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Distributors Invoice Factoring: A Way to Solve Cash Flow Problems for Distributors and Wholesalers

Invoice factoring can get you the revenues that are tied up in your accounts receivables without forcing your clients to pay up any sooner than the agreed terms.

If you have a wholesale or product distribution business, then you probably have heard of distributors invoice factoring. Yes, it may sound familiar, but truth be told, not a lot of people truly understand how it works.

Product wholesalers and distributors, much like any other business, need to make sure that their revenues are being managed wisely; otherwise they might face some cash flow shortage. Looking at the expenditures side, you have suppliers that need to be paid up. If you’ve already established yourself as a worthy client to your suppliers, then you can probably ask them for some payment terms.

However, at some point in time, (and normally this happens to budding businesses) you may exceed your credit limit, therefore forcing you to make upfront payments. On the revenues side of the fence, you have clients who will also negotiate for credit payments from you. And if they are indeed credit-worthy and you want to keep their business, then you will need to agree to some payment terms.

Scenarios like these make cash flow management a bit tricky and if your wholesaling/distribution company starts to grow rapidly, then you might face the possibility of running out of funds. If you won’t take immediate action, this can lead your business into a downward spiral.

Fix Your Money Woes by Factoring Your Invoices

The financial dilemma mentioned above can be addressed by going for distributors invoice factoring. This move can get you the revenues that are tied up in your accounts receivables without forcing your clients to pay up any sooner than the agreed terms. Rather, you do the financing with the help of a third party lender. Lenders will pay you in advance whilst they hold your invoices until your clients pay up. Once your clients have paid their dues, the lender gets their fees with the corresponding interests, then settles the transaction.

Get Your Funding By Using Your Clients as Leverage

The credit strength of your clients can be put into good use with distributors invoice factoring. But sometimes invoice factoring alone will not suffice. If you are a small business that landed a big deal but lack the fund to complete the transaction, the next best course of action is to get a purchase order loan. In PO financing, lenders check your client’s credit records, and if they pass, they’ll give you the loan. Once you’re able to deliver your products, go into invoice factoring to release the revenues tied with it. These two solutions, when combined, can give you a supply of cash that can keep your business operations running. So if you know that your client has good credit terms, use that as your leverage in securing your loans.

Will You Qualify for Funding?
For this to happen, you need to ensure that your invoices are from credit-worthy clients. You also need to make sure that you have lien-free invoices, a good management team running the show and follow good invoicing practices. Often you don’t need any other hard collateral to be approved for funding; your invoices should suffice if you are applying for distributors invoice factoring.

Should You Avail of Oil & Gas Providers Factoring?

Oil and gas companies also suffer from the numerous financial difficulties that plague long-term investment plans due to unstable cash flow, and this is why they turn to oil & gas providers factoring for help.

Although you may receive less than the face amount of your invoice, with invoice factoring you get the money you need to keep your business going

Consider this:

– Clients may take weeks or even months to fulfill their payments. This means the oil company will need to make do with whatever working capital they have to pay their employees, fund their business, and keep the company afloat.

– If the budget of the company is not enough they will have to turn to loans to sustain their production. This is not good for oil and gas providers due to the nature of their industry – loans are not often accredited to them because of the high risks and low chance of investment returns. Without a loan, production will have to be stopped, therefore reducing its profits.

– There are also many insurance and liability payments to take care of, that the production budget may not be able to cover immediately.

If you are a newbie oil and gas company, things will even be so much tougher for you. For the most part, new companies have little chance of securing a loan to start an oilfield operation because of their lack of credit history.

Accounts Receivables Loans or Invoice Factoring

Oil & gas providers factoring is a solution for both established and new companies alike. This is because they give both kinds of firms an opportunity that traditional loans cannot – instant cash flow that is guaranteed and insured.

Factoring often only takes 24-72 hours to process, making it much faster than a bank loan application. This is also several times faster than waiting weeks and months to finally get paid from the client who funds the oilfield operations. You could wait for weeks or you could get your payment in just a day or two. Your choice.

Is It Risky?

Of course there are always risks. The worse that could happen is if the client does not pay up. In this case the oil and gas provider will have to pay the factoring firm the money they got and then chase after the client so they can get paid. Unless of course if the factoring company offers some type of insurance where they will be the one to shoulder this risk in case it occurs.

The bigger risk is not getting the funds to operate your business. You won’t have money to pay your employees and you won’t have money to keep your operations going. So, if you want to secure instant cash flow that will keep your business operation running at all times then you may want to look into oil & gas providers factoring today, instead of taking the longer and often frustrating route of applying for a bank loan.

