Krista Morgan from P2Binvestor
Krista Morgan from P2Binvestor

P2Binvestor’s Ex-factor line of credit disrupts factoring

Krista Morgan from P2Binvestor
Krista Morgan from P2Binvestor

As innovators looked for areas of finance prime for disruption, it was only a matter of time before they addressed factoring, P2Binvestor‘s CEO and Co-Founder Krista Morgan believes.

That is why P2Binvestor created the Ex-factor line of credit, Ms. Morgan said.

The motivation for creating a better factoring experience becomes clear when you look at the typical process. The business owner seeks financing and begins a search involving talks with brokers, referrals from business contacts and online searches. They reach out to the sources they eventually uncover.

Then they wait.

They receive sales calls. Then they wait.

They apply and submit documents, and wait for the diligence call, which usually involves sending more documents. Then they wait for the term sheet, calculate the ACTUAL terms, sign (we’ll use the shorter route), pay a fee, and undergo more diligence and document submissions.

Then they wait for the contract and wait for the lawyers to review it and submit changes, which are submitted to the funder for their yea or nay. Assuming all is well, documents are signed and then they wait.

Don’t leave we are getting close to the end. No, really.

Training invoices are uploaded and payers are notified. Then you wait for invoices to be uploaded.

There appears to be a faint light in the distance. Could be your money.

It is! It is your money!

Well, some of it anyway.

Once the verification and advance are received, your money people record the invoice sale and you wait 30 days for the lockbox payment, which you promptly record before you are made to wait for something.

And all is good, until the next time.

“We started out wanting to make factoring better than the old school way,” Ms. Morgan said.

Add in that P2Binvestor targets loans beginning at $500,000 and has customers in the $2 million range, working invoice by invoice can be burdensome, she added.

As a technology company wishing to scale, P2Binvestor wanted to develop a better way, which led to Ex-factor, a name chosen as a unique take on the disruption Ms. Morgan hopes to bring to the space.

“With Ex-factor, you are essentially breaking up with factoring,” Ms. Morgan explained. “We are not trying to make factoring better, we are introducing an all new product.”

Ex-factor combines the flexibility of a line of credit with the legal protections of factoring, Ms. Morgan said.

And the entire process is much quicker. The business uploads its sales journal and tells P2Binvestor how much they wish to borrow before receiving the funds the next day.

Ex-factor was made possible by changes in their risk calculation model, Ms. Morgan explained. The key is the risk distribution model where larger loans are separated into smaller pieces and sold for $10,000 at a time to different investors. Such portfolio diversification potential is an attractive factor.

As P2Binvestor grows and its clients respond to the service, they submit more and more invoices at a time, with the larger ones posting as many as 2,000 in one sequence, Ms. Morgan said. Because they upload their sales journal and select which invoices they wish to include, it is both convenient and transparent.

That transparency extends to the information available to the client at all times, Ms. Morgan added. Their dashboard contains a running balance including the precise total of fees paid to date.

Speaking of fees, in particular interest, P2Binvestor only charges interest on the balance used for the number of days the client actually used it.

“Many systems charge 30 days interest even if it it was only used for 28 days,” Ms. Morgan explained, while adding P2Binvestor only charges for those 28 days.

Determining what other companies actually charge is often an opaque process, Ms. Morgan said. Term sheets can extend for several pages and fees can hinge on multiple factors. Ex-factor is an on-demand service, Ms. Morgan said, so when you do not use it, you do not pay.