Are you waiting 30 to 60 days to get paid by your clients and finding that the wait period is a strain on your business? The traditional sales to commercial clients do carry 30- to 60-day payment terms. As the supplier, this forces you to deliver your products or services now while you still have to wait out the agreed-upon cycle before your client has to turn over that payment to you. And waiting for that payment can become tough on your bottom line, especially if you are a new business owner. This cycle could feel like a significant problem for you.
Clients want to pay you in 30 to 60 days while in the interim you must put out money for rent, payroll and continue to pay your suppliers. The numbers don’t necessarily balance. Unless you started your business with a stocked and substantial bank account, this seems to lead to an untenable situation for you, the business owner. If this all sounds too much like what you are going through now, you may not be able to go to the bank for help, either. Banks usually lend to businesses with three years of profitable operations and significant hard collateral. This can be particularly challenging when your business is growing and adding customers every day. That is supposed to be a good thing, and it is, but it adds its own set of complications. Before you know it, your company has too much tied up in “Accounts Receivable” but much less money in the bank to take up the slack.
It all seems like a vicious cycle, doesn’t it?
There is a logical solution these days, though. It’s called commercial invoice factoring, a process which may be able to help provide you the cash flow you need. Commercial invoice factoring helps you have a steady cash flow, and it essentially provides you an advance on your slow paying invoices. The biggest benefit to your company of using a commercial invoice factoring company is in the fact that you will finally have a predictable cash flow. Factoring eliminates the uncertainty of when you’ll get paid for your product or services. You are essentially selling your invoices to a commercial invoice factoring company in exchange for the immediate payment on your behalf. This takes you out of the middle process, which is the part where you are waiting for the funds.
This process can be integrated easily into your business. This is how it works—as usual, you deliver your product or services to your clients. You then invoice them, as you always do. A copy of that invoice goes to your commercial invoice factoring company and they then give you an immediate advance on the amount of money, usually in the neighborhood of 70% - 90%. That remaining percentage is a reserve. This gives you the opportunity to use the money you receive right then and circulate it back into your business to pay your taxes, your employees, and even regenerate the suppliers who are really your backbone. And the whole process has its benefits for you as a business, too. Commercial invoice factoring income lines are tied to your sales. Your financing line grows as your sales, and your company, grow.
Commercial invoice factoring, in simple terms, is a business financing tool to assist business owners who just couldn’t possibly continue to operate if they have wait 30 to 60 days to get paid by their customers. Commercial invoice factoring provides you, right now, with the necessary funds you need for whatever it is you need that money for, in the moment. You are essentially financing the period between the sale and the payment, and then paying a fee for that service.
A traditional business loan has been historically difficult to get qualified. On the other hand, the current qualifications for commercial invoice factoring make it relatively easy to get that green light. If you have a profitable business and a roster of strong commercial clients, you are well on your way to being able to work within the guideposts of commercial invoice factoring.
The commercial invoice factoring company is paid by the client. You already have had use of most of their payment all of this time, and then your commercial invoice factoring company will give back the percentage they held in reserve, minus their fee, which you agreed upon when going into the service with them.
Considering all the potential implications of having to wait for your payments, working with commercial invoice factoring can be an affordable option for your company. Your average monthly discounts are between 1.5% and 3.5%. The fact that these fees are variable is usually based upon the determination of what it will cost the company to factor a transaction for you. The commercial invoice factoring company has to take into consideration the size of the transaction in question, and your client’s credit standing. It is only logical that the larger the transaction and the more reliable your client, the better your terms with your commercial invoice factoring company.
Not every business will always qualify for commercial invoice factoring but the great majority do. Your company has to sell products or services to other businesses known to pay their invoices on a reliable 90-day, or less, schedule. You have to be making a profit or, depending on the commercial invoice factoring company, are showing that you will soon, very soon, be making a profit. And the bottom line—the biggest things that will help you qualify for commercial invoice factoring, is reliable customers . . . those who pay on a regular schedule, and always faithfully pay what they owe.
Getting your commercial invoice factoring process in gear usually takes just a few days and most companies, even if it’s a start-up, find the qualification process relatively easy. If your company is clear of issues, financial or otherwise, and you have a decent customer base and they pay full and on time, you are already on the right track and probably in good stead.
So know that there are options out there for you to get your business up and running and moving ahead in short order. Don’t get frustrated over the old way of doing business. Consider utilizing the services offered by commercial invoice factoring, and then go forward with the feeling of liberation this new, and growing, opportunity can offer you and your business.