Required Disclosures for Invoice Factoring Companies in California

There’s been a lot of discussion around the recent passing of commercial finance disclosure regulations, or CFDR, specifically in states like New York, Utah, and California. This CFDR legislation impacts not just traditional lenders and commercial finance companies, but also invoice factoring companies, factoring brokers, and small businesses.

What are the required disclosures for invoice factoring companies?

The CFDRs that went into effect in California in December 2022 are perhaps the strictest of any state. They generally require the following to be disclosed:

• Financed amount – The sum disbursed to the client by the provider
• Calculation of APR – An estimation of the annual cost of the client’s funding, including the amount and timing of the funding received, fees incurred, and payments made to the provider
• Total finance charge – The sum of finance charges, specifying the amount and description of each expense, such as factoring fees, origination fees, etc.
• Payment details – Information regarding the payment amount, frequency, and method
• Estimated term – A summary describing how the provider calculated the term
• Prepayment terms – A description of policies related to prepayment, including how the amount is calculated

How can factoring improve cash flow?

A commercial factoring company understands the importance of addressing the limitations that businesses may face when it comes to managing their cash flow effectively. Most factoring companies offer a range of programs and services to support their clients in improving their cash flow and facilitating business growth.

Factoring companies understand that businesses experience varying levels of invoiced sales, both in terms of dollar volume and the number of invoices. To cater to these unique needs, factors thoroughly analyze each client’s business and develops a system that can effectively handle the quantity of business they generate.

Whether their clients are dealing with large transactions on a regular basis or a multitude of smaller transactions that accumulate significant revenue, factors have the necessary resources and expertise to meet their specific requirements. By anticipating and addressing potential challenges in advance, they can ensure that clients can continue to generate invoices, improve their cash flow, and ultimately foster business growth.

Struggling to find a factoring company?

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