Frequently Asked Questions
Construction Factoring Services Overview
Q: What is factoring?
A: Factoring is selling the right to payment in receivables or invoices to a factor such as CapitalPlus Construction Services, LLC at a small discounted rate from face value so that you do not have to wait the normal 45-60 days for payment. Factoring is also referred to as receivables financing. Over a billion dollars are provided to businesses each year through factoring and it is a financial service used by a wide range of companies, from multi-million-dollar corporations to small privately held companies.
Q: What is an advance rate?
A: When we purchase an invoice, we do so at a discount rate. Or put another way, we advance you a percentage of the face value of the invoice. This is typically 70 to 80% and is driven by the overall risk of the purchase.
Q: How can accounts receivable Factoring with CapitalPlus help my business?
A: It provides an immediate source of cash flow for your company which you can use for working capital, to meet payroll, pay taxes, replenish inventory, increase advertising, purchase equipment, improve your credit rating, and so much more.
Q: How can CapitalPlus give me cash for my unpaid invoices?
A: You provide CapitalPlus Equity with the original invoice and purchase order or contract, and we fund you 70 to 80% of the amount that would have been paid to you by your customer. The balance – 20 to 30% – is held in reserve. Then CapitalPlus collects the total amount due on these invoices from your customers and refunds the reserve balance to you less our fee.
Q: How does CapitalPlus charge for these services?
A: The established fee is a percentage of the purchase amount and the length of time it takes to collect. The established fee is driven by the risk of each purchase, the pay term and the volume of factoring. Additionally, other than a due diligence or underwriting fee for deals over $500K, our fee is absolutely all-inclusive!
Q: Do I have to pay a fee to get started or for you to process my application?
A: Typically not. Application or underwriting fees are only charged on large factoring facilities where extra due diligence is required (e.g., facilities greater than $500K).
Q: How long does it take to process my application?
A: We are will generally be able to process your application, complete the required paperwork, and fund your first invoices within three to five business days of receiving your complete application and required accompanying documents. We will usually be able to provide you with preliminary approval within 24-48 hours. For larger deals requiring additional due diligence, additional time may be required. We will let you know when this is the case.
Q: What is the difference between “recourse” and “non-recourse” factored invoices?
A: Invoices factored on a “recourse” basis means that the client is ultimately responsible for payment whether or not your customer pays. Factoring invoices on a “non-recourse” basis means that the factoring company assumes the credit risk of the customer (usually at higher rates), thereby protecting the client from possible credit loss. CapitalPlus purchases almost all invoices on a recourse basis, but we will work with clients on a non-recourse basis under specific conditions.
Q: Do I have to be established in business for a minimum number of years to be approved as a CapitalPlus client?
A: No. CapitalPlus specializes in helping growing businesses and new, start-up companies with accounts receivables financing. Additionally, CapitalPlus puts most of the focus on your customers’ ability to pay as they ultimately become our debtor/payer.
Q: Are my receivables held as collateral?
A: Yes. CapitalPlus purchases your invoices through the factoring process and therefore, we become the first position lien holder on all of your invoices while you are a client.
Q: Can CapitalPlus work with my bank?
A: Yes, on a case by case basis. CapitalPlus will purchase your invoices as long as your bank will subordinate those invoices to us or enter into an intercreditor agreement giving us first position lien on the purchased invoices.
Q: How long do I have to commit to factoring my invoices?
A: The decision is yours. We can provide spot, contract or volume-based factoring. Spot factoring means you use us when you need us, no strings attached; however, spot factoring is more expensive. Contract or volume-based factoring provides us with a consistent revenue stream and is priced much cheaper.
Q: What is an asset-based lender (ABL)?
A: ABLs are financing companies that offer loans based mostly on the asset section of a balance sheet such as equipment, inventory and accounts receivables. If a business defaults on its loan, the ABL can seize the collateral and sell it to recover its losses.
Q: My company owes back taxes. Can I still apply for accounts receivable funding?
A: CapitalPlus handles tax problems on a case-by-case basis. Please let us know immediately so that we can discuss the payoff of your back taxes or obtaining a subordination with the IRS.
Q: I have had a past bankruptcy. Is accounts receivable funding still an option?
A: Yes. CapitalPlus will still consider your application even if you have had credit problems or a past bankruptcy.
