Invoice Factoring for Technology Companies
Technology companies can be at a huge disadvantage when it comes to securing financing. As most technology companies have little in the way of hard assets, equipment, buildings or other so called “collateral”, it is difficult to secure traditional bank financing. This gives rise to a major concern related to available working capital to grow your technology based business.
Where do you go for financing a technology company?
Your overhead is most likely much lower than other forms of asset based businesses (transportation, manufacturing, textile), but you still have operating costs associated with serving your customers’ needs. If you are offering 30, 60 or 90 day terms yet have weekly, bi-weekly and monthly payment obligations, you need either existing cash in the bank or some type of financing to bridge the working capital gap. Where will you go for financing? One source that you may not be aware of is Invoice Factoring. What is factoring?
A typical Invoice Factoring for Technology transaction works as follows:
● You supply the factoring company your unpaid customer invoice(s)
● The Factor accesses your customers’ credit and ability to pay the invoice
● The factoring company assesses the fee they will charge depending upon the customer’s ability to pay the invoice
● You choose which invoices and which customers you would like to factor
● The factoring company pays you between 80% and 90% of the chosen invoice (usually within 24 hours)
● The remaining 10% to 20%, minus the agreed upon factoring fee, is sent to you once the invoice is paid to the Factor
Fast, Easy, Flexible & Friendly Financing
You choose when and which invoices to factor. The factor looks to the creditworthiness of your customers, giving you the ability to tap into your accounts receivable. This is vitally important for those companies with concerns of being turned down for traditional banking financing. With invoice factoring for technology, the factor is concerned about your customer, not whether or not you have real estate, equipment, CD’s etc. for collateral. Your customer base becomes your source of available working capital. You also eliminate the need for you to assess the creditworthiness of new customers as the factor will do that for you. That can prevent the pain of doing work for someone that will end up in your bad debt line item on your balance sheet.
What doors will this open to your technology company? Will this give you the ability to expand your business? Will you be able to hire or outsource more employees and meet payroll expectations? Will you be able to keep up with the latest technology tools, apps and programs to keep your business at the forefront of the technology market?
Contact us to discuss your unique invoice factoring for Technology business needs and how we can support you.
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