Factoring Blog

How To Finance a Retail Food Broker with Invoice Factoring

May 17, 2012 By

Most retail food brokers buy products from their suppliers and then resell them to their commercial customers. Unless the broker is a large company, suppliers will usually require an upfront payment for the goods. On the other hand, most commercial customers will request up to 45 days to pay an invoice. And some larger customers, such as major retail outlets, may request up to 60 or even 70 days to pay an invoice. This puts the retail food broker in the situation where they have to pay their suppliers and run their businesses for a full two months  before getting any money back. This can put serious financial pressures on growing food brokers that don’t have the financial wherewithal to handle these transactions. It puts them in the position where they either have to offer credit terms at the expense of suffering financial problems – or – not offer terms and suffer the loss of a customer. Clearly, both options are bad.

Obviously, this problem would not exist if customers paid their invoices quickly. However, getting a quick payment from customers is very difficult and many react negatively to quick payment requests. However, you can get a benefit of quick payments without requiring your customers to pay any sooner by using invoice factoring.  Factoring provides an advance on your slow paying invoices. Factoring companies will usually finance up to 85% of your open outstanding invoices. This gives you immediate access to funds that can be used to cover critical supplier expenses. It can also provide predictable cash flow which enables you to operate your business more smoothly.

As opposed to other types of funding, factoring companies do not require that your company have sizable assets that will be used as collateral. Factoring transactions use your invoices as their main collateral. Because of this, it is very important that your commercial customers have outstanding credit. As a matter of fact, the whole transaction depends on this. Additionally, your company should be well run and should not have any major legal or tax issues.

One attractive benefit of factoring is that it can also be combined with purchase order financing. Purchase order financing is a funding solution that covers your supplier payments for existing purchase orders that require a prepayment. When properly combined with factoring, it can be used to provide end to end financing for larger food transactions. Additionally,  factoring lines are designed to fit very well with growing companies that have an entrepreneurial culture. This makes it a very attractive solution for retail food brokers that have growth problems and need funding.

Filed Under: Distributors

What Happens if you Lie on a Factoring Application?

May 17, 2012 By

It is not usual for companies that are looking for factoring to have cash flow problems. As a matter of fact, factoring is specifically designed to help companies that have cash flow problems due to slow paying customers, so it should be expected. Obviously, some factoring prospects will have less than ideal financial statements. Their balance sheets may be thin, they may be low on working capital, their accounts payable may be challenging, or a whole host of other problems. Because of this, some prospects choose to embellish their factoring applications. While there’s nothing wrong with presenting your best foot forward – and as a matter of fact it’s encouraged – one should never intentionally provide inaccurate information or omit critical details on an application.

This leads to the question – what happens if your factoring application has a number of inaccuracies and omissions? The most likely outcome of this is that your application will be declined. Sometimes, the factoring company may overlook small issues, but they will not overlook big ones. As a matter of fact, most factoring companies will double check information that is on the application against available public record information. This enables them to verify if the prospect has any:

  • Lawsuits
  • Judgments
  • Tax liens
  • Conventional liens
  • Criminal records

Applications have inaccurate information or omissions because of the  business owner’s underlying fear that the application will be declined if they disclose everything. It is possible that the application may be declined if it has substantial negative information. However, it is guaranteed that the application will be declined if substantial negative information is omitted or presented inaccurately. This leads us to her next question – so what do you do if your application is less-than-perfect?

If your accounts receivable factoring application is less-than-perfect, your strategy should be twofold. First, you should honestly disclose all information that the factoring company is asking for. Second, you should approach the factoring company with a plan that shows how you will improve your situation. Since factoring companies are used to working with companies that have cash flow problems, they are likely to be very receptive to this type of an approach. Additionally, they’re likely to respect a business owner who calmly and candidly addresses their problems. And if they don’t you are better off finding out sooner rather than later.

Disclaimer: This article is for informational purposes only. It should not be considered legal or financial advice. Only a qualified professional can provide that advice and you should seek one if you require it

Filed Under: Factoring

Running Low on Fuel? Try Freight Bill Factoring

May 14, 2012 By

Managing the expenses of a trucking company can be very complicated. However, it’s critical that you do a good job at this if you want your company to be profitable. Trucking companies have a number of expenses that have to be paid regularly such as repairs and parts, drivers, and paying the ever-increasing cost of fuel. On the other hand, most customers are looking to pay their invoices as slowly as possible. Most will request that you offer them up to 60 days to pay an invoice if you want to win their business. And as you know, it is the largest and most important customers that will also request the longest payment terms. This can put you in a bind where you have to manage a number of immediate expenses while having to wait for your slow payments to come in. And the last thing you want is to run out of fuel while waiting for an invoice payment.

One way to solve this common cash flow problem is to ask customers/shippers for quick pays. It’s common for trucking companies to offer some customers a 2% discount if they pay an invoice in 10 days. This strategy can be very effective at accelerating your revenues and ensuring that you always have the working capital to meet expenses. However, the strategy has one important drawback. It leaves your cash flow in the hands of your customers who could eventually go back to paying their invoices slowly. For many trucking companies, freight factoring can provide more predictable and reliable alternative.

