Factoring and online arbitration work extremely well together and together provide the foundation for success in resolving disputes and recovering debt.
Factoring – also known as receivables factoring or debtor financing – is an industry that is crucial in helping businesses manage their cash flow.
It entails lending money and collateralizing the borrower’s debt or invoices from their customer and then collecting the debt from the customer directly.
It is also described as invoice discounting, where accounts receivable are discounted, allowing the buyer of the debt to turn a profit when it is settled.
How does factoring help businesses with their cash flow?
The factoring process is fairly simple.
Typically, a factoring company will lend between 70 and 90 percent of an invoice upfront. The rest is paid when the debt is recovered in full, minus the financing fee charged by the factoring company.
Factoring rates vary depending on the value of the accounts receivable and may be charged at a daily, weekly or monthly rate.
It is a very common commercial transaction used by textile companies and exporters to help accelerate and manage their cash flow.
Factoring is a viable option for any business where goods and services are sold and settled in 30 to 60 days.
Industries that use it include trucking, freight brokerage, medical care, oilfield services, construction, textiles any form of export goods, and logistics services.
How much turnover did the factoring business make in the US?
Factoring in the US is part of a much larger industry called the Secured Finance Market. According to the FCI Annual Review 2021, its volume exceeds $4 trillion. Factoring makes up 2.4% of the total, equaling about $100 billion of net funds employed in total volume.
Since 2019 and the Covid Pandemic the US has seen a drop in accumulative turnover to $100 million.
The reasons are many, but the overriding factor is that production is down and therefore the economy is down.
On a micro level, this means that businesses are producing less, meaning that there are fewer invoices to buy and debtors are also finding it harder to settle those invoices than they were when business was booming two years ago.
So where does online arbitration fit in with factoring?
Traditional debt collecting methods in the past include civil lawsuits and face-to-face arbitration.
The reality is that civil lawsuits are simply not worth the time, cost or effort to find a resolution to disputes arising from bad debt.
After paying legal fees, and going through the lengthy court process, factoring companies would be left with a return of pennies to the dollar.
The final nail in the coffin came in the form of US courts registering an average of a 30 percent increase in civil court backlogs as a result of the pandemic.
Traditional face-to-face arbitration is cheaper than filing a lawsuit, but there are still expenses that can drive claim costs into the tens of thousands of dollars.
This is where Brief becomes a game-changer. Our 100 percent online platform allows factors to file claims and upload their evidence.
Our software-based document-centric system allows for a speedy resolution, usually within 45 days, compared to 400 days plus with the traditional arbitration process.
So why does my factoring business need to have access to effective online arbitration?
No doubt, your factoring business will have partnered up with businesses that have solid trade.
However, you should ensure that your partners and their clients have a contract that includes an arbitration clause.
Alternative dispute resolution is a great tool, but binding arbitration depends on a solid contract that is relevant and fit for purpose. Meaning that the solution must fit the contract itself. (Many contracts call for expensive, in-person arbitration, which is overkill for most monetary claims.
If you are unsure, you can check out Brief’s arbitration sample clause and clause builder. If both parties agree to arbitrate in the contract itself, then the pathway to resolution can be made simple, fast and effective.
Filing an arbitration claim with Brief is easy and covers all types of disputes. The Brief six-step process involves opening a claim, to which the defendant will be notified.
They will be given the opportunity to respond to the claim, but if they don’t the assigned Ejudge will decide that they have defaulted and an arbitration award will be issued, which can be filed in the local court and reduced to an enforceable judgment.
Once both parties submit their evidence, the Ejudge will proceed to evaluate the evidence and will also handle the Discovery phase, eliminating “fishing expeditions” that can take place in both civil lawsuits as well as traditional arbitration.
Should your factoring company prevail, the Ejudge will issue an Award in your favor.
Brief’s main focus is on bringing the debtor to the table. This is why we also offer them the ability to settle the claim.
As the plaintiff, your business will be given the opportunity to set out a settlement sum, which is presented to the defendant.
If they do not find the offer acceptable, they are invited to make a counteroffer which you can accept or dismiss in favor of the arbitration process running its natural course.
Are you ready to recover what you are owed?
Brief has helped small and large businesses across the United States recover debts that were simply not worth the cost of traditional litigation or arbitration if not for online dispute resolution.
Register now on our online portal. If a dispute arises, it is a simple process to submit your claim, all for a flat upfront fee.
Brief’s online arbitration platform is typically 80 percent faster (or more) than a civil court hearing or traditional “brick and mortar” arbitration.
Satisfied and repeat participants include electronic commerce sites (Fintech), factors, banks, MCAs, and other lenders.
Brief also handles all types of monetary disputes as well as declaratory relief actions such as quiet title, coverage claims and warranty claims.
Our screened network of “Ejudges” spreads across all 50 states and each case is matched to the jurisdiction and subject matter expertise of the Ejudge.
You can request a demo from our homepage or call one of our arbitration consultants today on tel: +12134443794. Alternatively, drop us an email at [email protected] to see how factoring and online arbitration can work to your advantage.
Brief is a market-leading online arbitration platform in the United States. Our 100 percent online alternative dispute resolution platform helps businesses protect their contracts and agreements through online arbitration. Follow us on LinkedIn or Facebook for updates and news about online arbitration and more.
*Brief cannot and will not give any advice, legal or not