How to ask for early reserve release

Remember the old adage, "It's not what you ask, but how you ask it?" This also applies to requests you make to your factoring company. Most likely, the payment you get for the invoices you sell to your factor are being advanced to you in part. Anywhere from 85 to 97 percent would be typical. The remaining amount is held in a reserve account until the invoice is paid. Some factoring companies may release reserves as invoices are paid, but release reserves only once monthly.

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:

1. 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.
2. On average, are most  of your customers paying in a timely manner and do they have a good relationship established with your factoring company?
3. 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.

In my old office, the Portflio Manager often based his decisions on whatever his mood was for the day. If you encounter this type of personality, keeping your cool and having a better understanding of not only the best explanations to give to backup your request, but also the information as to why would not put the factor in jeapordy of eating the costs of any unpaid fees for invoices.