- Factoring is the selling of invoices at a discount and is governed by state law
- Based on business to business or business to government invoices (not business to consumer)
- Used as a short to medium term financing solution to get more cash flow to profitably grow business
Why Use Invoice Factoring?
- Bank lines of credit either not available, are not enough, or not available quickly enough
- To prevent the loss of profitable opportunities due to lack of funds
Accounts Receivable factoring can be utilized by many different types of companies for various reasons. Many of those that use accounts receivable factoring or accounts receivable financing are those in the service industries and have a staffing element involved. These include, but are not limited to security guard, IT staffing, janitorial, administrative staffing, architects, engineers, landscapers, pest control, nursing and medical home health. These companies usually experience periods when cash flow becomes an issue because invoicing is taking 60 days or more for payment, yet payroll and other expenses occur on a weekly, bi weekly or monthly basis. Other companies that benefit from accounts receivable factoring include manufacturing, distributing, suppliers, transportation companies, medical suppliers, and companies in the garment industry.
There are several ways accounts receivable financing can be used to finance growth. By employing factoring, a company can take on larger contracts than it has in the past. Cash is advanced when an invoice is issued and verified in order to meet payroll, expenses, etc. so it is not necessary to wait until the invoice is paid. This access to cash allows a company to operate efficiently through the length of the contract. Another method is to factor the invoices on one contract to provide cash flow to start up work on another contract. This provides the opportunity to take on new contracts that would otherwise be passed on.
Accounts receivable factoring is a very creative form of financing for business owners since it can be structured many different ways and is limited only by the amount of creditworthy invoices. It is a unique tool for new and established businesses to effectively manage current contracts as well as finance new opportunities.
Or give Infusion Funding, LLC a call at: 201-540-9210