Most Information Technology companies are capital intensive businesses. Whether you sell equipment, consulting or both, your company needs funds to pay suppliers and meet payroll.  This becomes complicated because most clients, especially large corporations, pay for goods and services on net 30 to net 60 days. However, your suppliers and employees still expect quick payment. Ultimately, your company has to carry the costs between the time of delivery of service and invoice payment. This will work well  provided your company is well capitalized. However, if your company is not well capitalized, a large order or a late payment can throw your cash flow into a tail spin forcing you to delay supplier payments or miss payroll.

One way to solve this problem is to use invoice factoring. This solves the cash flow problem by using a factoring company to act as an intermediary and provide the equivalent of a quick invoice payment. You get funds that can be used to pay suppliers and employees without having to wait for your clients to pay their invoices. This allows you to focus on running and growing your business while minimizing your cash flow worries.

A factoring transaction is basically the sale of your invoice to a factoring company. The collateral of a factoring transaction are the invoices from your clients, so factoring only works for companies who have commercially credit worthy clients. Qualifying for a factoring financing line is relatively easy.  Most importantly, your IT company needs to have solid commercial customers. Aside from that, your company needs to be free of legal problems and encumbrances.

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We offer factoring in the USA including factoring in Kentucky and invoice factoring in Louisiana. Get more information about factoring.

Most businesses will need some form of business financing to succeed. One of the most common forms of business financing is a line of credit. As opposed to a business loan, a revolving line of credit can be drawn upon when needed. For example, companies like them because they can be used to manage the ups and downs of cash flow. Lines of credit have the added benefit of being (on average) cheaper than most other forms of business financing.

Lines of credit do have drawbacks though. One of the more important drawbacks is that they are subject to very strict underwriting guidelines. This makes them accessible only to companies that have plenty of assets, solid profitability and a good management team. Few small companies can qualify for them.

Their other drawback is that they have fixed maximums. That means that if you reach the line’s ceiling and need additional funds, you are usually out of luck. You will need to submit your account for re-consideration to your lending institution and request and increase. This may happen – or not.

There is an alternative to conventional lines of credit that has been gaining traction in the past few years. It’s called factoring. Invoice factoring is a financing tool that is directly ties to your sales. It allows you to get an advance on your net 30/60 invoices, eliminating the wait and providing immediate liquidity to handle company expenses and new projects. Since it’s dynamically linked to your sales it grows in tandem with your company. This makes it an ideal source of financing for small companies that are in a growth stage.

Invoice factoring provides an easy proposition – you invoice your customer using traditional net 30 terms, but you get an 80% advance from the factoring company. This provides predictable cash flow, which enables you to run your business more effectively. You get the remaining 20%, less a financing fee, once your client pays the invoice in full.

Although factoring is not suited for every business, it’s ideal for companies that have heavy payroll and a lot of activity. Some examples include transportation companies, staffing agencies, security companies and construction subcontractors.

Financing any business in the current credit environment is extremely difficult. Banks and many financial institutions are retrenching their credit facilities, forcing companies to look for financing elsewhere. One of the business sectors that has been hit the hardest is manufacturing.

Manufacturing companies tend to be cash flow intensive businesses. They are constantly paying suppliers and  employees. There are equipment, payroll, supplier and rental expenses to handle. Most managers (or owners) will do their best to keep up to date with these payments, or they risk getting their company into trouble. What usually gets cash flow into trouble is that most clients pay their invoices in 30 to 60 days. Basically, most owners need to pay suppliers before they get paid by clients. Therefore, unless the company has a cash reserve, it will run into problems.

This situation can be fixed with business financing. Unfortunately, getting a business loan is the current environment is very challenging. Business loans are simply not available to companies unless they have stellar credit and impeccable financials.

But let’s review the problem though. The issue is the timing difference between when expenses are made and when payment is received. If you accelerate the payment, the problem is solved.

How do you accelerate a payment? One way to accelerate a payment is to finance it through a factoring company. When you factor an invoice, you assign it to a factoring company who gives you an advance payment for it. This accelerated payment can be used to pay corporate expenses therefore alleviating the pressure on your cash flow. The transaction is settled once your client pays the invoice in full. Factors will charge a fee for their services, usually a percentage of the invoice.

In an invoice factoring transaction, the factoring company is buying your invoice, rather than lending your company money. Since the factoring company is buying your invoice, the commercial credit of your customer (who actually pays the invoice) is very important.  Because of this, many companies with good customers can qualify for factoring financing, even if they are startups or have some financial difficulties.

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Learn about factoring in Utah and invoice factoring in Vermont

In short, yes. Provided that your company meets certain criteria.

Invoice factoring has been gaining popularity as a tool to finance growing businesses. It is a solution that accelerates payments from slow paying clients, freeing up cash flow and allowing companies to grow.  By eliminating the uncertainties of when they’ll be paid, business owners can use factoring to stabilize their business and put it on a growth path.

