There are many businesses currently facing recurring cash flow problems and should consider invoice factoring as a solution. An account receivable factoring company purchases your accounts receivables for a cash advance. These specialized factoring companies buy invoices at a discount and then take responsibility for collecting payment from debtors. You will be using an efficient and reliable way to raise regular amounts of working capital by factoring in your invoices. Additionally, this financing alternative removes the stress and pressure of paying bills on time and allows you to plan and achieve sustainable growth.
Factoring advantages and disadvantages vary depending on the type of business, but the main change you'll see is frequent cash advances from your lender. Amounts are based on the invoices you sell and can be between 80% and 97% of each approved invoice. There are many advantages and benefits associated with factoring, and some of these include:
Planning for expansion/growth
Many businesses still find it difficult to attain 'traditional' bank lending. Still, the characteristics of invoice factoring make it less risky, not just for the factor but also for the borrower. With factoring, business expansion is possible on many different levels:
Invoice factoring is one of the safest ways to fund growth without risking your business's existing favorable cash flow situation.
Extra time to focus on the business
When a business owner decides to get a loan against accounts receivable, they hand over control of their credit procedures to a lender. This comes with several benefits, including the extra time you have to focus on the company. Concentrating on other crucial aspects of your business rather than chasing payments is a huge plus and can bring about positive change across the company. The task of chasing payments will now be the lender's responsibility, and task, and business owners can focus efforts where they're needed most:
No limit on borrowing possibilities
The limit to your borrowing capacity is only tied to the number of approved invoices in your hands, so you aren't dependent on lengthy credit checking procedures and time-consuming paperwork to obtain additional funding when you need it.
Easy and Fast access to cash
For any business maintaining adequate cash flow is crucial. A healthy and reliable cash flow will enable businesses to finance operations, including paying their suppliers and employees and taking care of other business overheads such as rent and utilities. However, a company that offers its customers credit facilities may run into cash flow problems, primarily if it provides relatively long credit periods to its customers or if most debtors fail to pay on time. This is where invoice factoring can help. In most cases, businesses that approach companies that provide factoring services get financing within a few working days. On the contrary, a bank could take weeks or months to approve a business loan. Generally, most lenders will advance the cash within 24 hours of an invoice being sent and approved. This immediate access to money enables you to operate the business cost-effectively and experience greater financial flexibility.
Affordable Factoring Fees
The cost of factoring services can range anywhere from 0.5 to 3.0% of a business's turnover/business volume. 1st Commercial Credit is a factoring company with supply chain finance solutions offering financing rates from 0.69% to 1.59%. It is important to know that fees will vary from one industry to the other. In addition, invoice factoring service providers usually consider the creditworthiness of a business's customers, invoice volume, and how long it takes customers to pay to determine a factoring fee.
Lower risk for both parties
Invoice factoring involves considerably lower risk for both parties. Business owners don't need to provide any personal guarantees or assets as collateral. Since lending is based on work already delivered, the risk is reduced for the lender. The lending company is also in charge of collecting payments, and they will likely have robust, efficient procedures in place. To summarize, invoice factoring will provide:
Payroll funding or payroll financing enables a company to sell its outstanding invoices for instant cash to fulfill payroll needs. This financial solution works by providing capital to pay employees before the client pays that company for the services it has already provided, giving companies the ability to meet payroll requirements every week.
Hiring and retaining skillful and talented staff is a top challenge that every business owner faces. On top of that, irregular payments to employees will push them away from a firm. Timely payments to employees are indispensable to keep employees happy and satisfied. Payroll financing is a powerful financial solution. It allows a startup staffing company to sell their invoices to a factoring company and receive weekly advances to pay employees on time. The same applies to small and medium-sized businesses; invoice factoring provides these companies with funds immediately to take care of payroll, pay for business expenses, and expand.
Once a financing account is established with 1st Commercial Credit, you can submit an invoice along with a copy of the time cards. Once the invoices are received, we will advance up to 96% of the invoices and forward the funds to you to cover payroll right away.
How Is The Payroll Funding Process?
What are the Advantages of Payroll Funding?
As we mentioned before, many benefits come with this alternative form of financing. Business owners will experience these benefits from the moment they begin the application process to when the funds are received. Here, we will touch a bit more in detail about some of the common factoring benefits:
A factoring company (or accounts receivable factoring) converts invoices sold on credit terms to 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 receivables 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.
Simple Approval Process: Bank loans might be a good option for a well-established company with many assets and extensive credit history. However, it is a lot harder for a smaller business or contractor to get approved. Qualifying for a traditional loan will be almost impossible if you haven't been in business long enough or if your credit score and history are not the best. The advantage of factoring is that approval decisions are based on your customers' credit, not yours.
Fast Funding: The approval process for a bank loan can be complicated and time-consuming, sometimes running from 2 to 3 months or more. The funding process with factoring is fast and efficient because we understand the issues that arise with cash shortages and how crucial it is to have access to funds fast. We can transfer the funds to your bank account typically within 24 to 48 hours of verifying your invoices. This way, you can pay your bills and meet payroll demands.
1st Commercial Credit is a transportation factoring company offering various financing services to business owners in this industry. Contact us so we can assess your business situation and provide you with some offerings right away.
Manufacturing facilities needing to offer competitive credit terms to customers can benefit from working with factoring companies for manufacturing. Additionally, your production line no longer has to be paused or halted; you can easily use your receivables asset to obtain good cash flow. Business owners will also be able to offer credit terms to new and larger customers at an affordable cost, take advantage of early-pay discounts and buy larger quantities with additional discounts from suppliers. There are many other opportunities that your manufacturing business is missing out on because of cash flow shortages.
Invoice factoring or financing manufacturing firms use a company's outstanding invoices in exchange for access to immediate cash. There is money tied to these unpaid invoices that businesses need to access to cover for daily operations. 1st Commercial Credit offers to lend on accounts receivable by providing a loan against receivables.
Our expertise in the manufacturing industry gives us the ability to offer higher advance rates with competitive fees.
To remain competitive in this industry, most companies realize they need to facilitate and sell to customers on credit terms. This means they get paid weeks or months after having delivered the goods and services. The problem arises when some of these customers are paying late or not paying at all, affecting your business. Fortunately, when you pair up with a specialized factoring company, this can all be avoided.
Unfortunately, cash flow issues can prevent a manufacturing company from making crucial and necessary upgrades such as purchasing equipment, hiring experienced professionals, or completing projects on time. 1st Commercial Credit manufacturing financing services can help resolve all of these issues. Our factoring programs can be used for short-term funding to resolve unexpected cash flow problems or for a longer-term, allowing flexibility to choose the best arrangement for your company.