Factoring freight bills can provide a similar outcome to quick pays without requiring customers to pay any sooner. The transaction works using a financial intermediary – known as a factoring company. The factoring company advances up to 90% of the gross value of your outstanding invoices/freight bills as soon as the load is delivered. You get the remaining 10%, less the cost of funding the invoice, as soon as your customer pays in full on their regular schedule. This last point is important, as it allows your customers the flexibility to pay on their usual schedule.

Most factoring plans are designed to be accessible to transportation companies, including one truck owner operators. Since the factoring company is financing your freight bills, it’s important that your customers have good commercial credit. Your invoices are the most important collateral that the factoring companies using. Additionally, your company needs to be clear of major legal or taxation problems.

One advantage of factoring freight bills is that the financing facility is designed to support growth. The line will increase as your sales to credit worthy customers grow. This makes factoring an attractive option for growing transportation carriers and brokers.

Filed Under: Transportation and Freight

What is Freight Factoring?

May 14, 2012 By

Freight factoring is a form of financing that can be used by transportation carriers and freight brokers that have cash flow problems due to slow paying customers. These problems usually originate because carriers and brokers have to provide credit terms to their shippers and customers. They give shippers up to 60 days to pay an invoice/freight bill – and most transportation companies can’t afford to wait this long. This puts transportation companies in a difficult position because they have to offer terms to remain competitive or risk losing customers.

Of course, this would not be a problem if customers paid their invoices quickly. And this can be accomplished, sometimes, by offering them a 2% discount for a quick pay. This is a common strategy in the industry and it can produce good results. The drawback of the strategy is that your customers are still in control of when you’re payments flow in – and could change their mind at any time. For many companies, a better strategy is to use freight factoring.

Freight factoring accomplishes the equivalent of getting a quick payment without actually asking your customers to pay sooner. It works using a financial intermediary – a factoring company – that finances your open freight bills. Basically, the factoring company advances your company up to 90% of the gross freight bill value as soon as the load has been delivered. The remaining 10%, less a fee, is advanced once your customer pays in full.

When used correctly, a factoring line can provide the money that your transportation company needs to cover its expenses. Additionally, it will also provide a solid platform that can be used to take on new clients since concerns about slow payments will be minimized.

Qualifying to factor your freight bills is easier than qualifying for most conventional financing. First and foremost, your company must work with shippers and brokers that have a good commercial credit score. This is extremely important because your freight bills – and your customers ability to pay them – is that collateral for the transaction. Additionally, your company should be well managed and free of major legal or tax issues.

One important advantage of factoring over other sources of financing is that the line is growth oriented. The size of your factoring facility will increase as your qualified sales grow. This is a feature that is seldom found in other business financing programs. This makes factoring an attractive funding option for growing transportation companies.

Filed Under: Transportation and Freight

What Is Invoice Factoring Good For?

May 11, 2012 By

Invoice factoring has been gaining popularity as a business financing solution in recent years. However, invoice factoring is still not very well known and considered a type of niche financing. This short article will help you understand two simple questions – what is factoring? and, what is it good for?

Let’s start by describing a common situation for many companies. Companies that sell to other companies or to government entities usually have to offer payment terms. This means that they need to give the customer up to 60 days (or some other negotiated term) to pay an invoice. This can create a problem for small and growing companies because they need to cover the expenses of delivering the service/product immediately. But payment comes in two months. This can be difficult and companies with small cash reserves will find themselves with problems. They will either turn away customers that are demanding terms, or they will offer terms and run into cash flow problems when they realize that they can’t pay their own expenses.

Of course, this would not be a problem if all customers pay quickly. And this is where factoring comes in. Invoice factoring can provide similar benefits than having customers pay quickly. It works by using a financial intermediary, called a factoring company, that advances money to your business and uses your invoices as collateral. The transactions conclude when your customers pay their invoices in full – on their regular schedules.

What makes factoring very attractive to small and growing companies is that it has simple collateral requirements. The most important requirement is to have credit worthy customers. The whole transaction is based on the fact that you can leverage your invoices from credit worthy customers to your advantage. Of course, there are other requirements such as having good invoicing practices, being free of major legal or tax problems, and having a well-run business. However, invoice factoring is available for small and growing companies whose main asset are good customers.

More importantly, factoring is ideally suited for growing companies. The line is adaptive and will increase as your company grows. This ensures that your company has a solid financial footing that enables it to take on new customers. Given that factoring is flexible and easier to obtain than comparable products, it’s considered an ideal solution for growing companies that have working capital problems.

Filed Under: Factoring

How To Get The Best Factoring Rates

May 10, 2012 By

When looking for a factoring plan, cost is one of the most important variables that business owners seem to focus on. This makes sense, because many factoring prospects have cash flow problems, and this makes them very sensitive to pricing differences. However, most business owners think that the most effective way to get the best factoring rates is to call as many factoring companies as they can and submit as many applications as possible. More often than not, this strategy will waste your time and not get you what you want.

