC can help your team to accomplish a small, medium or broad merge process. Lets us know your plans, and we will generate a set of options tailored specifically to your needs. We can also offer a specialized Research & Development team if your company deals with Mining and Exploration. Call us for details!