Sustaining healthy cash flow is the key to surviving and thriving in a stalled economy. How do you do this without relying on banks for loans? Factoring companies offer invoice factoring services that give businesses of all sizes access to cash without the burden of taking out high-interest loans. Every business operator should understand what a factoring company does and how its services can give your business the boost that it needs to weather a financial storm or seize an awesome opportunity.
Many companies need only a certain amount of funding to get through temporary cash flow shortfalls. Even if they meet a bank’s stringent qualifications, taking out loans isn’t necessarily the best solution for them. Invoice factoring gives you the flexibility to get the cash that you need in a timely manner without having a loan and interest to repay.
Unlike trade credit that limits you to purchases from specific suppliers, invoice factoring gives you cash to use for any type of business expense. Some reputable suppliers offer discounts to businesses that pay for goods early. You can use cash advances from invoice factoring to avoid trade credit late penalties and even take advantage of early payment discounts from your suppliers.
Flexibility is one of the major benefits of factoring. Factoring is a great option for small businesses that frequently get rejected by banks for loans
Banks look at the creditworthiness of the small business and its owner to determine whether or not to loan money to the business. Your company doesn’t need a lengthy credit history to qualify for invoice factoring.
With bank loans, your company’s credit history is also used to establish loan amounts and interest rates. When you use invoice factoring services, the amount of money that you get is limited only by the number of qualified invoices that you’re willing to sell to the factoring company. There are no interest payments to make because invoice factoring doesn’t create loans.
Bank loans on balance sheets can make even established businesses look overextended. Large companies use invoice factoring services to weather short-term cash flow issues without placing more debt on their balance sheets. Invoice factoring not only makes these businesses more attractive to potential investors, but it allows them to keep their options open if they need bank loans for future large-scale initiatives.
Dallas is a place of limitless opportunity with a unique history and culture, infused by productivity and growing prosperity for businesses and careers in today's most promising industry sectors.
1st Commercial Credit has financial resources to help Dallas based businesses, including nationwide and foreign businesses finance their transactions with Dallas buyers and sellers. We have available unique financial cash flow solutions that help finance the supply chain that may include invoice factoring, purchase order financing and trade payable finance programs.
We are a flexible Texas Factoring Company when it comes to financing your accounts receivable. Small to large companies can pledge their receivables and obtain a line of credit using their unpaid invoices as collateral in only 3 to 5 working days.
Top Industries that are dominating the Dallas economy
We can finance receivables for all major industries that include defense, transportation, information technology and data, life sciences, semiconductors, telecommunications, and processing.
Dallas maintains its edge as a leading distribution center of the Southwest with a a dominate trucking and mid-continent transportation industry whose carriers offer direct service to all major destinations in the United States.
We serve all major industries with unique supply chain finance programs that include receivable factoring, purchase order funding and accounts payable discounting programs.
A factoring company (or accounts receivable factoring) converts invoices sold on credit terms for immediate working capital at a discount. It has become a simple, fast and easy way to access business cash flow. In comparison with a traditional bank loan, a company that factors receivables has a quicker approval process.
1st Commercial Credit is a factoring company that specializes in evaluating accounts receivable and can make a prompt approval decision. The documentation requirements are not as lengthy, and the main requirement is that an applicant has invoices for work or orders that have already been satisfied. It also helps to have creditworthy customers. As long as a business has been in operation, meets revenue requirements and is free of liens or legal issues, approval is likelier.
Making funds available to businesses when they need them is the driving force behind factoring companies. Many businesses sell products and services to customers and allow them to pay for their purchases 30 or 90 days after the offerings are delivered. Instead of waiting for customers to pay invoices in 30, 60 or 90 days, business owners can sell the invoices at a discounted rate to a factoring company to get cash early.
Factoring companies buy discounted invoices at rates that are based mainly on the creditworthiness of their clients’ customers. After establishing their fee rates, factoring companies offer their clients cash advances that are up to 95 percent of the value of the sold invoices. The balances of the invoices are paid to business operators minus all fees when the factoring company receives full payments for the invoices.
Factoring companies also determine fee rates by the volume of invoices that a customer wants to sell. A business that has multiple invoices to factor will be rewarded with lower fee rates than those that only want to factor single invoices per transaction.
Besides obtaining bank loans for working capital, some businesses rely on trade credit from their suppliers to keep their operations going. Trade credit is a privilege that suppliers extend to their customers which allows them to make payments 30, 60, or even 90 days after products are delivered. This gives some businesses time to sell the products to their customers for a profit while repaying vendors on time.
While trade credit is touted as good for maintaining long-term relationships with valuable suppliers, you’ll only realize those benefits if you’re able to pay back the suppliers on time. Suppliers stipulate high fees and stiff penalties for late-paying customers. If an emergency arises and you’re unable to pay multiple trade credit goods on time, you’ll incur fees that can quickly erode profit margins. Your long-term goals to expand into new markets or extend your product offerings in an existing one can be brought to a screeching halt with a batch of late payments on trade credit items.
One of the best things about running your small business is the ability to quickly respond to your ideal customers’ needs and interests. When adapting to changes in your market, it’s often necessary to change your vendor line up. If your company is dependent on trade credit from a particular vendor, you’ll need to quickly try to find a similar deal with a new supplier.
Dependency on trade credit also gives lending suppliers more power at the negotiating table. If you have the ability to pay on time or early, you can negotiate discounts with suppliers. This is especially beneficial if you plan to purchase products from them in large quantities.
Invoice factoring allows you to raise cash when you need it and to use the funds to buy goods from any supplier that has goods for sale. You don’t have to worry about not getting favorable trade credit terms from your sought-after supplier. You can do business with the supplier that best meets your product needs and those of your customers.
Invoice factoring services offer great cash flow solutions to a variety of companies. However, businesses that operate in certain industries use invoice factoring more than others. Construction contractors, staffing agencies, and manufacturing companies often rely on invoice factoring to meet cash flow needs.
What makes these and other companies ideal candidates for invoice factoring services? Factoring companies offer invoice factoring to organizations that work on business-to-business models rather than business-to-consumer ones. Companies such as construction contractors and staffing agencies often experience long payment cycles that put a strain on business operations. Invoice factoring saves the day with quick access to cash to pay for materials, marketing services, and salaries.
Factoring companies prefer offering invoice factoring to companies that have well-known business customers. Manufacturing outlets that range from electronics to upscale clothing makers all have note-worthy business clients.
Other criteria that factoring companies use to gauge a company’s fit for their invoice factoring services include monthly sales and the location of the business. Many factoring companies limit their invoice factoring service offerings to organizations that have at least $5,000 in monthly sales. Most U.S. factoring companies only offer invoice factoring services to other U.S. businesses.