September 1, 2016
Categories:
Traditional Factoring vs Fintech
There has been a lot of talk in the news about fintech (financial technology) lately. Certainly there is a lot to be said about alternative approaches to financing over more traditional methods offered by the banks. However, accounts receivable factoring has always been an alternative financing method over what the banks offer, and has a long track record of success. In fact, many of the fintech companies even offer factoring programs, but they tend to be bare bones versions of factoring that only offer some of the benefits gained by factoring, and oftentimes even charge higher rates than traditional factoring companies.
The factoring industry has been around for a long time. It was well established in Europe when the original colonists brought it over to America. In fact, the king and queen of Spain offered a form of factoring to Christopher Columbus when he wanted to set sail for the "New World". While this may seem antiquated in our modern technology driven world, the fact is that most factoring companies do take advantage of modern technologies, offering most of the benefits of fintech, but with much more experience, a proven track record of helping to grow small to medium sized businesses, and much lower rates.
To see the difference, the chart below compares traditional factoring with DSA Factors to similar programs with PayPal Working Capital, Bluevine, and Fundbox, three of the more popular fintech companies offering similar programs to invoice factoring.
| DSA Factors | PayPal Working Capital | BlueVine | Fundbox | |
|---|---|---|---|---|
| Take on New Debt | No, the funds DSA provides you with are yours to keep. | Yes, PayPal is offering you a loan, so you are taking on new debt. | Maybe, if your customers don't pay BlueVine, they will require you to pay them back after 90 days. | Yes, Fundbox is offering you a loan, so you are taking on new debt. |
| Credit Limit | No, with DSA Factors we will fund you for all of your receivables. | Yes, the lesser of 18% of your annual sales on PayPal or $97,000. | Yes, $20,000 to $500,000 based on your company's credit. | Yes, $25,000. |
| Based on Your Credit | No, since DSA is giving your customers a line of credit, credit decisions are made based on your customer's good credit. | No, the loan amount is based on your annual sales volume with PayPal. | Yes, BlueVine will assign you a credit limit based on your credit worthiness. | Yes, Fundbox determines your credit limit based on your credit worthiness. |
| Charges You Interest | No, DSA offers a flat rate factoring fee. | Yes, the interest is charged to you up front when you get a loan, regardless of how long it takes to pay the loan off. | No, BlueVine also offers a flat rate program, but at 10-15% their rates are at least triple or quadruple the rate that DSA offers. | Yes, based on the size of the loan, Fundbox may charge you anywhere from 5-12% over the course of a 84 day loan. |
| Term Limit | No, DSA Factors has no problem working with extended terms. | Yes, PayPal requires you to pay back 10% of the loan every 90 days, with the full amount due in 540 days. | Yes, if payment has not been received after 90 days, you are required to pay back BlueVine. | Yes, you must pay off the loan in 12 weekly installments. |
| Collections Outsourcing | Yes, DSA Factors handles all of your collection work. | No, your customers must make payments through PayPal, but PayPal does not help with collections. | No, your customers are required to make payments to a BlueVine drop box or bank account, however BlueVine does not help you collect. | No, Fundbox does not handle collections for you, it is strictly a loan that you need to pay back. |
| Insure Your Receivables | Yes, with DSA's non-recourse factoring your invoices are insured against non-payment. | No, PayPal only does payment processing for you. | No, if an invoice has not been paid after 90 days of being funded for it, you are required to pay back BlueVine. | No, Fundbox is strictly a loan that must be paid back in 12 weekly installments. |
| Choose Which Invoices You Factor | Yes, DSA Factors does not require you to factor all of your receivables. | No, a percentage of all payments made through PayPal will be applied towards your loan. | Yes, you can choose which invoices you want to get funded on. | Yes, however there is a $100 minimum in order to get funded for an invoice. |
| Minimum Volume Requirement | No, at DSA Factors you are not required to factor a certain amount, and there are no annual fees. | Yes, PayPal requires you to pay back 10% of the loan every 90 days if you aren't doing enough volume. | No, BlueVine does not require you to fund a minimum amount each year. | No, Fundbox does not require you to draw a minimum amount each year, however, they will not fund you if an invoice is worth less than $100. |
| Long Term Commitment | No, with DSA Factors you can stop factoring at any time, but since many of our clients have been with us for over 20 years, we don't think that you will want to stop. | No, once your loan with PayPal is paid off you can start looking for alternative sources of financing. | No, BlueVine allows you to stop drawing on your line of credit at any time, but you will need to pay them back for any invoices that they have not received payment on. | No, once you have paid off your loan with Fundbox, you are free to pursue other financing options. |
| Charge Payment Processing Fees | No, DSA will never charge you for processing a payment. | Yes, you are required to accept payments through PayPal and pay their payment processing fees. | No, although BlueVine will funnel all payments into their account without your customers knowing that BlueVine is receiving the payment. | N/A, Fundbox does not process payments. |
| Available Technology | DSA offers its clients an online portal where they can get automatic approvals, view agers, remittance reports, and other reports in real time. Your customers may also go online to make payments. | With PayPal you get a loan online and customers make payments online. | BlueVine requires the use of Quickbooks or similar software to get funded. | Fundbox requires the use of Quickbooks or similar software to get funded. |
| Good Old Fashioned Service | As a family owned and operated business, you can call DSA at any time and speak with a principal who can come up with creative solutions to help grow your business. | PayPal doesn't even list a phone number on their web site. | BlueVine may have a phone number, but it is doubtful that you will be able to speak to anyone who can actually help you. | Fundbox may have a phone number, but it is doubtful that you will be able to speak to anyone who can actually help you. |
| DSA Factors | PayPal Working Capital | BlueVine | Fundbox |
As you can see, traditional accounts receivable factoring with DSA Factors offers all of the benefits that the fintech companies offer, along with many more. You still get an online portal where you can efficiently do business and your customers can make online payments, but you also can pick up a phone and speak with one of our principals at any time. As a result, we can come up with creative solutions for your business that might not fit into a fintech company's software, such as purchase order financing. So if you are looking for ways to finance your business, go with a time-tested method that works, accounts receivable factoring. Give DSA Factors a call today at 773-248-9000 and we can be funding you in as little as 24 hours.
