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04-10-2014, 12:46 PM #1
- Join Date
- Mar 2014
- Location
- Ann Arbor, Michigan
- Posts
- 1,289
Factoring Misconceptions
• What is factoring?-the purchase of commercial accounts receivable that provides a revolving credit line to be used from time to time as needed. A MCA is a term loan with one initial advance and then periodic payments.
• Does factoring compete with MCA deals? Rarely, the marketplace is different and they are completely different loan products
• Don’t I make more money selling a MCA product? It’s not unusual to make up to 12.5% over term of the factoring relationship. To put it another way that’s like comparing selling houses to condominiums. They look alike but are really two totally different items. Would you pass up selling a house because you would get a higher commission rate on a condominium?
• Wouldn't all borrowers rather use an MCA than factoring? The last numbers available for 2010 is that the MCA industry was about $500 million while the factoring industry was about $2.8 Trillion.
• Am I passing up money by not knowing enough about factoring? YES. A borrower looking for a line of credit in many cases will not accept a term loan (MCA.)
• Does my industry have many naysayers? Yes, especially those that can’t tell the difference between a house and condominium
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