Accounts receivable financing is used by businesses to convert sales on credit terms for immediate cash flow. 1st Commercial Credit adopts a quick and simple approval process and expedites initial funding in 3 to 5 working days.
1st Commercial Credit provides a variety of purchase order financing solutions to meet your trade financing needs. P.O. financing is suitable for any wholesaler, reseller, importer or any company that purchases and resells goods.
Accounts receivables are in the current assets section of a business's balance sheet. These accounts receivables are the cash inflows that a company expects to receive in the future, near or far. Typically there are no issues for companies if their accounts receivables remain in check and roll over promptly. Unfortunately, these agreements do not always work the way a company plans, and delays in accounts receivables can cause cash shortages and liquidity problems. The good news is that a company can outsource its accounts receivables to a third-party lending company called a factoring company.
Accounts receivables factoring is defined as the sale of a company's accounts receivables or unpaid invoices to a specialized factoring company or third party for immediate cash. This financing method is often referred to as AR financing, an arrangement where the debt collection is passed to an accounts receivables factoring company. These cash flow lenders specialize in trading debts and manage the debt owed to their client (a business owner) on the client's behalf and assuming the risk of non-payment.
There are three main aspects of receivable factoring:
Specialized receivable financing companies will offer two types of factoring programs: recourse and non-recourse factoring. Recourse factoring is a factoring agreement between a factor and a business where the latter retains ownership of the accounts receivables and the risk of uncollected receivables. This means the factoring company does not guarantee against bad debts. In this type of factoring agreement, the company holding the accounts receivables is responsible for recovering the cost if the factoring company cannot collect such receivables. So, the factoring companies do not assume the risk if the customer fails to pay the outstanding invoices.
In contrast, non-recourse factoring is a factoring agreement where the factoring company takes all the risk from bad debts. This is also known as secured debt collateral. In this type of agreement, the factoring company will decide what action to take against the non-payers. Generally, the fees for the non-recourse factoring are higher than the recourse factoring because of all the risks associated with uncollected accounts receivables.
Advantages of Account Receivables Factoring
Companies in need of cash can also opt for bank loans or other financing options, but that won't solve the outstanding invoice balance issue. Factoring offers a two-for-one opportunity for companies to get the cash immediately and eliminate unpaid invoices. Some additional advantages of factoring accounts receivable include:
1st Commercial Credit is an experienced factoring company with supply chain finance solutions. We have financed businesses in all industries for more than 18 years and can help your company today! Once we set up a business on a receivable-based financing program, we can offer other financial tools and services to take your operations to the next level. We specialize in evaluating and financing accounts receivable and can make a prompt decision within 24 hours.
It is becoming challenging for businesses in North Dakota to continue running operations while waiting long periods for invoices to be paid. These businesses need to pay bills, suppliers and cover unexpected expenses that may appear along the way. Not having sufficient cash to do so can put the company in a terrible position.
For businesses in a similar situation, purchase order lending is the solution. This funding alternative is excellent because it can substantially benefit any industry that must fulfill orders constantly and without interruptions. 1st Commercial Credit knows how crucial it is to maintain a steady and reliable working capital while keeping up with sales and demand. If your North Dakota company is experiencing cash flow issues affecting your order status, purchase order financing is the financial solution business owners need.
We have made the P.O. financing process fast and straightforward, especially when comparing it to other forms of financing. Imagine your business has a client wanting to put in a large order, but you don't have sufficient money to cover the costs to fulfill the order.
In this case, P.O. financing is ideal for receiving a cash advance to complete this order. P.O financing gives you immediate cash for goods that have been ordered but have not been yet delivered. Distribution businesses lacking the working capital to get inventory and complete orders can benefit from this funding alternative.
Purchase order financing is very popular for many industries in North Dakota, including manufacturing. 1st Commercial Credit has over 18 years of experience financing businesses in North Dakota and works with companies involved in the international trade business. Companies with creditworthy customers who have large orders to complete can benefit from our P.O. financing program today.
This financial alternative is especially advantageous for companies with seasonal sales, unpredictable cash flow, and startups. Some of the regular businesses benefiting from our P.O. financing program include importers, exporters, wholesale distributors, government contracts, industrial manufacturers, drop-ship orders, and direct ship orders. Contact us to learn more about the process to qualify for purchase order funding with 1st Commercial Credit.
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.
1st Commercial Credit offers asset-based lending for companies that need to maximize their financing capacity using their accounts receivable and inventory as collateral. These two have become valuable tools for many under-capitalized businesses. Unlike traditional banks that rely heavily on balance sheet ratios and cash flow projections as criteria to approve a loan, 1st Commercial Credit will evaluate a client's business assets to establish the borrowing base. This evaluation often results in a far greater borrowing power than what can be achieved from the traditional banking approach.
