If you are running a maintenance company, it’s not surprising if you find yourself needing short-term loans every now and then . One of your options is maintenance factoring, which is offered by financial companies specializing in the maintenance industry.
Instead of having to wait weeks and months for a company to pay for the services you’ve rendered to them, you can receive the bulk of the payment in advance from a factoring provider. You can get anywhere from 70% to 90% of the value of the invoice right away. Then when your client pays in full, you get the remainder of the money after the factor deducts their fees.
In some cases, maintenance factoring may be a better deal for you than a traditional bank loan. Here are some reasons why:
- You will get the funding you need. Regardless of news reports saying that banks today are becoming less tight-fisted, the awful truth is that their approval rate is very low. You’ll need to have a stellar credit rating, your maintenance business should be well-established, and you’ll need a significant asset as collateral. In fact, the US SBA has a very long list of requirements for you to consider.
On the other hand, the approval rate for maintenance factoringis quite high. Your bigger clients may be able to demand that they can pay in 60 days or more, but you can use their excellent credit to negotiate a good deal in the factoring agreement.
- You get your money much more quickly. A bank loan application can take weeks or months, with a lot of bureaucratic red tape to navigate. This can be terribly frustrating, since your needs are often immediate.
You may need the money because you need to buy new equipment and cleaning supplies, or you need to hire new workers to service new contracts. You may also be involved in some workers’ compensation issue, which can put a dent on your working capital. If you run out of working capital to pay for cleaning supplies or to meet payroll, you’ll have a serious problem on your hands.
With a factoring provider, it may take only two weeks or so to set up a factoring arrangement. After that, you can get your money within days of providing the service. That gives you a lot of leeway in terms of working capital for operational needs and for business growth.
- You can outsource invoice management and collection. Some factoring companies can manage your invoices for you and furnish you with reports. They can even do the collecting for you, which spares you the trouble of setting up a department and hiring new personnel.
This provides you with the clear opportunity to focus on what you do best, which is to provide for the maintenance needs of your clients. It’s always a good idea to stick to your strengths, so you should just let the experienced pros do these tasks for you.