I told my College Daughter to get a job this Summer.

[126coupe]

Even though she is attending summer school I suggested it would be a good time to get some job experience. She is a junior. She went on her first interview and was hired by a start up company. She will be selling commercial loan packages. Commission only for a few months. Even if she makes no $$ I will be happy for her to get some experience in the "business" world. She is a communications major and plans on going to law school.
I can usually answer most questions she poses but on the phone today she was explaining her new job and asked me "dad, what's factoring" I did not have an answer.
Help!!!!

[MatthewBrum]

is it factoring the algebra rule

[126coupe]

Got me?????

[Dueller]

Different types...probably in regard to AR if she's doing commercial loans:

Factoring, also known as "cash for receivables," is the conversion of a business accounts receivables into immediate cash by the outright purchase of its receivables, at a discount by a factor. Factoring is not a loan and is not based on a business ability to repay the money advances. The length of time in business is NOT a consideration. The debt to equity ratio is NOT a consideration. Instead, it is based on the ability of your customers to pay what they owe. Once a factor purchases the receivable invoice, they assume the responsibility for its collection. The factor is also responsible for accounts receivable management functions, such as credit investigation, accounting and bookkeeping. As compensation for these activities, the factor purchases the receivables at a discount.

The discount fee is usually dependent on the amount purchased, the credit worthiness of the debtors, and the turn around time. Fees can vary substantially but are usually less than most business owners expect.

Frequently, a commercial bank cannot provide all the loan funds a growing company needs. A balance sheet is not liquid enough, or it can't clear off the bank debt every 6 or 12 months. A factor can provide funds to clear off bank loans periodically or make additional bank credit possible by guaranteeing accounts or replacing accounts receivables with cash.

Once a factoring contract is entered into, you will submit orders to the factor for credit approval before shipping. The factor's credit department becomes your credit department. When the order is approved, you will receive up to 80% of the proceeds with the remainder retained by the factor as a reserve against loss from complaints and returns. This is withheld to protect against credit losses, since the factor purchases the accounts without recourse. Usually the factor will settle the account each month and pay the proceeds due, less cash discount.

One of the biggest advantages of factoring is that businesses get immediate cash (from 70 -80% of the face value of the invoices) within 24-48 hours, which means you can accelerate your cash flow by speeding up payment of the receivables. You will have an immediate source of funds for operating expenses and future growth. You will be able to use your own, hard earned cash without having to wait 30, 60, 90 or 120 days to collect from customers. Additionally, since only receivables are used as collateral for the cash advance, other assets (such as real estate and equipment) can be used for future borrowing.

Cash flow is probably the most important element in the success of a business. Accounts receivables may be the biggest asset on a company's balance sheet. They also represent the business best source of operating capital that is in permanent disuse. Factoring improves cash flow. A business can use cash currently tied up in receivables to increase sales and take advantage of supplier discounts. Factoring accelerates cash flow by eliminating the time lag between the delivery of goods or the performance of a service and the payment for it. Most businesses have to pay their expenses before they can collect their receivables, disrupting cash flow.

[dhoward]

You heartless bastard.

[Hugh R]

I encouraged my daughter to get an office job while in high school instead of the waitress gig. She worked for a local accountant for two summers. He jumped to one of the big accounting firms in downtown LA when she was a junior in high school and he convinced them to let her work for them in the summer as well. Normally they only take college kids between Junior and Senior year. They gave her an assignment to research how teenage girls use gift certificates and mall money. I showed her a few tricks in Word, like automatic footnotes, Tables of Contents, imbedding graphs, etc. Her boss's Boss said it was better work than most 1st year associates. She graduated from UC Santa Barbara with a degree in accounting last year and worked there during the summers and is now on partner track at that same firm. She just turned 22.

[Porsche-O-Phile]

She's gonna' get you back by overheating your car's engine.

[126coupe]

Thanks Dueller! Very clear explanation.

[126coupe]

Originally Posted by Hugh R

I encouraged my daughter to get an office job while in high school instead of the waitress gig. She worked for a local accountant for two summers. He jumped to one of the big accounting firms in downtown LA when she was a junior in high school and he convinced them to let her work for them in the summer as well. Normally they only take college kids between Junior and Senior year. They gave her an assignment to research how teenage girls use gift certificates and mall money. I showed her a few tricks in Word, like automatic footnotes, Tables of Contents, imbedding graphs, etc. Her boss's Boss said it was better work than most 1st year associates. She graduated from UC Santa Barbara with a degree in accounting last year and worked there during the summers and is now on partner track at that same firm. She just turned 22.

I did not her working at night ie Waitress gig. I am familiar w that lifestyle, not good.

[Rick Lee]

I don't remember not having a summer job. I think my allowance stopped around the end of the school year for the whole summer. I never had to be told to get a job because the lack of funds if I didn't have one would have made every summer miserable. I ended up making pretty good money just about every summer and banking enough to do whatever I wanted when the allowance went fast during school. In my town we were allowed to get working papers at 15 with parents' permission, though IIRC, Ponderosa Steakhouse was the only place at the time that would hire anyone under 16. I started bussing tables there, though I was mowing lawns long before that.

My sister, OTOH, was content to sit home, do nothing, earn nothing and then be poor. She always ended up calling my grandparents up for money. She turned 34 today and has just recently broken that habit.

[Dueller]

Originally Posted by Minkoff

Thanks Dueller! Very clear explanation.

Can't take credit...just cut and pasted from a commercial loan site

[126coupe]

Originally Posted by Dueller

Can't take credit...just cut and pasted from a commercial loan site

Can you tell us the site?

[Dueller]

http://www.moneyfindersllc.com/factoringaccountreceivable.htm

[Don Plumley]

Factoring: Payday loans for businesses.

[on2wheels52]

Dueller
"Can't take credit...just cut and pasted from a commercial loan site"
Here I was all set to give you a letter of recommendation to the pawnbroker's union, you would have had a great future.
"Factoring: Payday loans for businesses."
The Arkansas Attorney General has recently come down on the payday lenders in the state. I was happy the traditonal pawnshops escaped his wrath (nothing re hookers either).
Jim

[BRPORSCHE]

ok, I am going to be the first one to say it....PICS OR BAN!x

[legion]

I never got an allowance or anything. If I didn't have a job, I didn't have any money. I've been pretty much financially-independent from my parents since 17. (They did pay my first two years of tuition.) I've been completely independent since 19--they haven't given me a dime in 10 years.