In the event that you find yourself in need of funds and do not yet have any new invoices ready to send in to your factoring company, all is not lost. The two most common reasons I was given for needing an early reserve release were fuel for the trucks or needing to meet payroll. When we got pleas such as is, we almost always gave in. much more went into the decision to hold or release those funds early. Try to keep in mind that factor relies solely on this reserve as a safety net should any of your customers not pony up the dough. So before you make your request, here is the information you will want to have at the ready:
- Total outstanding A/R compared to total A/R over 60 days - Many factors have a 90 day recourse rule. If an invoice is not paid back within 90 days by your customer, you buy it back with that reserve. If your portfolio is upside down (more over 60 than current) they may hold that reserve indefinately.
- On average, are most of your customers paying in a timely manner and do they have a good relationship established with your factoring company?
- Do you have any upcoming orders that you will be planning to factor? If so, your factoring company may be take that into consideration when making their decision.