With the recent rollout of its FactorSoft Web Portal in mid-April, Jack Henry Lending, the lending division of core technology provider Jack Henry & Associates, is looking to gain further traction in a sector of secured finance where customers can be resistant to new technology. Factoring is a specialty finance model in which a lender advances funds to a company based on their accounts receivable. 

The new solution integrates with a financial institution’s existing core operating system to automate income verification, credit checking, purchase decisions, and trend and risk analysis. Commercial factoring customers can send documents through the FactorSoft portal, and invoices can be easily reviewed by the lender. Funding can be facilitated immediately if the customer fits the lender’s criteria.  

“We’re seeing tremendous volumes over in the factoring space right now,” Gary Lewis, director of sales for Jack Henry Lending, told Bank Automation News. “Factoring is poised to really expand over the next 12 to 18 months, and this technology system will help those institutions that we work with today, scale, and handle the volume.”  With the economic recovery ahead, commercial customers are likely to add products and services and, in turn, look for additional funding from factors.

ProBilling & Funding Service, a subsidiary of the $1 billion People’s Bank of Alabama, is already using the FactorSoft portal. “Our team has seen a reduction in time on the phone with the client base on the credit, information side,” Ginger Farley, executive vice president and senior operations manager of the company, told BAN. “These products have allowed our company to grow with minimal additions to staff. The responsive, app-like design of the new portal will increase their productivity.” 

However, factors aren’t using a web portal to finalize larger transactions. For companies with between $45 million and $250 million in revenue — the sweet spot for the $30 billion Sterling National Bank — factoring deals require hands-on underwriting and face-to-face meetings rather than cookie-cutter solutions, Michael Haddad, president of capital finance at the bank, told BAN. The Montebello, N.Y.-based bank’s factoring deals are currently facilitated via cloud-based software solutions from William Stucky & Associates (WSA) that provide management, calculation and collection of purchased receivables.  

Factors generally use more traditional portfolio management solutions for their transactions, such as the one Jack Henry rolled out more than two decades ago and the one from WSA. WSA was acquired in February by IDS, a provider of asset and equipment finance technology. After the deal closed, IDS began migrating the WSA solutions for factoring and asset-based lending to its own IDScloud, said Ray Wizbowski, chief marketing officer at IDS.  

“Over the remainder of the year, we will be focused on adding functionality, for example, data streaming, and a [user experience] refresh,” Wizbowski told BAN. 

Despite the growing shift to digitalization in factoring, Haddad noted that banks are still playing a catch-up game. “At the end of the day, I don’t think anybody’s got a big head start on it,” he said. And, while the economics of the pandemic are forcing lenders to refocus their efforts on digitalization, it will be some time before banks and finance companies get their legacy factoring deals into the cloud, he said.

For new deals, “You still need the relationship. You still need to handhold, but clients want their life made easier. They want technology to really help them,” Haddad told BAN.