From a factoring company’s perspective, rates are associated with risk. This means that if they perceive the client to be risky, they will charge higher rates to compensate for that. However, if they perceive the client to be less risky, they will lower their rates. The right strategy to get the best factoring rates involves doing two things:

  1. Select the factoring company that has experience with your industry
  2. Presenting your company and your application professionally

Determining if a factoring company has experience in your industry is relatively easy – all you need to do is ask them. However, it’s always a good idea to ask some in depth questions to verify that your financing company really knows about your industry. For example, if you’re in the transportation industry, the financing company should be comfortable with all the necessary documentation needed to deliver and accept loads. Additionally, the factoring company should be familiar with all the major shippers and carriers and their procedures. Lastly, it also helps to ask them for references that are in your industry and that have been with the factoring company for at least one year.

Once you have selected which factoring companies you’re going to apply to, the second step is to actually submit the applications. This is where most prospects go wrong. It’s common for prospects to turn in sloppy applications that are hard to read and are missing important information. Most factors see this as a troubling sign and will adjust their  rates accordingly. You should always submit a well-crafted application that is easy to read and has all the required information. If any information is missing, you should make an effort to note that on the application, explain why it’s missing, and advise the factoring company as to when they will receive it.

It is not unusual for factoring prospects to have less than ideal circumstances. Many try to hide this fact from their application. Sometimes they omit details or even critical documents. In other cases, they just enter completely inaccurate information. This can be a serious mistake that will almost always lead to higher factoring rates – or worse – having your factoring application declined. Factoring companies are trained to look for problems and will easily catch any missing information. Additionally, they also do public records searches, which are very helpful in determining if any critical facts have been omitted or are inaccurate.

This opens the final question – what do you do if your situation is less than perfect? Remember that many companies that look for factoring do so because they have growth or cash flow problems. Factoring companies are used to working with companies that have less-than-perfect situations. As long as your situation is workable, there is a very good chance that the factoring company will be willing to help you. The best strategy in these situations tends to be a combination of full disclosure and good planning. You should provide your financing company with a full and honest picture of your situation early on, along with the plan of how you will turn things around. This last point is critical – you must have a plan to improve things. Many factoring companies will react positively to this and will be willing to help you. And if they’re not willing to help you, it’s best that you find about it early on in the process.

Filed Under: Factoring

Factoring Financing in Canada

May 9, 2012 By

Invoice factoring has been gaining popularity in Canada as an alternative to conventional business loans and lines of credit. One reason for this is that getting a business loan is particularly difficult. Most lending institutions only provide financing to companies that have substantial assets for collateral, spotless financial records, and a long track record of success. Few small, or even midsize companies, can meet this requirements. However, if your company has cash flow problems because it’s offering payment terms to its commercial customers, then factoring may actually be a better solution than a conventional business loan.

Factoring in Canada is designed to help companies that have cash flow problems because they do business with corporate customers that pay their invoices and up to 60 days. From a capital perspective, your company has to spend money to deliver the service and then wait up to two months for payment. Few companies can afford to do this and grow at the same time. Of course, companies would not have these problems if customers paid their invoices within a few days of receiving your product/service. And this is where factoring your invoices comes in.

Factoring provides a similar benefit to a quick payment, without actually requiring your customers to pay sooner. Rather, a factoring company advances funds to your business using your open invoices as collateral. Usually, factoring companies advance anywhere between 80% to 90% of your invoices as soon as the work is completed. You get the remaining 10% to 20%, less the financing fee, once your customer pays in full.

One important advantage of factoring over other solutions is that it has easier collateral requirements. From a collateral perspective, the most important requirement is that your customers must have good commercial credit. This is most important because your customers payment ability acts as collateral for the transaction. Additionally, your company needs to have good invoicing practices, be free of major problems, and be operated by knowledgeable managers.

One clear benefit of factoring your invoices is that it’s one of the few forms of financing that allows you to leverage the credit strength of your customers to your own advantage.  Additionally, most factoring lines are designed to be indexed to your sales – this means that the line will increase as your sales to credit worthy customers grows. This makes invoice factoring an attractive solution for growth oriented companies in Canada that have cash flow problems due to slow paying clients.

Filed Under: Factoring Canada

How To Finance a Seismic Testing Company With Invoice Factoring

May 8, 2012 By

Seismic testing companies that work for oil and gas companies usually have to offer 30 to 60 day payment terms to their customers. Offering payment terms gives customers the ability to pay their invoices in up to 60 days. This is a standard business practice and seismic testing companies that want to remain competitive have to extend payment terms. The problem is that smaller companies can’t usually afford to offer terms. They don’t have the necessary financial reserves to cover their expenses, take on new business, all while waiting for customer payments. This puts them at a disadvantage from larger and better funded competitors.

One way to solve this problem is to get customers to pay sooner. Some customers may be enticed to pay sooner if you offer them an incentive, such as a 2% discount for payment in 10 days or less. While this strategy tends to work reasonably well, it also has one drawback. Your customers remain in control of your payments and could change when they pay at any time. There is another way to accomplish something that is similar to a quick payment though. You could use a factoring financing line.

Invoice factoring works by using a financial intermediary that provides an advance on your open invoices from credit worthy companies. The financing company holds the invoice as collateral until it’s paid by the customer on their regular schedule. This provides a similar effect to quick payments without actually requiring customers to pay any sooner.