Q: How do you establish your fees?
A: The CapitalPlus fee structure is based on a combination of criteria including: anticipated monthly factoring volume; overall risk of the deal (e.g., customer creditworthiness); the average invoice amount; and average account payment terms.
Q: Does CapitalPlus offer Purchase Order (P.O.) financing for work in progress?
A: No. CapitalPlus only provides cash flow funding of invoices for goods and services that have been satisfactorily delivered and/or performed and billed in arrears. We can however, refer you to a financing company that can provide purchase order funding and work with the P.O. Finance firm to provide you with a holistic solution to your cash flow concerns.
Q: Do you only work with contractors in a particular area?
A: We work nationwide, with General Contractors and Subcontractors of all types and sizes.
Q: Do you fund against bonded projects?
A: Yes, as long as the bonding firm has not filed a First Position UCC Financial Statement. Additionally, bonded projects are higher risk and advance rates are lower and fees can be higher.
Q: Can I factor if I or my business has a bad credit score?
A: Yes. We take into consideration the credit of you and your company but our greatest focus is on your clients’ creditworthiness. After all, it is your client that becomes the payer!
Factoring — The Invoice
Q: What is a reserve and where does it go?
A: When we purchase an invoice, we will typically advance 70 to 80%. The 20 to 30% is held in a reserve. When we receive payment from your customer the reserve becomes real money and is wired back to you minus our fee. (Percentages may vary with individual companies.)
Q: How often do I give my invoices to CapitalPlus?
A: It is your choice how frequently you provide invoices for purchase. Keep in mind that price is based on volume. When you reach out for the first time, you will be assigned an Executive Account Representative. Tell your representative what your needs are and we will help you understand how you get the most out of factoring for the best price.
Q: Do my invoices have to be changed to CapitalPlus?
A: No. The name on the check remains that of our customer (yours). You will be required to change the remittance address that sends the check to our lock box.
Q: Does CapitalPlus prepare my invoices?
A: No. Most contracts specifically define how your invoices should be prepared and when they should be submitted. We have contract experts on staff and can help you understand the requirements and help you comply with invoice formats and other issues.
Q: Will CapitalPlus purchase only a portion of my company’s invoices?
A: CapitalPlus allows you to decide which invoices to factor and which to keep in-house. But, remember that when invoice volumes are higher and larger numbers of invoices are issued to a larger pool of customers, the result is lower factoring fees.
Q: Will CapitalPlus purchase my outstanding invoices?
A: Generally, yes. We will purchase your current outstanding receivables that are no older than 60 days.
Q: Does CapitalPlus pay my subcontractors?
A: Yes. On each purchase, CapitalPlus takes funds control on the invoice. We pay your subs out of the disbursement and get lien waivers signed for the protection of our clients and their clients. Where terms are a flow down to your subs, we will hold the payment in reserve and fund them at the stated due date. Additionally, we will work with our customers to get early discount pay terms with customers thereby helping to reduce the overall cost of factoring.
Q: Does CapitalPlus verify invoices with my customers?
A: Invoice verification is an essential, and accepted, part of factoring. CapitalPlus generally verifies invoices and completion of work by phone, email or a standard invoice verification form to ensure their validity and that there are no offsets or issues that may reduce the expected payment.
Q: What is the cut-off time for submitting invoices?
A: Invoices must be submitted by 12:00 p.m. ET for same-day funding. Invoices submitted after 12:00 p.m. ET may not be funded until the next business day. It is highly recommended that you send your invoices early, even if you will not want them factored for a while. Fees do not start until the invoice is purchased. So, sending them early means you are in the queue and can ensure you get your money when needed.
Q: Is there an invoice dollar limit on customer invoices?
A: Yes, but read on. We need the invoices to be $20,000 or larger for new customers. However, we are looking for promising young firms. Speak to your account manager early and let them know if you will be working on larger contracts and they can seek a variance for your account. If we cannot help you, we have partnerships with other reputable firms that do not have minimums.
Q: Do you have any caps on your funding?
A: No, ideally we are looking for clients that have a need for a factoring facility of $50K per month up to $10M. For demands greater than $10M, we have partners we work with that can co-factor to meet your demand; and the co-factoring is seamless to you in every way.
