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.
Managing cash flow is vital and often difficult for any business, regardless of the size or type of industry. Many businesses need financing to smooth out their cash flow cycles. Debt factoring or accounts receivable factoring is an increasingly popular form of funding for Pennsylvania businesses. It involves 'selling' your accounts receivables in exchange for fast access to cash.
Debt factoring is a financial solution to fund your business by using the most significant asset it has – its accounts receivable. This type of funding is when a business sells its accounts receivables to a third party. This arrangement allows companies to get quick access to cash before the customers pay for the goods or services delivered, allowing them to re-invest that money right away.
This financial solution works by 'selling' your outstanding customer invoices (accounts receivable) to a company that factors in Pennsylvania. The factor 'buys' those invoices in exchange for fast cash to be used immediately, rather than waiting for your customer to pay. The factor will then collect the entire invoice payment from your client and deliver you the outstanding amount, minus a factoring fee.
How does the process work?
Step 1: SELL
Create an invoice for a client for an order or service delivered
Step 2: GET UP TO 97% OF THE INVOICE VALUE
When verified, a factoring company will advance you up to 97% of the invoice within a day or less.
Step 3: CUSTOMER PAYS INVOICE
Your customer pays the invoice in full directly to the factoring company.
Step 4: GET THE REMAINING BALANCE
You will receive the remaining balance minus applicable fees.
A loan on receivables will put the funds in your bank account within a day, giving you essential working capital and the financial flexibility your business needs. This available cash can be used to pay expenses, fund business expansion, and even pay back existing debt. In reality, your customers aren't going to pay you within 24 hours. They're all managing their own cash reserves and prefer to have extended payment terms, so it's rarely ever in their best interests to pay your invoices early. In essence, debt factoring will solve this tricky situation by opening up more finance than you can achieve by any other business funding means.
AR factoring improves cash flow by giving your business significantly faster access to revenue owed to you. This means you never have to wait the entire term of your invoice to get your cash. And that's critical because waiting 30, 60, or 90 days to be paid can put a severe strain on your business. It is not uncommon for many customers to take an average of 30 days to pay invoices.
Even worse, the average time it takes big companies to pay small businesses is even longer. So consider how powerful and beneficial it would be to get your money almost immediately via factoring. You would be able to:
However, business owners need to fund all of the above from their profits or cash reserves when access to the money locked up in their accounts receivable is not an option. In this case – unless your cash flow is solid from other sources – your business can't grow or, in worst cases, even run. Additionally, you won't be able to take on new work and opportunities if you don't have sufficient cash flow to support them.
It's also important to realize that cash flow isn't something you can sort out once and never think about again. Running a successful business requires sustaining a steady and strong cash flow over time. Luckily, factoring gives you ongoing access to cash flow, much like a line of credit. As your invoices from sales increase, so does your ability to have access to more cash.
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 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.
Improved cash flow is not the only advantage of factoring. It also provides:
Manufacturing businesses have been taking advantage of the benefits of manufacturing factoring for a long time. Factoring has become the financing choice of many companies in Pennsylvania. There are many different aspects of factoring that can also benefit your company today.
Some additional benefits of working with manufacturing financing companies include:
In contrast, when obtaining a line of credit with a bank, you will take on additional debt. You will also be adding another monthly bill to pay, increasing your overall debt. Yes, business owners will have working capital and available cash flow, but this solution will have high monthly costs over a long period. On the other hand, you are not taking on any additional debt when you turn to invoice factoring. You get to select the invoices you want to sell to the factoring company, giving you the flexibility for which invoices to factor in and for how long. If you find your company is running low on cash, you can simply sell a few invoices and get a cash advance within 24 hours.
Picking up new accounts when also fulfilling big orders may require an even larger amount of cash. If the line of credit with the bank is not sufficient, you might need to request a larger line of credit with them, which can take an even longer time to be approved. If you were to use factoring instead of a bank line of credit, all you have to do is sell us more invoices to get you the capital you need to fulfill your new orders.
1st Commercial Credit offers simple cash flow solutions for many industries across the nation. If you provide a service or product to slow-paying businesses, your cash flow can be affected. 1st Commercial Credit’s payroll funding program is ideal for resolving this financial issue. Many companies in need of payroll financing benefit from our financing services because we provide a more straightforward application process.
Businesses in the service industry sometimes do not have sufficient working capital if their needs are seasonal, causing them not to pay providers on time. Bank loans may be an option for some businesses, but they typically come with a long list of requirements. However, turning to a bank for financing is not feasible for newer firms, firms going through financial difficulty or lacking adequate collateral.
On the bright side for these industries, payroll funding is an alternative funding solution. Factoring exchanges the invoices for immediate funds. Once your business is approved, it can qualify to receive a percentage of the invoice value immediately, while the remainder is given when the factor collects. A payroll line of credit, also known as invoice factoring or payroll funding, is a financing method designed to help businesses struggling to fulfill payroll responsibilities each period. Many companies have to wait 30-90 days before receiving payment on outstanding invoices but need to make payroll far sooner. By selling your receivables for funding, your business has access to the following:
A third-party lending company like 1st Commercial Credit can be one of your most valuable additions to your company. As long as you provide professional services or products to other companies, you can factor those invoices for immediate cash. We can personalize payroll funding for staffing agencies today!
Many times, trucking businesses can experience rapid growth, which is excellent, but at the same time can put stress on the cash flow. Other companies transport seasonal products and are very busy at certain times of the year but slower on others. Others might be heavily weighted in business, concentrated only on a few customers with extended payment terms, putting a hold on your cash flow. Other businesses can simply have existing debt or be undercapitalized. Regardless of the situation, invoice factoring makes sure you always have working capital to run your business, and 1st Commercial Credit can help make this happen.
Factoring for trucking companies is a great way for small businesses, especially trucking companies, to manage their cash flow efficiently and not waste valuable time that can be better spent moving the next load and not chasing down late payments.
Factoring involves selling accounts receivables in exchange for a small factoring fee that the factoring company deducts. In exchange for the fee, which varies depending on the industry and invoices, the factor agrees to pay you for the invoice right away and then take responsibility for collecting the debt. Some factors will pay you for a large percentage of the receivable and complete the payment once the debt is fully collected. In contrast, others will pay only a small percentage until the final collection is concluded.
The two most significant benefits factoring offers for small carriers and owner-operators are that they are given the possibility of spending less time chasing payment for receivables and more time driving while also having a steady stream of revenue coming into the business. There is a cost associated with factoring, of course, in the form of the fee, but knowing you have reliable and consistent income coming in regularly can lift a great weight off your back. If you think factoring is for you, 1st Commercial Credit has experience working with trucking companies in Pennsylvania and can evaluate your cash flow situation today.