Traditional Factoring vs. Borrowing Base Factoring

For those that can’t tap traditional credit markets, factoring is a reliable way to access working capital and accelerate cash flow. With our borrowing base

factoring solution, Gibraltar brings a fresh approach to a typically tedious process.

The purpose of factoring is to monetize something of value: a business’ accounts receivable. Today, more and more companies do not fit the strict guidelines of traditional lending boxes. For those that can’t tap traditional credit markets, factoring is a reliable way to access working capital and accelerate cash flow.

Traditional factoring*: A tedious process that slows cash flow

Here’s an example of traditional factoring: Company A sells a widget to Company B for $100

1. Company A submits an invoice for purchase to the traditional factor. 2. Traditional factor runs credit check on customer. Depending on public credit data and

requests for more information, a credit check can slow the process right from the start. 3. After credit approval, traditional factor attempts to verify that the product has been

shipped and that the customer intends to pay for the product within terms, which could take as long as a week. This multi-step process can slow down your cash flow significantly—the exact opposite of what factoring is meant to do.

4. Upon satisfactory verification from the customer, the factoring company funds $85 (85% of the invoice) to Company A.

5. 30 days later, Company B pays the factoring company $100, which results in a $5 discount fee (5% of the invoice). Note: This is only one example based on simplified

math. Fees will vary from factor to factor. 6. The factoring company remits $10 back to Company A ($100 payment, less $85

advance, less $5 fee = $10).

* Not all factors or traditional factoring situations are alike.

Gibraltar’s borrowing base factoring: A line of credit with same-day availability With Gibraltar’s borrowing base factoring product, we aggregate all of your invoices to give you a line of credit based on the total amount of invoices you have outstanding. This becomes your borrowing base. It’s the same concept as borrowing from a bank,

but Gibraltar’s method gives you immediate access to daily cash flow, plus the flexibility and cost controls linked to the size and timing of your advance. With our borrowing base factoring, you …

Decide how much cash we advance you

Decide when we advance it to you

Pay a one-time discount fee on your advance and an interest charge at the end of each month based on your average cash outstanding

Additionally, Gibraltar does not verify like traditional factors. Instead, we periodically call a select handful of customers to confirm receipt of product or service and customer satisfaction. Rather than verifying every invoice before paying, our quality-assurance program allows you to receive same-day funding, each and every day. Our quality controls also help you pinpoint early on any

potential problems with your product or service, allowing you to resolve issues proactively with your customer.

The difference is dramatic:

Traditional Factor Gibraltar (Borrowing base)

Funds available

Post Verification Line of credit: You choose how much cash we advance you and when you want it.

Verification Every invoice, prior to

funding

NOT every invoice. QA program only requires periodic contact with a handful of customers from time to time

Turnaround for funding

Only after acceptable

verification of invoices

Same day as your request

Discount Based on the length of time

each invoice takes to pay

One-time charge – length of time is irrelevant

The decision to factor involves many criteria but the choice on how to factor is clear. Borrowing base factoring gives you the flexibility, security and speed you need to boost business.

Are you or do you know a business with low cash flow but high receivables, or a client denied by a bank, asset based lender or private equity source? Contact me to learn more about why borrowing base factoring could be a smart solution for your cash-flow needs.

Chris Lehnes

Senior Vice President

Gibraltar Business Capital

Gibraltar Business Capital | 23 Barnabas Rd, #57 | Hawleyville, CT 06440

(203) 664-1535 | CLehnes@GibraltarBC.com |

www.GibraltarBC.com