Qualifying for invoice factoring is relatively easy, at least when compared to other options such as business loans. The most important collateral requirement is to have invoices from companies that have solid commercial credit. Additionally, your company should have good invoicing practices, be free of major problems, and be managed by knowledgeable and reputable individuals.

Most accounts receivable factoring lines are designed to support growing businesses. The line is flexible and will increase as your revenues grow, provided that your sales are to credit worthy companies. Because of this, invoice factoring is an ideal alternative for seismic testing companies that need business financing and can’t qualify for a line of credit.

Filed Under: Oil and Gas

Is Factoring Financing Right For My Company?

May 8, 2012 By

The popularity of factoring financing has increased in recent years due to the current economic problems. Basically, company owners have been looking for a way to finance their businesses and started to seek out alternatives when business loans became hard to obtain. Although invoice factoring is a very flexible tool it can only help companies that have a very specific set of problems. This article will help you determine if factoring financing is the right solution for your company.

Let’s start by defining factoring. Factoring is a form of financing that helps companies that have working capital problems because their customers are taking up to 60 days to pay their invoices. It provides an advance on the open invoices, providing the liquidity that the company needs to pay operating expenses. By accelerating the revenues that are locked in slow paying invoices, working capital is optimized and companies can focus on growing their sales.

Your company may be able to benefit from factoring if you meet the following criteria:

  1. You have commercial or government customers with good credit
  2. Your customers are taking up to 60 days to pay their invoices
  3. You need working capital to cover operational expenses such as payroll, suppliers, and rent

Invoice factoring has two advantages over other common business financing solutions. The first advantage is that it’s easier to obtain. The most important collateral requirement is to have customers with solid commercial credit and good invoicing practices. The second advantage – and perhaps the most important one – is that the line is indexed to your revenues. The financing line will increase as your sales grow, provided that you meet the factoring financing criteria. This makes it an ideal source of growth financing for companies that have working capital problems that originate from slow paying customers.

Filed Under: Factoring

Types of Factoring

May 7, 2012 By

Every factoring company claims to offer their own unique flavor of factoring financing. While it is true that there are some variations in how factoring is offered by each company, there are really two major types of factoring – they are called full recourse factoring and non recourse factoring. This article will help you understand the differences in these two types of factoring so that you can better decide which one works best for your company.

Let’s start by defining factoring. Factoring is a type of business financing that helps companies that have cash flow problems due to slow paying customers. Most commercial sales – whether selling products or services – are structured to provide the customer up to 60 days to pay their invoices. This is called “selling on terms” or “selling on credit”. This is a common practice in the industry and companies that want to remain competitive have to offer it, otherwise customers will go somewhere else. The problem with offering payment terms is that many companies, especially smaller companies, can’t afford to do so. They need the funds sooner so that they can pay their own expenses.

This is where invoice factoring comes in. A factoring company provides financing using your accounts receivable as collateral. Basically, you get an advance on your slow paying invoices, which provides you with the working capital you need. This type of financing is ongoing but individual transactions settle once each invoice is paid.

The most common type of factoring is called full recourse factoring. With this type of financing, your company is fully liable for any unpaid invoices. If your customer does not pay for your invoice because there is a dispute, they have financial problems, or they simply don’t want to pay, your company has to return the funds to the factoring company. Usually this is done by debiting your reserve account or having you provide a substitute invoice to cover the one that did not pay.

A less common type of factoring, and also the most misunderstood, is called non recourse factoring. Nonrecourse factoring operates in a similar way to recourse factoring with the exception that your company is not liable if your customer does not pay the invoice due to a financial insolvency during the factoring period. In other words, you don’t have to pay the factoring company back if your customer declares bankruptcy or a formal insolvency during the first 90 days from the time that the invoice was purchased (referred to as the factoring period). However, your company is usually liable for any nonpayments due to disputes or any other reasons. Although nonrecourse factoring provides very valuable protection – it is also a very narrow protection. It is very important that you and your attorney examine the factoring agreement so that you understand what protections are being afforded.

Of course, the obvious question is – which one is better? The answer is not as easy as it appears and it’s often the subject of heated debate in the industry. You should go with whatever type of invoice factoring you you think will benefit your business the most. However, bear in mind that most factoring companies will do extensive credit research on your invoices before financing them. Because of this, there is only a small likelihood that they will buy an invoice that has a chance of defaulting. Which brings us to the closing point, one important benefit of factoring is that the factoring company can act as your credit review advisor. And if you use their services correctly it may help you reduce bad debts by ensuring that you only sell to companies that have the best credit quality.

Filed Under: Factoring

What Types of Companies Should Use Invoice Factoring Services?

May 7, 2012 By

The use of factoring financing has increased in popularity in recent years. Although factoring is usually promoted as a very flexible solution, which is true, it should be noted that it can only be used successfully in certain situations. This short article will help you determine whether invoice factoring is the right solution for your company.

