Financing a Commercial Cleaning and Janitorial Company with Invoice Factoring

Most commercial cleaning and janitorial companies are small businesses - started by entrepreneurs who had an idea and plenty of motivation. Few, however, have plenty of capital. But that is understandable because janitorial companies tend to be easy to start - buy some supplies, hire some people and you are ready to go.

But there is a big catch to this business model - commercial clients don't pay for janitorial services upfront. Rather, they pay on a net 30 to net 60 days. This means that you only get paid a month or two after completing the work. In the meantime, you still need to buy more supplies and pay your employees.

If your company is well capitalized, waiting to get paid is not usually a problem. On the other hand, if your company is not well capitalized, waiting can be a very serious problem. The simple solution to this challenge is to get business loans. This is almost always a problem for the company since few janitorial companies have substantial assets to use as collateral - and institutions need collateral to issue business loans. More often than not, the business owner will need to put their house (or other assets) as collateral to secure the business loan. However, loans are not the only alternative.

One solution is to use invoice factoring. This financial tool provides you with a quick payment for your invoices, boosting your cash flow and enabling you to meet your expenses. To qualify for factoring you need to have invoices from credit worthy clients. This makes it an ideal solution for janitorial companies that handle commercial work for large clients.

Most factoring transactions are structured in two payments. You get the first payment, usually 80% of the invoice, as soon as the work is done and you invoice your client. You get the second payment, the remaining 20% less the financing fee, as soon as your client pays the invoice in full.

One advantage of factoring is that it enables you to leverage your client's credit to your advantage. Furthermore, it's a dynamic product that is tied to your sales. This means that your financing line increases as your sales to credit worthy clients increase. This makes it ideal for small janitorial companies who are experiencing growth.