Interested in oil and gas factoring for your business, click here

Purchase Order Financing as a Solution to Cash-Strapped Businesses

A lot of people are getting confused with the difference between purchase order financing and accounts receivable financing. Both can be quick sources of funds to keep your business going but of course, both are running on different terms.

fast Purchase order financing — Purchase order financing is also sometimes referred to as pre-delivery financing. It is meant to be a short term way of allotting funds to your inventory that are required to complete an entire sales transaction.

Take this as an example; if you’re a business owner and you just have landed a deal with a huge corporation or a government agency, but you don’t have enough funds to cover the manufacturing and delivery. What will you do? The recourse is to find a quick source of cash; otherwise, you stand losing the order and possibly create a dent on customer relationship, too.

In situations like this, business owners are looking into alternative lending solutions that have the capacity to provide them a loan in such a quick turnaround; and that’s where purchase order financing comes into play.

What is Purchase Order Financing?

Purchase order financing is also sometimes referred to as pre-delivery financing. It is meant to be a short term way of allotting funds to your inventory that are required to complete an entire sales transaction. PO financing is designed for growing businesses that have very little access to working capital or those that are suffering from cash flow issues. Mostly, the types of businesses that are qualified to take out a purchase order financing are producers, wholesalers, distributors, or resellers of manufacturing products.

Purchase Order Financing for Businesses with No Credit History

In a purchase order financing deal, the lenders will evaluate the credit history and ratings of your clients, not your company. So even if your business does not have a credit history to boast of, many lenders are still going to work with you on the deal. If your client has a solid track record in terms of payments, credits and such, then there’s a good chance that a lending company may be willing to finance your sales transaction.

PO Financing: How Does It Work?

A typical purchase order finance deal looks like this:

You scored a large business deal with a reputable client, but you don’t have enough funds to cover all the costs necessary to complete the entire sales transaction.
You go to a lender and apply for a PO loan. Lender checks your customer credit rating and if it passes, they’ll agree to finance your transaction.
PO lender issues the funds, you complete the transaction and deliver the goods to your client.
Once the client pays up, the PO lender collects the money, gets its share of the pie and gives back to you the remaining proceeds of the sale.

Yes, a chunk of the profit will have to be sacrificed, but if you really want your business to survive and honor your commitments with your clients, then opting for a purchase order financing is worth a shot.

Interested in Purchase Order Financing as a Solution for your Businesses? Click Here

What’s Up, Doc? – Medical Services Factoring

Medical Factoring — , medical services companies need to maintain their cash flow. They have a constant need for the supplies that are required to conduct a number of different procedures

Just like any other business, medical services companies need to maintain their cash flow. They have a constant need for the supplies that are required to conduct a number of different procedures: everything from routine blood tests, to x-rays, all the way up to the more costly process of giving patients dialysis.

There is one difference that separates medical services from almost any other type of company, and that’s the fact that nearly all of their income is received via health insurance companies.

Doctors routinely refer their patients to medical services companies for screenings, treatments, and even transportation – activities that do not require the presence of a physician or the facilities of a hospital.

Upon arrival at a medical services office, the first thing that the receptionist will do is ask that person to complete a form, often several pages long. And on the first page will be a place for that person to enter his or her health insurance details.

Usually, there is a co-payment that the patient must contribute. This is to minimize fraudulent claims. But, the largest part of the bill issued for the service is paid by the insurance company to the firm providing the medical care.

The health insurance industry in the US is big business. But it’s also a complicated and time-consuming one. Doctors, medical services, and hospitals routinely file health insurance claims on behalf of their patients, but each insurance company has its own requirements and makes its payment according to its own timetable. Not only that, but there are dozens of them.

However, there is another side to invoicing that many firms never have to worry about, and that’s dealing with the US Government. That’s not to say the no other company gets contracts with them. They do. But contracts of that kind tend to be less complicated than those that deal directly with Government programs, such as Medicare and Medicaid.

An invoice that would normally be paid within 30 days by an insurance company could instead take three months or more, depending on how complicated the treatment was, and whether or not the patient and the clinic had completed all of the necessary documents.

All of these things can put pressure on the cash flow that medical service providers depend on to keep them in business.

And, as we all know, this kind of care can be very expensive. That means that the slow or non-payment of invoices can have a much greater impact on the survivability of these kinds of companies in the short term.

That makes factoring a particularly important option. So far, no one has been able to figure out a way to make the Government work faster or to write its regulation in language that people can understand, nor has there been any progress on lowering the costs of medical care.