Factoring — Relating to Your Customer
Q: What should I do if my customer mistakenly sends a payment to my company?
A: Call us immediately and let us know and immediately send the check to us. Your company should never deposit checks that are from customers who are being funded by CapitalPlus Equity. Before CapitalPlus will fund a customer, that customer will be notified that payments must be remitted directly to CapitalPlus. Your customer’s obligation to pay CapitalPlus Equity for the invoices funded will not be released until CapitalPlus Equity has received their payment. Payments deposited by you for funded invoices will not release their obligation.
Q: What happens if my customer doesn’t pay the invoice?
A: Your contract with CapitalPlus is typically a recourse agreement, which means that your company will ultimately absorb the credit risk either by replacing the invoice with another collectable invoice for purchase or having the amount due for the invoice deducted from the next advance or your reserve. CapitalPlus will work with you to put the appropriate pressure on your customer including filing a mechanics lien if required.
Q: How can I be certain that CapitalPlus will treat my customers well?
A: CapitalPlus Equity’s success is directly related to your success. The last thing we want is for you to lose a valuable customer. CapitalPlus is not a collection agency. We will send out routine, courtesy AR statements but will not harass your customers for money. Maintaining your customers’ goodwill and confidence are extremely important to everyone at CapitalPlus.
Q: Where do my customers send invoice payments?
A: When you present us with a new customer, we will notify your customer of the new remit address of CapitalPlus, LLC, P.O. Box 24118, Knoxville, TN 37933. They may send payments by FedEx, UPS or courier to 2510 Solway Road, Knoxville, TN 37931.
Q: How are my customers’ credit limits determined?
A: Customer credit limits are based on one or more of the following: How long it takes them to pay, number of years they have been in business, net worth of their company, number of employees, credit appraisal rating, trade references and/or our client’s history with CapitalPlus Equity.
Q: Will CapitalPlus Equity provide me with a credit rating for my customers?
A: Yes. Although CapitalPlus Equity does not provide credit information on all customers as a part of our client services, we will provide credit ratings for specific customers when requested for the purpose of determining credit-worthiness of a potential new customer.
Factoring — Funding
Q: How soon can I get financing?
A: After the schedule of invoices is processed, funding will be typically wired to you the same day.
Q: When will I receive my money?
A: Payments by wire will be in your bank account by the same day your invoices are purchased when submitted before 12:00ET. Once CapitalPlus is paid for the purchased invoice, the reserve will be ACH to your account in three business days.
Factoring — The Backend
Q: What types of accounting reports will I receive?
A: We provide daily cash reports on invoice payments received and also a schedule of account reports, reserve reports, monthly account reports and account aging reports.
Q: Will I be charged extra for collection services?
A: No. Our collection services are included in your factoring fee.
Q: How will I know the status of my factored Invoices?
A: CapitalPlus Equity works closely with our clients, notifying them when payments are received and sending monthly statements.
Q: What do your collection services consist of?
A: When your customer invoices exceed the net payment terms you set up, we will perform soft collections to customers consisting of no harassing, courtesy telephone calls to only accounts payable for related invoices. We also prepare and send monthly past due statements to customers. If a customer requests a replacement invoice, we will provide that by fax or email to them. CapitalPlus Equity is not a collection agency and we do not deal with collection agencies.
Materials Financing — Services Overview
Q: What is Material Financing?
A: Material Financing (also known as Supply Chain Financing) is a short-term capital solution in which a third-party lender, such as CapitalPlus, purchases the materials subcontractors need and gives subcontractors extended terms to pay it back.
Q: Whom do you work with?
A: Subcontractors in all construction industry trades and in all stages of the business lifecycle, from startups to established companies.
Q: What is your fee?
A: It is based on the length of time the invoice is outstanding.
Q: What type of financing is it?
A: Unsecured financing without any change to any existing bank relationships or loans.
Q: Where do you buy the materials?
A: We buy the materials from one of our suppliers or set up relationship with your preferred supplier.
Q: Does this disrupt my project logistics?
A: No. Your materials order us shipped directly to your project or job site so you have the materials you need, when you need them.
Q: What materials do you purchase?
A: From raw materials such as lumber and piping to components such as electrical circuits, we buy the materials and supplies you need right now, and that buys you time.