However, factoring is not for everyone. For factoring to work, your business must meet certain criteria:

1. It must be established and have commercial or government (not consumer) sales
2. Your profit margins must be at least 12% or higher
3. Your biggest problem must be that clients are taking too long to pay their invoices

If you fit these criteria, then there is a chance that factoring financing will be a good solution for your business. It may not be as inexpensive as a business loan, but certainly will be significantly more flexible and easier to obtain.

Factoring will help you if:

1. You are turning away orders because you lack the cash flow
2. You risk missing key payments (rent, suppliers, payroll) because of cash flow

Factoring transactions are relatively simple. Once you invoice your client, you sell your invoice to the factor, who advances you up to 85% (on average) for your invoice. 15% is usually kept as a cushion to handle potential issues with the invoice. You get immediate funds from the advance while the factoring company waits to get paid. Once the client pays the invoice, the factoring company will rebate the 15% less their fee.

Factoring costs can vary depending on your financed volume, credit quality of your clients, payment cycles and industry. Generally speaking, factoring will cost 1.5% to 3.5% per month. However, most factors break their pricing in smaller ten-day increments, making cost more attractive. So a factor that charges 2.7% per month, would actually charge you 0.9% for every ten days the invoice is outstanding.

As you can see, invoice factoring is a reasonable alternative to other financing products, provided that you can meet certain criteria. Qualifying for invoice factoring is very easy, the biggest requirement is that you do business with credit worthy commercial or government clients.

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Learn about factoring in Pennsylvania and invoice factoring in Rhode Island

If you own a business that sells products or services to commercial customers or to the government, you must be familiar with the maxim – hurry up and wait. That is what you always end up doing after delivering your services. You hurry up and wait up to 60 days to get your invoices paid. In the meantime, you still have to cover rent, supplier payments and employee salaries. Hurry up and wait, indeed.

But this is a major challenge if you are a business owner. It slows down your growth, significantly. Why? Well, could you take on a large order and afford to wait months to get paid? Could you afford to buy the supplies, pay the staff, cover rent? This is why this is a major challenge. And in many cases, it can drive you out of business.

And yet, when faced with a financial challenge, what does a business owner do? Most will go to the bank, hoping for a business loan. But business loans are very hard to obtain and not very flexible. Plus, banks give loans based on your business past rather than your future opportunities. Many times, what you need is a financing product that will be focused on your true sales potential.  And that product is invoice factoring.

Invoice factoring eliminates the 60-day payment wait, providing you with funds right after you invoice your client. Imagine this. You deliver your product or service to your customer. And then, instead of waiting up to 60 days to get paid, you get paid in 2 days. How quickly could you grow then? How many clients could you take on?

And how does factoring work? Well, it’s very simple. Once you have delivered your product, you send an invoice to your client and a copy to the factoring company. The factoring company advances you a substantial portion of your invoice, usually within a day.

The factoring company’s advance gives you the breathing room you want and the money you need to pay business expenses and take on new opportunities. This allows you to grow your business. Once your client pays their invoice to the factoring company, the transaction is settled.

Factoring is easy to obtain. The biggest requirement is that you do business with solid credit worthy customers. So, if you need financing and do business with great customers, consider factoring your invoices.

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Learn about factoring in Michigan and factoring in Minnesota

Finding small business financing in the current environment is very difficult. Lending institutions are being very cautious and are only providing business loans to companies that have impeccable financial statements, a long history of growth and substantial assets. Because of this, few small companies can get a business loan or other forms of conventional financing.

Fortunately, not all financial problems need to be solved with a business loan. Many cash flow problems, common to small business, can be solved using invoice factoring.

Most small companies run into cash flow problems because they don’t have an adequate reserve of capital to handle unexpected growth or costs. This situation is worsened by the fact that small companies usually have to give clients 45 to 90 days to pay invoices. This leaves the small company with the hard costs of delivering their product or service while having to wait for payment.

Asking clients to pay their invoices sooner will not work. Most clients, especially large corporations, require 45 to 60 day payment terms. Most will have these payment requirements in their contracts and won’t show flexibility. And unfortunately, if you don’t provide them with payment terms, someone else will.

This is where invoice factoring comes to play. You can get an advance on your invoices using a financial intermediary, called a factoring company. This provides you with the liquidity you need to operate your business. The factoring company holds the unpaid invoice until maturity and then settles the transaction with you when the client pays.

One of the biggest advantages of invoice factoring is that it enables you to leverage your invoices. Factoring companies look at the credit worthiness of the companies paying the invoices as an important components in their funding decision. This means that a small company whose biggest assets is a client list of large credit worthy companies can usually qualify for this form of financing.

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Learn about factoring funding in Kentucky.

