The Manufacturing, wholesale and distribution industries are all being affected by the lengthening time for invoice payments by customers and the tightening of bank supported financing. The best pricing from suppliers can be secured by faster payment times – 2% Net 10 is an example. The widening time gap between paying your suppliers and getting paid by customers can put a huge strain on cash flow and business growth. What other options are available to provide working capital to support a company’s growth and daily operations?
Invoice Factoring for Manufacturing, Wholesale and Distribution Industries
Factoring is a fast source of readily available cash flow with the added benefit of no additional debt. What is factoring? It is the purchase of your accounts receivable at a discount. Factoring can supply you cash from 80% to 90% of your outstanding accounts receivable, usually within 24 hours. The remaining 10% to 20%, minus the factor’s fee will be sent upon completed invoice payment from the customer. Factoring is unique in its credit underwriting approach as well. Instead of relying solely on the customer’s credit, the factor is more concerned with the creditworthiness of the businesses making up the accounts receivable. This is incredibly important when the manufacturer, wholesaler or distributor has limited or no established credit. Companies with established credit can also find themselves in a growth mode that outstrips credit availability – factoring can be a step to provide the working capital for that growth.
Benefits of Invoice Factoring for Manufacturing Companies?
- What if you have a supplier that will discount your order if you offer them a quicker payment plan? Invoice Factoring provides the cash today to take advantage of the supplier discounts.
- What if you were about to lose a large new customer because your cash flow did not allow you to purchase the needed supplies to manufacture their order? Factoring makes cash available from existing accounts receivable that can be used for resource purchases to bring on the new customer.
- What if you were trying to decide whether or not to extend terms to a new customer? The factor will check the new customer’s creditworthiness before you begin the work to ensure prompt payment upon delivery.
- What if you want to outsource billing and collections? Factors provide those services and frequently do not charge for them as they are all part of the invoicing system from which the factor derives its fee.
The choice is yours. Once you have established your customers with Provident Commercial Finance (usually a 3 -5 day process), you choose which invoices you would like to factor. If you chose not to factor an invoice, but suddenly have the need for increased cash flow, you can choose to factor any outstanding invoices you have. This allows for great flexibility in how and when you use factoring. You are able to scale up immediately as you grow, while containing costs by factoring only what you need. The factoring line available to you will not be based on your hard assets, but rather the amount of your outstanding accounts receivable. The flexibility to handle one or all of your clients, the ability to only factor when you need to, and the ability to time the funding of your invoices all give you the most flexible accounts receivable financing available.
Provident Commercial Finance will not only relieve you of the concern for checking the credit standing of your customers but also free you up from the collection of invoiced payments. Concentrate on your manufacturing, wholesale or distribution business, not the accounting and collection business.
Contact us for your invoice factoring for manufacturing, wholesale or distribution needs today.
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