And so for both of those reasons, medical services ought to consider selling their invoices so that they aren’t held hostage by those from whom they receive the majority of their income.

Accounts Receivable Loans: Should You Rely On Them?

Here is a question that a lot of entrepreneurs ask: Is it wise to rely on accounts receivable loans? These loans are often regarded as the quick way out of a financial slump for small and medium-sized businesses.

Entrepreneurs who are considering setting up their own business will have all the passion and energy to get started but will not have the funds to do so. They won’t qualify for a business loan simply because they have no financial history that the bank can assess.

The only other option for these entrepreneurs is to shove their dreams back in their pockets and wait for such time when they’ll have enough money to start their own companies. Others may have the capital to start the business but they eventually close down because they don’t have the money needed to keep their business afloat. This is especially true for companies that do business with customers who set up payment terms with them.

Accounts receivable loans are the answer they seek. Instead of applying for a loan – which they will either be refused of or given but with incredibly high interest rates – they can factor out production costs by selling their invoices early on. This allows them to get started on bigger projects offered by clients despite not having the resources to do so.

Weighing Benefits Against the Risks

If you look at it, you are getting your pay from a job before even completing it. That is basically what accounts receivable loans are. Your end of the deal is to make sure you finish the job you were paid in advance for. This way the invoice factoring firm will be able to collect the payment from your client. However, as mentioned, there are risks too. You may not satisfy the client with the project you’ve completed for them and they might refuse to pay. Some clients will simply disappear once you complete the project so you’ll end up paying the account receivable loan back and with penalty fees.

Yet you should not overlook the fact that you need money to keep your business afloat. This is why you need accounts receivable factoring. Just consider these benefits:

– Finances are secured early

– Invoice factoring only takes 1-3 days to get the funds, compared to the thirty-sixty days it takes for clients to pay you.

– The transaction fee for invoice factoring is very low and there are financing offers as well.

– Cash flow is established early on so you can begin production.

– The aforementioned risk of clients not paying can be covered with minimal insurance fees.

If you were to weigh both the risks and the benefits, you will realize that opting for accounts receivable factoring is the smart way to go. You want to get started and yet with traditional business loans out of your reach, you will find that accounts receivable loans are indeed a reliable source of financial stability for your company.

Temporary Employment Agencies Factoring: Financing Solution That Can Help Grow the Business

Cash flow problems can be one of the most familiar problems for a lot of temporary employment agencies. And a solution that businesses often resort to is the use of temporary employment agencies factoring. Sure you have lots of clients whose companies are financially capable and are good with credit. But the thing is, these companies are slow on payments due to maybe a longer billing cycle or probably because of some sort of corporate red tape; but that of course is outside your concern.

On the other hand, while you are waiting for your receivables to fully liquidate, you have to make your own payments to your staff and suppliers. This is where the equation gets all muddled up. You have money that you have yet to collect, but you have dues now that you have to settle. So where do you get your money to cover your current dues?

Temporary Employment Agencies Factoring: Quick Cash for Dire Needs

Generating cash for your business is not easy. Sure, there are lots of ways to do so, but not all of those ways are applicable to your business. An option to get some funding is to take out a traditional loan; however, if you are a newbie in the business, you may not yet qualify for this kind of loans. But the good news is, it doesn’t end with traditional financing. Instead you may opt to go to a lender or a factor.

They offer short term solutions to companies suffering from financial constraints by buying accounts receivables. However, they’ll buy it at a rate that’s lower than the actual amount of the invoices. On the upside, it will give you some instant funding that can help make you pay your current dues as a temporary employment agency.

Is Factoring the Right Financing Option for Temporary Employment Agencies?

Temp agencies have lots of expenses that cannot be put off; so it is of utmost importance that they have a steady influx of funds. For a temp agency to run, it needs to pay for advertising, utilities and more so, it needs to make prompt payments to their employees. So for immediate funding needs, taking out a business loan the traditional way is not going to be a practical option, since approval for this kind of loan takes too long. That is why factoring is the ideal choice for businesses such as temporary employment agencies.

Lenders or factors also do not require a company to put up a whole array of hard assets to be used as collateral. Oftentimes, they only require the invoices that borrowers want to sell plus probably the employees’ corresponding timesheets. If they get approved for invoice factoring, the lender will deposit the funds into the company’s bank account and will soon be made available to fund the company’s monthly obligations. Temporary employment agencies factoring allows the company to pay their dues to its billers and employees without having to take out a new loan.