Companies go out to the marketplace to get business financing because they have a specific business problem that they want to solve – they need to buy equipment, property, make payroll, pay suppliers, or cover many of the other expenses that companies incur. With this in mind, what is the specific business problem that factoring your invoices will solve? Invoice factoring helps companies that have cash flow problems because they can’t afford to wait 30 to 60 days to get paid by their commercial customers. This problem arises from the fact that most commercial sales are done on terms, which means that you deliver the product/service now, but get paid for it later. Few companies can afford this.

As a rule of thumb, factoring should be able to help your company if the following is true:

  1. You have credit worthy commercial or government customers
  2. Your customers are taking 30 to 60 days to pay their invoices
  3. You need the funds sooner to cover ongoing operational expenses

Some examples of companies that use factoring are staffing agencies that need liquidity to meet payroll, trucking companies that need money to pay for fuel and repairs, distributors that need to pay suppliers, and many other types of businesses that have ongoing operational expenses. Now that we know what problems are solved by factoring and who does it help, the next question to ask is how does it work?

Most factoring transactions are structured to advance money to your company using your invoices as collateral. The factoring company advances anywhere between 80% to 90% of your outstanding accounts receivable as soon as you invoice your customer for completed work. Your company gets the remaining 20% to 10% (less the fee) as soon as your customer pays the invoice on their regular schedule. Basically, factoring accelerates the collection of your revenues in exchange for paying a fee to a financing company.

One of the advantages of factoring over other business  financing solutions is that it’s easier to obtain. Usually the biggest requirement is to have commercial customers with good credit and have a well-run business. But the biggest benefit from factoring comes from its flexibility – the line is indexed to your sales and will increase as your sales grow, as long as you meet the factoring criteria. This makes it ideal for growing companies that have cash flow problems due to slow paying customers.

Filed Under: Factoring

Are You A Good Candidate For Factoring Financing?

May 5, 2012 By

Factoring financing has been gaining popularity in the past few years. While factoring is a very effective product at helping companies that have cash flow problems, it is not for everybody. This article will help you determine if factoring is the right solution for your company. First and foremost, let’s determine the problem that factoring solves. Factoring helps companies that have cash flow problems because their customers are taking up to 60 days to pay their invoices. Because of this, some companies have problems meeting their own operating expenses. Additionally, they also have problems signing on to customers because they can’t afford to offer them payment terms. If used correctly, factoring can fix this.

Usually, your company will be a good candidate for this type of financing if all or some of  following statements describe your situation:

  1. You are having problems making payroll
  2. You are having problems paying suppliers
  3. You are having problems taking on new clients because you can’t offer them payment terms
  4. Your customers have good commercial credit, and lastly,
  5. Your company has good invoicing practices
An invoice factoring transaction provides an advance on your accounts receivable. Instead of waiting up to 60 days to collect your money, a factoring company fronts you the money using your invoices as collateral. This gives you the operating capital to meet ongoing expenses and take on new clients. Factoring transactions are usually structured using two installments. The first installment covers about 80% of your accounts receivable and is provided as soon as the work is invoiced for. The second installment covers the remaining 20%, less the financing fee, and is provided as soon as your customer pays in full.
Accounts receivable factoring transactions differ from other financial transactions in that they use your invoices as the main collateral for the transaction. This is important because from a collateral perspective, the most important requirement is to have credit worthy invoices. This puts factoring within the reach of small companies whose biggest asset is a strong roster of customers.
Perhaps a good way to finish this article is to mention what financial problems are usually not solved with factoring:
  1. You need capital to buy large pieces of equipment
  2. You need capital to buy real estate
  3. You need startup capital to pay initial corporate expenses that are not associated with sales

These problems are better served by other financial products.

Filed Under: Factoring

Financing An Offshore Oilfield Marine Transportation Company

May 4, 2012 By

One of the challenges of winning a large marine transportation contract from an oil and gas company is that the contract will usually have a clause that allows the client to pay their invoices in up to 45 days. This is a common industry practice, and for the most part, it can be seen as the cost of doing business with a large customer.

For larger companies, offering payment terms is usually not a problem because they have substantial cash reserves. They can use those cash reserves to meet current operating expenses and then replenish them once the customers pay their invoices. Smaller companies don’t usually have any substantial cash reserves, which leaves them at a disadvantage.

This cash flow shortage can easily be solved by complementing your existing cash reserves with an invoice factoring line. Invoice factoring is a form of financing that accelerates the revenues that are tied to your slow paying invoices. This provides you with the needed liquidity to meet your ongoing expenses so that you can operate your business with confidence. More importantly, it provides predictability to your revenues which enables you to take on new customers without worrying about giving them payment terms.

Factoring transactions are structured through a factoring company that advances funds for your invoices as soon as the work is completed. They also settle the transactions once your customers pay their invoices in full on their regular schedule. Most companies use invoice factoring as a source of ongoing financing, which ensures that they always have to cash on hand to meet working capital demands.

Most factoring transactions are structured using two installments payments. The first installment is called the advance, and covers about 80% of your outstanding accounts receivable. This is provided immediately upon invoicing. The second installment, called the rebate, is provided as soon as your customer pays in full. The rebate covers the remaining 20%, less the financing fee.

