“ACCOUNT FACTORING,
ACCOUNT RECEIVABLES FACTORING
AND FACTORING LOANS
VS. A TRADITIONAL BANK LOAN”

Is factoring a type of loan?

No. Even though account factoring is commonly referred to as “factoring loans”,
it is a financial practice involving Praxis, you and your customers, but no bank.
To further explain account factoring, a factor–like Praxis–purchases your accounts receivable invoices and advances your company immediate cash. A traditional bank loan uses all of your company’s assets as collateral and, generally requires personal guarantees. Account receivables factoring relies on the credit-worthiness
of your customers, not your balance sheet or history. Banks are regulated heavily; large finance companies generally are public and driven by pressures in the financial markets. When times are tough, banks and finance companies limit lending. A small business, too new to have a track record, with a weak balance sheet, with a history of financial problems, in turnaround mode or undergoing big changes, often cannot find a willing lender at any price. That is why factoring is the right solution for small
to mid-sized businesses.

Does a bank loan make more sense for my small business than account factoring?

Probably Not. Banks often have restrictive lending requirements relating to cash flow, profitability, equity, and years in business, which limit them from making loans to many small to mid-sized businesses. Factoring companies are not in the lending business and there is really no such thing as “factoring loans.” The decision
to purchase invoices is influenced primarily by the quality of your customer base and their financial stability, not the financial fundamentals of your company.

Do I have to jump through the same hoops for account receivables factoring as with bank financing?

No. All Praxis needs to produce a proposal is a completed pre-approval form, summary accounts receivable aging, summary accounts payable aging and some other basic financial information.

Do I have to be an established business operating a minimum number of years
to start an account factoring relationship with praxis?

No. Praxis prides itself on working with companies in all stages of business, including small to mid-size companies with limited histories. Even pure start-ups are usually not a problem for Praxis. If your company has good invoices and creditworthy customers, Praxis will happily speak with you about an account receivables factoring relationship.

Are my receivables held as collateral while my company is factoring?

Yes. Praxis requires a first position on all accounts receivable while you
are factoring with us.

Does praxis require additional collateral when my company is factoring?

No. Within our traditional account factoring programs, a first position on accounts receivable is all that Praxis requires while you are factoring. In some situations, Praxis may take an available security interest in other company’s assets.