Source: Cash Now
Cash Now Corporation (CHNW.PK) (Cash Now) today announced that it has executed an agreement in principle to acquire an ATM enterprise business and a factoring company for an undisclosed sum in cash and stock.
Over the next couple of weeks Cash Now management and their advisors will be conducting due diligence on both of these 2 separate private companies, for viability, revenue generation and client base.
"The ATM business looks extremely attractive to us," says Kevin Price, Cash Now's CEO. He added, "we have been provided with unaudited statements of this company with sales of over 1.5 million dollars in 2005. This company does not collect interchange fees from the processor and those fees could be substantial to Cash Now's bottom line."
Interchange fees paid by merchant-acquiring banks to cardholder-issuing banks are in place to cover the cost to convert a charge on a cardholder's card to a cash deposit at the merchant business checking account, including cost factors like billing services, credit and fraud risk, profit, etc. All payment systems utilize Interchange as a key driving component in forging markets. All card products have Interchange: Discover, American Express, Diners, Debit, and even smart cards. Interchange fees are particularly fundamental with charge cards whose balances are paid in full each month. Interchange is important to a payment system because it facilitates growth. Technology advances have made it easier to implement and manage a wide array of specialized Interchange rates and fees by card type and merchant. New indicators built into the system will allow not just by industry segmentation, but merchant segmentation within an industry.
When asked about the factoring company Mr. Price added "Cash Now is a sub prime lender and this acquisition would open the door for us to service both the B2B and B2C market place. We see factoring as a payday loan transaction for businesses, so it is a natural fit for us" Factoring goes by many names, including invoice discounting, receivables factoring and debtor financing. In simple terms, factoring is a practice wherein one company purchases a debt or invoice from another company. It refers to the acquisition of accounts receivable, which are discounted in order to allow the buyer to make a profit upon collection of monies owed. Factoring transfers ownership of such accounts to another party that then works vigorously to collect the debt.
While factoring may allow the liable party to be relieved of the debt for less than the full amount, it is generally designed to be more beneficial to the factor, or new owner, and the seller of the account than to the debtor. The seller receives working capital, while the buyer is able to make a profit by buying the account for substantially less than what it is worth and then collecting on it. Factoring allows a buyer to purchase such accounts for about 25% to 50% less than what they are actually worth.