One of the more important benefits of invoice factoring is that it’s easier to obtain than most conventional business financing products. The transaction uses your invoices as collateral, so it’s very important that your customers have good commercial credit. Aside from that, your company needs to be well managed and have good invoicing practices.

A clear advantage of accounts receivable factoring over other solutions is its flexibility. The financing line is tied to your sales, which enables it to increase as your sales grow. This makes invoice factoring an ideal solution for offshore oilfield marine transportation companies that  are experiencing growing pains due to slow paying customers.

Filed Under: Oil and Gas

How To Finance a Waste Disposal Company With Factoring

April 30, 2012 By

Companies in the waste disposal services industry are used to offering payment terms to their commercial, medical and government customers. This means that the customer usually haves up to 60 days to pay an invoice. The problem with offering terms is that if the disposal company is not well capitalized, it will run into cash flow problems. The reality is that few companies can afford to pay their expenses, take on new customers, and offer payment terms at the same time.

A simple way to solve this problem is to use business financing as a stop gap measure to cover your operational expenses while waiting for customers to pay. Unfortunately, most loans are very difficult to get in the current economic environment. Lending institutions have very strict requirements and will only lend to companies that have strong income statements, substantial assets that can be used as collateral, and a long track record of profitability. These criteria rule out most waste disposal companies. Fortunately, a business loan is not the only (or the best) way to fix the financial problems created by slow paying customers. For many companies, invoice factoring is a much better solution.

Factoring solves the problem created by slow paying customers by accelerating the revenues that are tied to your slow paying invoices. Basically, a factoring company advances funds to your waste disposal company using your invoices as collateral. This ensures you have the cash at hand to cover operational expenses. More importantly, it ensures you can take on new customers without worrying about their slow payments. The factoring transaction is settled once your customer pays their invoice in full.

Getting a factoring financing line is easier than getting a conventional business loan. The most important requirement is that your customers – whether they be commercial, medical or government – must have a good track record of paying their invoices. It’s ok if they pay slowly, as long as they pay. Additionally, your company should also:

  1. Invoice for completed work
  2. Must not be encumbered legal or tax problems
  3. Invoice must be free of liens
  4. Company owners must have industry experience and a good reputation

One of the advantages of accounts receivable factoring over other solutions is that the line is designed to grow dynamically with your sales. The line will increase as your sales grow, provided your company meets the factoring criteria. This makes factoring financing an ideal solution for waste disposal companies that have cash flow problems due to slow paying customers.

Filed Under: Business Services

How To Finance a Warehousing And Distribution Company With Factoring

April 9, 2012 By

Running a warehousing and distribution company can be very challenging. One of the most difficult tasks is managing the company’s cash flow and coping with the demands of customers that want to pay their invoices in 30 to 60 days. While offering payment terms to prime customers is a common business practice, it also comes with its own set of problems. Small warehouse and distribution companies that are not well funded can find themselves with working capital problems and unable to wait that long for payment. This puts them in a catch-22 where they risk cash flow problems if they offer payment terms or risk losing customers if they don’t. Obviously, both options are bad.

One way to solve this problem is to use business financing to cover expenses while waiting for customers to pay their invoices. Unfortunately, this is easier said than done. Most financial institutions have very strict financing criteria and will only fund companies that have substantial collateral, sizable assets, impeccable financials, and a track record of successful operations. In reality, few small or midsize companies meet these criteria. Fortunately, there’s a new alternative that has been gaining traction in the industry. It’s a form of financing known as factoring.

Invoice factoring solves this problem by accelerating your revenues. Basically, a factoring company makes a funding advance to your warehousing and distribution company based on its outstanding invoices. The transaction is structured so that you get a large percentage of your accounts receivable up front, which provides you with the needed working capital to run your business. Transactions are settled once your customers pay their invoices in full on their usual schedule. Please note that your customers are not required to pay any sooner.

One of the benefits of accounts receivable factoring is that it’s easier to obtain than conventional business financing. The most important requirement to qualify is to have credit worthy commercial customers. This is critical since their invoices – and more importantly their credit worthiness – acts as collateral for the factoring transaction. Additionally, your company should also meet the following requirements:

  • Your company should only invoice for compleated services
  • Your invoices should be unencumbered
  • Your company should not have any serious legal or tax problems
  • Company owners should have industry experience and a solid reputation

Freight factoring lines are designed to work with growing companies and can increase dynamically as you book new sales and customers. This is an important feature because many  companies experience growth once they get the financial stability that factoring provides. Because of this, factoring is an ideal solution for growing warehouse and distribution companies that have working capital problems that are related to slow paying customers.

Filed Under: Transportation and Freight

How To Finance A 3PL Company With Freight Factoring

April 5, 2012 By

It is not unusual for successful third-party logistics companies to run into cash flow problems at one time or another. Actually, unless the 3PL company is well financed, there is a higher chance that it will run into cash flow problems as it grows. What makes this situation very interesting is that the root cause of these problem is also the reason for the company’s success - its customers. Most commercial customers pay their invoices in 30 to 60 days. However, most third-party logistics companies need faster payments so that they can pay their own expenses. Obviously, if they have cash reserves or financing, slow payments will not be a problem. But if they lack financing and if they have no cash reserves, slow payments can spell disaster.

