In a nutshell,
eTACH financing
allows Business to Business Buyers of goods or services to receive
payment
terms of up to six months while the Sellers of those goods or services
can
receive their cash immediately. All of
this is possible through the creation of financing instruments known as
Term
Allowance Drafts (TADs) which are somewhat similar to post-dated checks. These instruments, though, and for that
matter this entire system is all electronic.
In TAD
transactions, the
Seller accepts Term Allowance Drafts (TADs) from the Buyer which allow
the
Buyer to pay for the Seller’s goods or services with pre-arranged
periodic
electronic debits for a period of up to six months, in lieu of paying
an
invoice all at once. This increases the
Buyer’s purchasing power and spreads their payment term out, thereby
increasing
cash on hand and monthly cash flow.
Once the TADs
are created,
multiple Investors (Holders) are able to view and evaluate the
instruments,
then bid on their rates of discount to buy them from the Seller. Obviously, the TAD is sold to the Holder
offering the least discount, which provides the Seller with immediate
cash,
much the same as in factoring, where the Seller issues the Buyer an
invoice and
then sells the invoice for immediate cash. The Holder (Investor)
becomes owner
of the irrevocable instrument and receives the subsequent payment
stream.
Bottom line,
this process
provides unsecured Receivables AND Payables financing (that’s
unsecured, as in
no liens). For the same one-time
Enrollment Fee of $500, a company can sign up as both Buyer and Seller
and
receive financing on the front and back ends of virtually all future
transactions. They can receive terms of up to six months when buying
materials
etc., then receive cash up front when selling their own final product,
increasing
their cash flow two-fold.
To deal with the
great
diversity of credit-worthiness among Buyers, each one is thoroughly
credit
rated (assigned a TACH grade) and in exchange for terms of up to six
months,
they pay a processing fee (in lieu of interest) which is commensurate
with the
term and the risk involved. Businesses
wishing to utilize this unique financing system can normally be set up
and
using it within 48 to 72 hours.
TAD
transactions range in size, but average $90,000. They
range in maturity but average 60 days.
They range from very low to marginal risk, yet with optional credit
insurance
or recourse, they present virtually zero principal losses to the
investors (Holders)
buying them. Because of this, the
Sellers of goods & services can even receive immediate cash for
their
Customers with marginal credit. Most
Factors will only buy invoices issued to businesses with good credit,
so more
of your transactions will qualify.
Let’s
review a couple of ways we’ve discussed that
TADs can help your business:
• Offer Buyers up to 6 month terms, while providing
Sellers with cash up front.
• Improve Cash Flow by providing financing on both
Receivables and Payables.
• Can be used along with most other types of
financing.
• Impose no liens.
• Fast, easy qualifying for Business to Business Clients.
Much
more can be said about eTACH financing, but
this gives a background from which to determine whether TADs may help
you and
your Business.