Interested in Factoring: Click here

Purchase Order Financing | How it works

Purchase order financing puts a different spin on raising capital to fund your business. Instead of borrowing against assets you hold, or selling invoices that you issue, you instead acquire that money on the basis of an order that a customer places with you.

Let me explain what I mean.

By definition, a purchase order is a request for a product to be delivered on one day, but paid for on another. If you have a credit card, then you do exactly the same thing every time you use it.

The financial institution that issues the card, in effect, gives you a loan to buy whatever items you obtain with it. Most people don’t see credit cards in that light, which is perhaps one reason why they get into debt so easily.

But the principle behind purchase order financing is exactly the same. You don’t have to part with cash at the time that you buy. In fact, you don’t actually pay the supplier. Instead you repay the bank for the loan.

Here’s how it works:

The company such as Neebo Capital takes your purchase order as collateral for a loan. The finance company gives you the money in exchange for that order. They issue a Letter of Credit, which amounts to the loan documents, and then give it to your supplier. The supplier is now the borrower.

When the supplier fulfills the order, you can then resell it as part of your normal business. Then you can use some of your profit to pay the supplier, who in turn redeems the Letter of Credit they received from the bank. In other words, it’s a means for you to pay your supplier on time without draining your company of the money it needs to continue to trade.

Companies of all sizes can benefit from this form of financing, but it works especially well for wholesalers.

Let’s say that you receive an unusually large order. You don’t want to increase your credit risk with the bank any further by obtaining an ordinary loan and, in any case, the length of time under normal circumstances to get one could cause you to lose the order altogether.

You know that you’ll make the money needed to cover the loan after you fill the order, but you need the additional money now so that you can.

Or, let’s say that you receive an order from a foreign country. That can add a level of complication the companies that only trade in the US can’t even imagine. Not only are delivery times longer, but payment has to pass through the arduous, and sometimes costly, process of exchanging one currency for another.

There is one proviso, however, and that is that your supplier must be a reliable, creditworthy firm. That’s because he bank wants to be sure that you will be able to repay the money that it loans you.

Your ability to do that is based on the assumption that the supplier will give you what you need to fill the order. Then, when you’ve paid the supplier, they can then repay the bank.

Interested in Purchase Order Financing? Click Here

Manufacturing Factoring –Is It Beneficial for Your Business?

Manufacturing Factoring rates — manufacturing factoring is when you sell your invoice out to a factoring company. The company will purchase the amount of your invoice instantly.

Anyone who is running a manufacturing business understands how tough it can be to keep the business afloat. To ensure you can still keep production running and to fulfill employee salaries and compensation you may want to look into manufacturing factoring. This is a system that is quick and simple and yet very effective if you want to keep cash flow steady in your manufacturing business. Here is a look at what it is and how it works.

What is Manufacturing Factoring?

Basically manufacturing factoring is when you sell your invoice out to a factoring company. The company will purchase the amount of your invoice instantly. Say you are contracted to manufacture a thousand bottles for a soda company and yet the payment is still weeks away, you can get your payment instantly by factoring the invoice.

Of course you won’t get the full amount stated on your invoice. The factoring firm needs to profit as well so you will most likely be approved for 85-95% of the total invoice value. This means the factoring company will hold the remaining amount until your customer pays the invoice. Then you will receive the remaining amount of the invoice, minus the factoring fee, typically 1-3%.

There are two things to be concerned with here: your credit standing as a company and the client. First of all, if your manufacturing company has poor credit standings you can expect to get a lower percentage when you factor out the invoice. This is to ensure the manufacturing factoring company they are covered for any financial risks.

Most of the time your credit is not even considered. Some invoice factoring firms take a quick look at your history but this is very rare. At the most, a bad credit standing will lead to a higher percentage cut and a lower payout for you.

The second problem is the client. As with any business a client may decide not to pay your invoice. But since you already sold your invoice to the factoring firm, what happens next? There are often two ways this can go. You will need to chase the client and secure the payment or end up having to pay the amount (out of pocket) to the factoring company. The other solution is to get your invoice insured so in case the client decides to run, you won’t need to worry about paying the amount owed yourself. It will be the factoring firm who will handle the damages and chase after the client. The burden will no longer be placed on you. Of course this also means your percentage is cut down a bit more.

Is This Beneficial to Your Business?

The short and sweet answer is a definite yes. Invoice factoring guarantees:

– steady cash flow in the business

– payroll is always met

– credit standing is not moved

– costs of production are met beforehand

You do not have to worry about taking out loans because now you get your compensation before the job is even started. You can meet the financial demands to keep production going. If you want to ensure that all your financial demands are met without having to risk taking out a high interest bank loan, manufacturing factoring is a very ideal option to look into.