The common way to address this problem is to offer a 2% discount to customers that agree to pay quickly – usually in 10 days or less. However, not every customer will agree to quick pays. And those that do agree to quick pays are free to leave at any time, which makes this an unreliable solution. For many 3PL companies a better solution is to use freight factoring.

Freight bill factoring accelerates the revenues that are tied to your slow paying invoices. This provides your logistics company with the necessary liquidity to meet its ongoing obligations. More importantly, it provides your logistics company with a solid financial footing that enables it to take on new customers without worrying about slow payments.

Most freight bill  factoring transactions are structured as a two installment advance on your open invoices. The first installment, which covers 90% of the value of your open invoices, is provided once the load has been delivered and accepted by the customer. The second installment, which is the remaining 10% (less the factoring financing fee), is rebated to your company once the customer pays the invoice in full. You should note that your customers still pays the invoice on their regular schedule and are not required to pay any sooner.

One of the most important requirements to qualify for freight bill factoring is to have credit worthy customers. This is very important to the factoring company since your invoices are acting as collateral for the transaction. However, these are not the only requirements. Your company should also:

  1. Only invoice for loads that have been delivered and accepted
  2. Have A/R that is free of liens and encumbrances
  3. Be free of major legal or tax problems
  4. Have owners with industry experience and a good reputation

The most important advantage of factoring financing lines is that they are flexible and will grow with your sales. This can make them a superior product in instances where a company is growing but has cash flow problems due to slow paying customers. Because of this, freight factoring is a tool that every growing third-party logistics company should consider.

Filed Under: Transportation and Freight

Financing An Oilfield Services Company With Factoring Financing

April 5, 2012 By

The oil and gas industry has been on a tear and has been growing very quickly. This in turn has had a positive impact on the oilfield services industry which has seen an incredible increase in demand for services such as oilfield fluids transportation and seismic testing among others. Although this increase in demand has had a positive impact in revenues, it has also negatively affected the cash flow of some companies. This is because most oil and gas companies pay their invoices in 30 to 60 days. However, many oilfield services contractors don’t have the financial resources to wait for payment – they need faster payments so that they can meet their own obligations. This puts the oilfield services company in a bind because they have to choose between offering payment terms and suffering financial difficulties or not offering terms and losing customers.

One way to solve this problem is to use business financing to pay for company expenses while waiting for customer invoice payments. Though this works great in principle, there is one drawback with this option. Getting business financing is very difficult. Most lending institutions require substantial assets as collateral, impeccable financial statements, and a very long track record of successful operations. The reality of the situation is that few oilfield services companies can meet this criteria. However, there is an option that has been gaining traction in recent years as a solution to this problem – it’s called invoice factoring.

Invoice factoring is the business financing tool that accelerates the revenues that are locked in your slow paying invoices. This reduces the time that it takes you to get paid, providing the working capital you need to meet ongoing business expenses. And when used correctly, factoring can put your company on a stable financial footing and provide a platform for growth that enables you to take on new business without worrying about slow paying customers.

Factoring transactions are structured by advancing two installments. The first installment which covers up to 85% of your outstanding invoices is given to your company as soon as the work is delivered and accepted. The second installment, which covers the remaining 15% (less the factoring fee) is rebated to your company once your customer pays the invoice in full. It should be noted that your customers pay on their regular schedules and are not required to pay any sooner.

Since your invoices act as collateral for the transaction it is important that your customers have good commercial credit. Fortunately, most oil and gas companies are doing very well financially and have good credit. Additionally, to qualify for factoring your company should also meet these requirements:

  • You must only invoice for work that has been delivered and accepted
  • Your invoices must be free of liens and encumbrances
  • Your company should not have serious legal or tax problems
  • Company owners should have a good reputation and solid industry experience

When used correctly, accounts receivable factoring is a vehicle for financial stability and growth. As a matter of fact, your factoring line is designed to increase as your sales grow, provided your company meets the factoring criteria. This makes accounts receivable factoring an ideal solution for growing oilfield services companies that have working capital problems due to slow paying customers.

Filed Under: Oil and Gas

Factoring Financing For School Bus Companies

April 5, 2012 By

Most school districts tend to outsource their school bus services to third party providers. Although offering transportation services to school districts is a great business, it also has its financial challenges. One common challenge  is that districts pay their invoices in 30 to 60 days. This can be very difficult for companies that don’t have the financial resources to wait this long for payment because they have their own immediate expenses to pay such as fuel, payroll, and repairs.

One way to address this problem is to request faster payments. However, most school districts are reluctant to pay sooner and will follow the terms of their contracts. Sometimes, school districts may be enticed to pay sooner if they’re given a discount in exchange for a faster payment. Offering a 2% discount for a payment in 10 days or less is a common strategy. For most companies however, the better option is to get a business financing solution such as invoice factoring.

Factoring provides working capital for your company by accelerating the revenues that are tied to slow paying invoices. This gives your school bus company the cash flow it needs to meet ongoing expenses, and to expand its fleet as it pursues new opportunities. When used correctly, factoring con provide financial stability and a platform for future growth.