Sooner or later, almost every business will run into cash flow problems. Although ideally you want to prevent these problems, this is not always possible. Part of running a business involves, at times, living a little bit on the edge. Sometimes, you go a little farther than you should have.

One of the more common causes of cash flow problems is slow paying clients. These happen because most commercial sales are not paid immediately, but rather 45 to 90 days after the product or service has been delivered. Few business owners can afford to wait that long to be paid, though. There are constant business expenses that have to be covered.

Common wisdom suggests that companies should keep a cash reserve that is large enough to cover expenses while waiting to get paid. This works beautifully in theory but seldom in practice. The truth is that most small companies keep inadequate reserves.

One way to fix this problem is to complement the cash reserves with business financing. Selecting the right type of business financing to help with this problem is critical. Most business owners will first try to get a business loan. They soon find that business loans have difficult qualification requirements. The business must have a profitable track record and impeccable financial statements. Also, the business and the owners need to have substantial assets. Few will actually be able to get the loan.

However, a business loan is not always the right solution. You can eliminate the cash flow problem from slow paying clients by factoring your invoices. Invoice factoring provides you with a funding advance on your invoices. This enables you to cover business expenses while waiting to get paid. The transaction is facilitated by a factoring company, who buys the invoices from you (at a discount) and hold them until maturity. Since the factoring companies buy invoices, their biggest concern is that the invoice will be paid. Although the factoring company wants to make sure the company selling the invoice has no major problems, they are more interested in the credit worthiness of the company paying the invoices. This makes factoring an ideal solution for small companies who don’t have a lot of credit or a long track record – but have a solid list of clients.

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Learn about factoring in Kansas

Hurry up and wait. It’s common knowledge that clients always want business owners to hurry up and delivery their services – only to have them wait 30 to 60 days before invoices are paid. Giving 30 to 60 days terms to clients can have substantial implications for small and medium sized businesses, who simply may not be able to afford to wait for payment.

Unless a company has a substantial capital reserve, waiting for payments can be very difficult. There are businesses expenses that must be met – rent, telephone and supplies. There is also payroll, one of the most important businesses expenses that must be met – on time – every time.

If you lack the funds to wait, the obvious solution is to get business financing. This is easier said than done, especially in the current market. Qualifying for a business loan can be a long tedious and uncertain process. One alternative to business loans – at least in some instances – is to get and advance on your invoices using invoice factoring.

Invoice factoring is a simple financing process that provides you with an immediate advance on your invoices. Instead of waiting for your clients to pay, a factoring company advances you funds on each qualifying invoices. The transaction is completed once your client pays the invoice in full. The factoring company charges a fee for this service, which is usually based on a percentage of the invoice gross value.

Factoring has a couple of advantages over conventional business financing. A factoring company is in effect, buying your invoice for a discount (their fee). Because of this structure, they are more interested in the credit quality of your clients than in the financial strength of your company. This makes it easier to qualify for. However, your company must be reasonably well managed and free of any liens or encumbrances. The other advantage is that qualifying for factoring is a quick process – and can usually be completed in a couple of weeks.

Although factoring receivables is not a cure-all, it’s an innovative solution that should be considered if your company cannot afford to wait to get paid on its invoices.

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More information about factoring in Hawaii.

One of the side effects of the economic crisis is that more companies need business financing while less institutions were willing to provide it. Because of this, companies started looking for other options to business loans. One of the options that has gained substantial traction in the last year is invoice factoring.

Factoring invoices is a form of financing that is often offered by factoring companies. It’s ideally suited for companies that are selling goods/services on net 30 to net 60 days, but can’t afford to wait for payment. This is a common problem since most medium sized companies have immediate expenses and don’t have the necessary capital to wait for payment.

Factoring companies solve this problem by accelerating payment of your invoices. They act as an intermediary who buys your invoices and pays you for them immediately. This provides your company with the necessary cash flow to pay operating expenses and handle new orders. The factoring company, which now holds the invoice, waits for your client to pay for the invoice and settle the transaction.

A factoring company usually buys your invoice in two payments. The first payment, called the advance, is usually 80% of the invoice. The remaining 20% is called the reserve and is held to cover any invoice discrepancies and potential underpayments. Once your client pays the invoice in full, the factoring company sends the second payment, which is the 20% reserve less the factoring fee.

Factoring fees are determined by the credit quality of your clients, the volume of financing that you need, your industry and invoice diversification. They vary in range but they are usually a specific percentage of the purchased invoices.

One of the big advantages of invoice factoring is that factoring companies consider the credit quality of your invoices to be your biggest asset. This means that medium sized companies that have a solid roster of clients can usually qualify. However, to qualify for factoring your invoices need to be free of any potential encumbrances or liens.