Banks are more inclined to lend on fixed tangible hard assets, and occasionally inventory and receivables might be considered but with a borrowing base at a low advance rate. We can offer higher advance rates due to our 18 years of experience in receivable valuation.
Suppose the client already has a bank line of credit. In that case, an Inter-creditor agreement is made between the bank and 1st Commercial Credit where the receivables are assigned to us, allowing the client to borrow at higher advance rates. Asset-based lenders offer lines of credit highly valuable in today's competitive business world, providing fast and steady funding.
ABL's supply a continuous flow of cash utilizing revolving lines of credit; they provide financial support and stability to the daily operations of their commercial borrowers. The combined worth of its assets determines each borrowing company's credit line. These assets may include inventory, accounts receivable, business equipment, manufacturing machinery, specific contracts with recurring revenue, and business owners' assets.
Most businesses can benefit from asset-based lending to help obtain steady access to working capital to finance their growth. In the expansion, acquisition, or turnaround stages, firms can find great value in working with asset-based lenders. All businesses in North Dakota with assets that include accounts receivables, inventory, or fixed assets should consider asset-based lending as an alternative form of financing. ABL's do not require many years in business, an implacable credit record, and do not add additional debt as traditional bank loans do.
It is important to mention that asset-based lending is not the right solution for every business. Businesses using a recurring revenue model that have no assets wouldn't qualify for this type of financing. Those companies dealing primarily with cash transactions also would not be a good fit. On the other hand, sectors with a capital-intensive nature are the perfect fit for asset-based lending. If you're a distributor or manufacturer, you're most likely an ideal prospect for ABL's. The stronger a company's collateral reserve is, the more attractive a lender will find the company's situation. Distributor financing is a fast and straightforward process for us, and we can approve your company and give immediate access to funds today.
Many industrial businesses also take advantage of our asset-based loan financing program. Companies with seasonal sales, including staffing, apparel, retail, and business service companies that extend credit to their customers, also benefit from the fluidity of an asset-based loan. 1st Commercial Credit's asset-based loan rates are competitive and accessible, starting at 0.69% to 1.59%.
North Dakota has a thriving agriculture industry, and those who are a part of it know how resilient, vital, and diverse it is. Despite the challenges faced with a changing economy, a pandemic, and weather difficulties, North Dakota's 26,000 farmers and ranchers continue to be some of the best in the nation, producing crops and commodities for the entire world.The state's farms are spread across 39.3 million acres, nearly 90% of North Dakota's land area, and the average farm spans about 1,512 acres. The state's top commodities include spring and durum wheat, dry edible beans, flaxseed, canola, oats, and honey. Livestock is also an important agricultural sector. The state's livestock sector, mostly cow-calf and purebred cattle production, accounts for about 15% of the state's agricultural cash receipts.
North Dakota agriculture extends well beyond commodities and crops. Agribusiness, agritourism, food processing, innovative technology, local food, and farmers markets all contribute to the state's thriving industry. North Dakota believes a solid agricultural economy is vital to the long-term well-being of the state, the country, and the world.
Hard red spring wheat, durum, and barley have been the mainstay of North Dakota's agricultural economy for a long time. Recently, the state has become the country's leading producer of crops like sunflowers, field peas, dry edible beans, lentils, and canola. North Dakota is also a significant producer of sugar beets, potatoes, and other commodities. Thanks to the growing demand for ethanol and corn production, it is now produced statewide. Soybean and canola production is also rapidly increasing to meet the demand for biodiesel.
Many agribusinesses in North Dakota are using agriculture factoring, helping it become an established and reliable financing method for the industry. Many companies benefit from agriculture funding, including farmers, retail food processors, food manufacturing companies, food packaging companies, food distributors, shippers, and suppliers. Our factoring services will provide fast capital for your agriculture-related business within a few working days, helping you avoid having to wait weeks or months to receive payment from customers.
Once your account is approved, we can finance the invoices and advance the funds within 24 hours. Factoring companies that offer financing solutions to farm businesses charge a fee for accelerating this payment process; with 1st Commercial Credit, this fee is low and competitive, ranging between 0.69% and 1.59%. Factoring financing companies working with the produce and agriculture industry make receivable financing easy to obtain. Decisions are never based on a company's financials, tax returns, credit scores, or even equity to debt ratios.
1st Commercial Credit offers invoice factoring with PACA related receivables for produce and agriculture distributors. If your agribusiness in North Dakota would benefit from this financing program do not hesitate to reach out to us so we can evaluate your company’s situation and provide you with funding solutions today!