A/R Financing: Is It the Right Option for Your Business?

A/R or accounts receivable financing is done to help companies free up some capital that are otherwise stuck in accounts receivable.

No business owner is a stranger to all the struggles of running a company, especially when it comes to dealing with cash flow shortages and coming up with enough working capital to keep the company afloat and growing. And in times when other modes of financing like applying for small loans are limited, business owners resort to A/R financing. But the question remains, is A/R financing the best option for your business?

A/R Financing Defined

A/R or accounts receivable financing is done to help companies free up some capital that are otherwise stuck in accounts receivable. In this method,

The amount of money the company will receive will depend largely on the age of the receivables. A company that has old receivables can expect less compared to the value of newer ones—this is what is known as “factoring”.

Is A/R Financing Going to Be Beneficial to my Business?

Business owners resort to A/R financing mainly because of the following benefits:

It provides for a relatively quick mode of financing. A/R factoring does not need an elaborate business plan or tax statements. It is really a quick cash option for businesses suffering from fund shortages.

A/R allows businesses to free up some capital. Most businesses have some of their assets and capital tied up in inventory. With A/R funding, those tied up capital can be used right away.

It allows you to skip the part where you need to outsource your accounts receivables to a third party manager. By passing off the task of collecting altogether, A/R financing helps you save on your resources and you can just divert your energy to other activities that are more productive and profitable for your company.

A/R Financing Potential Drawbacks

A/R financing can provide a business with a lot of benefits, but it may also come with some potential drawbacks. Probably one of the biggest considerations when it comes to A/R financing is the cost associated with it. If you think about it, a discount cost of 5% may not seem much initially, but if you’ll look at it over a course of several months or a year, then you’ll find that the accumulated costs far exceed the interest levied from a bank loan or credit. Remember that different financing companies offer varying A/R financing rates, so you really need to shop around in order to get the lowest fees and interest rates.

Sound business decisions are essential to the growth of the company. You need to make certain sacrifices in order to keep the operations going. Taking the A/R financing route can sometimes spell the difference between your company’s survival and failure. It would be wise if you invest some time in finding the best A/R financing deal for your business.

Types of Factoring Business

Types of Factoring Business

If you are contemplating the possibility of availing the services of a factoring business, then by now you know that invoice factoring (also known as “business factoring”) is one way of quickly providing your company with working capital. Factoring is a business transaction, during which your company gets instant cash by selling its accounts receivable invoices to a factoring firm at a discount.

There are generally two types of factoring services you can avail. The right factoring service for your company depends on who is held liable for the debts when some customers are unable to pay. The two types of factoring to consider are (1) recourse factoring and (2) non-recourse factoring.

Recourse Factoring

This type of factoring is usually more preferable because the cost is generally less. The lower cost is due to your company’s decision to still shoulder the burden of bad debt instead of passing the risk to the factoring company. Because the factoring company does not take on the risk, your company should get this agreement rather quickly, as the factoring company should have less stringent rules regarding your business systems. The factoring company will also be less stringent about the payment history of your clients.

After the agreed upon time—usually 60, 75, or 90 days—your company is required to buy back the invoice from the factoring company if the customers are unable to pay. Recourse factoring is recommended if your customers are reliable about the payment, because if many of them are unable to pay then you would have to return the money paid to you by the factoring company, with the standard fees and interest.

Typical Non-Recourse Factoring

Most factoring companies define non-recourse factoring to mean that your company has no further liability for the unpaid invoice should a customer become unable to pay due to insolvency. If the customer declares bankruptcy and becomes unable to pay after the appointed time (usually the same period of time as recourse factoring), then you are under no obligation to return the advance you received from the factoring company. However, if the customer won’t pay the invoice for any reason other than bankruptcy, then even with the non-recourse factoring agreement in place the factoring company will require your company to buy back the invoice.

In this type of non-recourse factoring, the factoring company shoulders the entire risk of unpaid invoices. If for any reason the customer is unable or unwilling to pay the invoice—they don’t have to be insolvent—then the risk falls on the factoring company. If the debt cannot be collected, the loss is on the factoring company.

The sole exception to this is when the customer disputes the invoice; for example, the customer refuses to pay because your company is accused of not providing the service or product properly. Because the factoring business is outside this dispute between your company and the customer, then even with this version of the non-recourse factoring agreement you will still be required to buy back the invoice.

This type of factoring is usually more expensive and a factoring business will typically charge about 2-5% more, because of the additional risk involved.