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Learn about factoring in Florida

Finding the right type of business financing for your company can be a major challenge, especially in the current economic environment. Understandably so, institutions are behaving cautiously and only providing business loans to their prime clients. To qualify for a business loan, companies have to show that they have solid balance sheets, stable (or growing) income and an experienced management team. These requirements put small and medium sized companies in a competitive disadvantage since few will have the financial stability to qualify for financing, especially in today’s marketplace.

A business loan is not always the best solution to cash flow problems, especially if these are caused by slow paying clients. In most commercial transactions, clients have to pay their invoices in 15 to 30 days. However, most companies have been extending their payment terms to 45 or 60 days as a way to cope with the current credit crisis. Small businesses have been affected the most, because they can’t afford to wait 45 to 60 days to get paid. The need the funds immediately to fulfill their own obligations.

Factoring financing could be a good solution If the company’s biggest problem stems from cash flow and clients that take too long to pay. It is very different than a business loan. With factoring, a financial intermediary called a factoring company buys your invoices for an immediate payment. They wait for your client to pay the invoice and settle the transaction, while you get the benefits of the immediate funding. Most factoring companies will charge a fee for their services – usually a percentage based on the invoice.

One of the biggest advantages of working with a factoring company is the way the structure their transactions. Since they buy your invoices, their biggest concern is the credit quality of the company paying for the invoices. This allows you to leverage your client’s commercial credit and make it work to your advantage. Thanks to this structure, small companies that have a solid list of clients can usually qualify for this type of financing.

Factoring can be an ideal solution for companies that can’t afford to wait 60 days to get paid and that sell to solid commercial clients.

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Learn about factoring in Alabama.

Small businesses have been one of the biggest victims of the economic credit crunch. Some have seen their revenues go down. And almost everyone has seen their cash flow suffer. Clients that used to pay in 15 days are now paying in 30 or even 45 days. And those that used to pay in 45 days may now be paying in 60 days. The net effect of this is that cash flow weakens, and with it, the company’s ability to operate.

Although larger companies have sufficient reserves to wait for payments, few small companies do. And, due to the lack of credit, small companies usually need to pay their own bills sooner. This creates an unsustainable situation, where the end result is downsizing the company, if not closing it.

The most obvious way to solve this problem is to get a business loan. The problem, especially in today’s market, is that qualifying for business loans is very hard. Most institutions are being cautious, in part due to their own capital problems, and are only providing business financing to their prime customers. These are customers that have solid income statements, strong balance sheets and seasoned management teams. This also rules out a number of small and midsized business owners who also need the funding.

One alternative that is often overlooked is invoice factoring, a solution that is specifically designed to address slow payments from commercial clients. It helps by providing an advances for your slow paying invoices – this accelerates your cash flow enabling you to meet your obligations. You get immediate funds, while the factoring company who bought the invoice from you, waits to get paid. The transaction settles once your client actually pays the invoice. The factoring company charges you a small fee for the service.

The transaction is usually structured as a sale – where you sell your invoice to the factoring company. Because of this structure, factoring companies are more interested in the commercial credit of your clients than yours. This means that small to medium sized companies whose biggest asset is a list of solid customers can usually obtain factoring financing.

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Learn about invoice factoring in Alaska.

One of the side effects of the current recession is that business financing has become hard to get. A few years ago, business credit was flowing and companies could shop from bank to bank looking for the best terms. Nowadays, even companies that have solid financial statements are having problems getting a business loan. This situation is not likely to change for the foreseeable future as many lending institutions have capitalization problems and won’t be able to lend much until these problems are solved.

Because of this, many companies that need business financing will need to find an alternative – or do without. One alternative that has been gaining popularity is invoice factoring.

Invoice factoring is designed to solve the cash flow problem that are generated when clients pay their invoices in 30 to 60 days. While extending 30 day payment terms is common for commercial clients, many small and midsized companies can’t afford to wait that long to be paid. They have a number of expenses that need immediate handling, such as supplier payments, payroll and rent. Factoring invoices can reduce the days outstanding on invoices substantially, putting your company on a solid financial footing.

The mechanics on invoice factoring are fairly simple. Once the work or product for an invoice is delivered, you sell the invoice to an intermediary company called a factoring company. The factoring company examines the business credit of the company paying the invoice (your client), and if acceptable, buys the invoice from you at a small discount. This provides a quick source of funding that can be used to cover operational expenses and grow the company.

Most factoring transactions are structured with two payments. The first payment, called the advance, is for about 80% of the invoice amount. The second payment, which is for the 20% reserve (less fees), is rebated once the invoices is actually paid in full.

The biggest advantage of factoring is that it’s easy to obtain. Most small and medium sized companies can get it, provided they have solid clients and no encumbrances on their assets. This makes invoice factoring an ideal solution for companies that cannot afford to wait 30 to 60 days to get paid by their clients.

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More information about factoring in Delaware.