Most factoring transactions finance your accounts receivable in two installments. The first installment, usually about 80% of outstanding invoices, is advanced as soon as the work is completed and invoiced for. The second installment, which covers the remaining 20% (less the factoring fee) is advanced once the school district pays for the invoice in full. Note that the school district does not need to pay sooner – they pay on their regular schedule.

The most important requirement to qualify for factoring is to have credit worthy customers. For the most part, school districts are reliable payer’s so this probably won’t be a problem. Additionally, your company should also meet these criteria:

  1. You must only invoice for completed work and must not invoice in advance
  2. Your company must not have any serious legal or tax problems
  3. Your invoices must be free of liens and encumbrances
  4. Company owners must have industry experience and a solid reputation

Most factoring lines are designed with growth in mind and will accommodate increases in sales, as long as your company meets the factoring criteria. Because of this, accounts receivable factoring can be a great solution for school bus companies that have cash flow problems due to slow payments from school district customers.

Filed Under: Government Suppliers

Factoring Financing For Companies That Do Commercial Laundry

March 29, 2012 By

Many times, managing the cash flow of a commercial laundry and linen company is similar to managing a tug of war competition. On one side, you have customers that demand that you give them 30 to 60 day payment terms. And on the other side, you have company expenses that need to be paid regularly. This tug-of-war is usually not a big problem for companies that have good financial reserves. However, it is a major daily battle for small and midsize businesses that don’t have large cash reserves.

In an ideal world, your customers would pay soon after receiving your services. But in reality, 30 to 60 day payment terms are the norm and your commercial laundry company has to offer them if it wishes to remain competitive. This can leave you with a serious predicament – if you offer terms you risk financial problems and if you don’t offer terms you risk losing the customer.

One way to address this situation is to accelerate your revenues by financing your invoices with  invoice factoring. This provides your company with immediate working capital that can be used to cover expenses or to win new business. Factoring transactions are intermediated by a finance company who advances funds using your outstanding invoices as collateral. They also clear and settle transactions once your customers pay in full. Most transactions are structured as a purchase of your invoices in two installments. The first installment covers about 80% of your outstanding invoices and is paid as soon as the work is completed and invoiced for. You get the remaining 20% (less a factoring fee) as soon as the invoices are paid in full by your customers, who pay on their usual schedule.

The clear advantage of factoring over other solutions is that it is easier to obtain. The most important requirement to qualify for factoring is to have credit worthy commercial customers. This is important because your customers – and their credit – act as collateral for the transaction. Your company should also meet these criteria:

  1. You should only invoice for completed work
  2. Your company should not have any serious legal or tax problems
  3. Your invoices must be free of liens and encumbrances
  4. Company owners should have industry knowledge and a good reputation

Invoice factoring lines are designed with growth in mind and will dynamically increase alongside your sales. This flexibility enables companies to use accounts receivable factoring as a tool for growth. This makes accounts receivable factoring an ideal solution for growing commercial laundry companies that have cash flow problems due to slow paying customers.

Filed Under: Business Services

Factoring Financing For Uniform Rental Companies

March 28, 2012 By

Most uniform rental companies that work with midsized and large companies usually have to accept the fact that larger commercial customers will demand payment terms and will pay their invoices in 30 to 60 days. While this is not a problem for companies that have sufficient financial reserves, small or growing uniform rental companies can find themselves at a disadvantage. This is because many times, they will need to be paid sooner, so that in turn they can pay their own bills. This leaves companies with a dilemma – they risk financial problems if they offer terms and risk losing the customer if they don’t.

The common solution to this problem is to use the tried and tested method off offering a 2% discount to customers that pay in 10 days or less. This strategy can work very well but also has one serious drawback. It leaves your customers in control of your cash flow. And they can return back to their slow payment habits without warning. There is one solution that has been gaining traction as a better way to solve this problem – it’s called invoice factoring.

Factoring solves this problem by accelerating the revenues that are due to your company from credit worthy customers. This provides your uniform rental company with the working capital it needs to meet ongoing expenses. And more importantly, it puts your company in a position where it can take on new customers without worrying about their slow payment habits. Factoring works by partnering with a financial intermediary, called a factoring company. The factoring company advances funds to your company while using your invoices as collateral. They also settle transactions once your customers pay in full on their regular payment schedule.

Getting a factoring line is easier than getting a conventional business financing solution. The most important qualification criteria is that your customers must have good commercial credit. This is critical, because your accounts receivable is the collateral that the factoring companies are using to fund your transaction. Additionally, your company should also meet the following criteria:

  • It should be owned and managed by individuals that have industry knowledge and a solid reputation
  • It should only invoice for delivered and accepted rentals
  • It should not have any serious tax problems
  • It should not have any serious legal problems
  • It’s accounts receivables should not be encumbered by any liens

Factoring lines are designed with growth in mind. Your line will usually grow alongside your sales provided that your customers and your company meet the factoring criteria. Because of this, accounts receivable factoring can be an ideal solution for growing uniform rental companies that have cash flow problems due to slow paying customers.

Filed Under: Business Services
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