Cost — In general, asset-based loans are considerably cheaper than invoice factoring. This makes sense because asset-based loans are usually for bankable, well-established, and larger businesses that may not involve many risks. In contrast, the factoring company assumes a considerably bigger risk by working with newer and smaller businesses with invoice factoring. The price of a factoring line is established by discounting the total value of the invoice by a percentage. Discounts can range from 0.69% to 1.59% per 30 days. On the other hand, asset-based loan prices are calculated at an annual percentage rate. This yearly percentage on ABL's can range from 7% to 15%, and many variables, such as line size and risk, can impact the final costs.
Discretion — The lending company will not contact your customers to inform them about the lender's involvement with asset-based loans. This means your business will continue to handle your receivables collections and retain a crucial relationship with your customers. In contrast, because the factoring company owns your invoices, they will be the ones contacting your customer for payment. Suppose an invoice isn't paid by the due date.
In that case, your customer can expect a follow-up call from the factoring company inquiring about the payment. In addition, factoring companies generally will require that your customer make checks payable directly to them and your customers will inevitably be informed about the factoring company's involvement.
Most business owners in South Dakota prefer to use asset-based loans over factoring due to their overall cost and flexibility. Still, asset-based loans typically have high due diligence costs and are available only to companies that meet their collateral and size requirements. On the contrary, factoring is open to companies of all sizes, has minimal due diligence costs, and is easier to get. 1st Commercial Credit is an experienced lending company working with many different businesses in various industries in South Dakota. We have 18+ years of experience providing programs for businesses to borrow money against invoices and asset-based lending services. If your South Dakota business is struggling with cash flow issues because of rapid growth or slow-paying customers, we can help. Contact us today for an assessment and learn more about the many benefits we can provide to your business.
Agribusinesses in South Dakota coming to us for financing solutions usually have the same cash flow problems. Growers generally want cash on delivery or pickup, and customers want extended credit terms that can range from 14 to 21 days or more. This situation can cause a tremendous cash flow gap when you are trying to grow your company.
The agriculture and produce sector is undoubtedly one of the most crucial sectors for any state in the country. At the same time, running a business in this industry involves a complex process that involves lots of hard work and financial struggles from time to time. On top of that, agriculture-related companies do not work alone. Today's farming process involves numerous entities seemingly working together to bring food to the American families' tables.
To make everything work smoothly, farms require reliable and consistent financing. Yet farming businesses often work with slim margins and seasonal sales that banks generally do not want to lend on. An accounts receivable credit line in the produce industry allows agriculture companies to access the funds needed to harvest and ship their crops while meeting the Perishable Agricultural Commodities Act (PACA).
The timely delivery of perishable produce is crucial for agricultural businesses, and failing to do so can result in significant business losses. Fortunately, 1st Commercial Credit can offer financing methods with fast and straightforward processes. The setup process for our agriculture financing program involves filling out a 2-page online application. In most cases, businesses can have the money they need in a matter of days rather than weeks or months.
Factoring produce receivables is a financing alternative to conventional loans and lines of credit. Unlike banks and other financial institutions, which require perfect credit history and often ask for substantial collateral to secure funding, factoring for agriculture puts money in your hands without making you go through an expensive, time-consuming, and painful process.
Agriculture receivable factoring offers many significant advantages, including:
1st Commercial Credit is a leader in accounts receivable financing for startups, small and medium-sized businesses that can provide various lending options for all agriculture-related companies in South Dakota. We have the experience and resources to help companies to meet their business obligations. Business owners come to 1st Commercial Credit to take advantage of their still invoices and obtain immediate funds.
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 company that factors and 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.
Most businesses in the manufacturing industry have to accommodate and sell to their customers on credit terms. This means the goods and services will be delivered immediately by the manufacturing company, and it will then send an invoice and get paid a few weeks or even months after the delivery. Having many orders is excellent, but the problem arises when some of these orders are being paid late or not paid at all, affecting your business.
Cash flow problems can put a stop to the timely delivery of goods to customers. Regardless of the manufacturing company you run, it would help to meet daily business expenses if you had sufficient working capital. 1st Commercial Credit can offer a reliable financial solution to help business owners navigate this situation and solve their cash flow situation.
Cash flow shortages can also affect the possibility of making crucial upgrades such as buying new equipment or hiring professionals. Manufacturing financing can help a manufacturing company complete projects on time and meet the increasing demand, both crucial for success. Fortunately, a factoring company for manufacturing can bring the funds needed to take care of some essential financial responsibilities. These funds can also be used to fund growth and pay off existing debt. A factoring arrangement can be either short-term or under a long-term agreement, giving businesses the flexibility to select the best arrangement for them.
Companies in the trucking and transportation industry in South Dakota, including shipping and logistics, are aware and routinely face disparities between completing the work versus the length of time it takes for customers to pay. Whether you are a broker, an independent driver, or a large logistics organization, the gap between the work and the payment for the work can lead to several financial problems and cash flow issues.While it is typical for the transportation industry to extend 30, 60, or even 90 days credit to most customers, this extended payment period can create some significant problems while awaiting payments to come in.
Some trucking companies might have solid cash reserves to deal with this situation, but most businesses face challenges. As with any other business, you have bills to pay, and those bills have to be liquidated every month without the option to "extend credit." This whole situation may not sound fair, but it is the reality and the nature of the transportation industry. With that said, business owners can improve their cash flow and get access to that cash sooner with a financial solution called "factoring."
Many people confuse invoice or receivable factoring with a traditional loan, but it is not. To qualify for a conventional loan from other financial institutions like a bank, businesses must meet many different criteria, including providing evidence of collateral and good and long-standing credit history. If you have a small business or startup, the chances of qualifying for an unsecured loan decrease considerably. Most banks are unwilling to extend credit, particularly to small companies without significant collateral. Receivable financing is not a loan but rather a convenience fee paid to a financing company that is willing to advance the value of your customer accounts receivable invoices. They are not lending you money; they simply allow you to have immediate access to a high percentage of the total value of the invoices that you know will be processed in the next one to three months. It is a great way to unlock additional liquidity for your business and resolve the sales and cash flow imbalance.
When a business uses the services of transportation factoring companies, it is as if they were receiving upfront payment from the customer. This financing alternative becomes the lending company's responsibility to collect the amount directly from the customer. The business can retain a positive relationship with its customer as the factoring agency is the one that contacts the client if the invoice is late. While the company can expect to pay from 2-3% every month for the service, it can be a valuable and effective alternative.
Business owners in the logistics business deal with some of the slowest paying accounts receivables in any industry. The reason is that logistics services and fees are often paid by several contractors depending on the product's shipping duration. The multiple levels inherent in the way logistics and shipping companies do business lead to extended payment deadlines. It is yours, but you can't get your hands on that income just yet and it doesn't matter whether your company needs it or not.
There are many benefits to working with a factoring company. These cash lenders will provide varied fees for doing the same thing, so doing sufficient research beforehand to find the one that can offer your business the best to better fulfill its needs and goals is crucial. Bank loans can be challenging to obtain. The popular business loan is typically tricky to get for most small and medium-sized businesses, but turning to a receivable factoring company can be a reliable, accessible, and convenient solution for transportation and logistics organizations.