How to Finance a Manufacturing Company with Invoice Factoring
Down you own a manufacturing company and need financing? Read this article to learn how invoice factoring can help improve your cash flow.
Manufacturing companies tend to be cash flow intensive businesses. They are constantly paying suppliers and employees. There are equipment, payroll, supplier and rental expenses to handle. Most managers (or owners) will do their best to keep up to date with these payments, or they risk getting their company into trouble. What usually gets cash flow into trouble is that most clients pay their invoices in 30 to 60 days. Basically, most owners need to pay suppliers before they get paid by clients. Therefore, unless the company has a cash reserve, it will run into problems.
This situation can be fixed with business financing. Unfortunately, getting a business loan is the current environment is very challenging. Business loans are simply not available to companies unless they have stellar credit and impeccable financials.
But let's review the problem though. The issue is the timing difference between when expenses are made and when payment is received. If you accelerate the payment, the problem is solved.
How do you accelerate a payment? One way to accelerate a payment is to finance it through a factoring company. When you factoring an invoice, you assign it to afactoring company who gives you an advance payment for it. This accelerated payment can be used to pay corporate expenses therefore alleviating the pressure on your cash flow. The transaction is settled once your client pays the invoice in full. Factors will charge a fee for their services, usually a percentage of the invoice.
In an invoice factoring transaction, the factoring company is buying your invoice, rather than lending your company money. Since the factoring company is buying your invoice, the commercial credit of your customer (who actually pays the invoice) is very important. Because of this, many companies with good customers can qualify for factoring financing, even if they are startups or have some financial difficulties.
Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHOR
About Commercial Capital LLC
Looking to finance your manufacturing company? For an invoice factoring quote, please visit our website or call (877) 300 3258.