Factoring Financing For Oilfield Services Companies

March 26, 2012 By

The oil and gas industry has been growing by leaps and bounds in the past few years. This has created a great opportunity for companies that service it. Demand for services such as oilfield transportation, among others, has been growing at a very healthy clip. However, the increase in demand has also created a financial hardship for some of the smaller providers in the industry. It’s a common practice for large customers to pay their invoices in 30 to 60 days. This can create a problem for companies that need to be paid sooner because they need the funds – so that in turn they can pay their own expenses.

Commonly, companies handled this situation by offering customers a discount in exchange for a quicker payment. Most in the industry offer a 2% discount for customers that are willing to pay in 10 days or less. While this strategy has a number of benefits, it also has one very serious drawback. It leaves your customers in full control of your cash flow. And if your customers decide to return to their slow payment habits, your company could find itself heading for financial problems. A better alternative is to accelerate your revenues using invoice factoring.

Factoring offers a very simple proposition. A factoring company advances a portion of your outstanding accounts receivable, which provides your oilfield services company with the cash flow it needs to meet its obligations. Those transactions settle and close once your customers pay their invoices in full on their usual schedule. When used properly and on an ongoing basis, factoring can provide your company with financial flexibility and enable it to take on new customers without worrying about their slow payment habits.

Since the factoring company is financing your accounts receivable, it is very important that your customers have good commercial credit. Fortunately, most companies in the oil and gas industry are well established financially and have good credit. Additionally, your company should also meet the following criteria:

  1. Your invoices must be unencumbered by liens
  2. You must only invoice for delivered and accepted services and products
  3. The company should not have any serious tax problems
  4. The company should not have any ongoing legal problems
  5. The owners and managers should have industry experience and a good reputation

Most factoring lines are designed with flexibility in mind. This means that the line can grow dynamically alongside your sales, provided that your existing and new customers have good credit. This is a major distinction between factoring and other financial solutions. Because of this, factoring can be an ideal solution for oilfield services companies that have growing pains and are experiencing cash flow problems due to slow paying customers.

Filed Under: Oil & Gas

Factoring For Oilfield Transportation Companies

March 23, 2012 By

For the past few years the oil and gas industry has experienced substantial growth, especially in the area of hydraulic fracturing (also known as fracking). This has created a substantial opportunity for oilfield transportation companies that have capitalized on this specialized trend. However, with rapid growth usually come challenges. For example, many oilfield transportation companies have had cash flow problems due to the fact that most customers pay their invoices in 30 to 60 days. While larger companies may be able to afford to wait that long for payment, smaller and growing companies can’t. Many need to be paid sooner so that in turn they can meet their own obligations such as fuel, vacuum truck maintenance, vehicle maintenance, salaries, and repairs.

Some transportation companies have tackled this problem by asking customers for faster payments. They commonly use the industry practice of offering a 2% discount to customers that pay in 10 days or less. While this can work very well, this strategy has also some serious drawbacks. One of them is that your cash flow will ultimately depend on your customers willingness to take a discount in exchange for a quick payment. If they change their mind and revert to their old payment habits, your company could be in trouble. For many transportation companies, a better solution is to use invoice factoring.

Invoice factoring accelerates the revenues that are tied in slow paying accounts receivable. It provides your company with the cash flow it needs to meet its obligations, and more importantly, to take on new customers without worrying about slow payments. The transaction works by using an intermediary, called a factoring company. The factoring company handles all funding advances while using your invoices as collateral. They also handle settlements and close transactions once your customers pay on their regular schedule.

Most factoring transactions are structured as the purchase of an invoice in two installments. The factoring company gives you the first installment as soon as the work or load is accepted by the customer. This installment is usually for 90% of the invoice (this varies). Once your customer pays, your company gets the remaining 10% as a second installment, less the factoring fee.

Qualifying for factoring is easier than qualifying for other types of business financing. The most important requirement is that your customers must have good commercial credit. Fortunately, most of the larger players in the oil and gas industry have very good commercial credit. Additionally, your company should also meet the following criteria:

  • You must only invoice for delivered and accepted work
  • Your invoices must be unencumbered by liens
  • Your company must not have any legal or tax problems
  • Company owners must have industry experience and a good reputation

Most oilfield transportation companies that use freight factoring do so on an ongoing basis. They factor a portion of their receivables that is sufficiently large to ensure that they have the cash flow to meet ongoing expenses. More importantly, the factoring line is designed to grow with your business.  This makes invoice factoring an ideal solution for growing oilfield transportation companies that have cash flow problems due to slow paying customers.

 

Filed Under: Oil & Gas

Financing For Trucking Companies

February 23, 2012 By

Most trucking companies have to offer their commercial shippers up to 60 days to pay their invoices. While this is a common practice, it usually has a negative impact on the trucking company’s cash flow. That is because most trucking companies have a number of recurring expenses and can’t wait that long for payment. The obvious solution to this problem is to ask your shippers for quick pays. This strategy has one drawback though, it leaves your cash flow at the mercy of your customers,  who could start paying slowly at any time.

A better strategy is to use freight bill factoring, a business financing solution that has been gaining traction in the trucking industry. Factoring solves the problem of slow paying shippers by advancing funds and using your freight bills as collateral. This provides your trucking company with the funds it needs to pay for critical expenses like fuel, drivers, repairs, and other items. One advantage of freight factoring is that it can be used on a revolving basis, providing a source of constant liquidity for your business.

The most important requirement to qualify for freight factoring is to have credit worthy shippers. This is critical because the factoring company uses your shippers credit worthiness as collateral for the transaction. Additionally, your trucking company:

  1. Must have it’s documentation up to date
  2. Must only invoice for delivered loads
  3. Its invoices/freight bills must be free of lien
  4. Must not have corporate legal or tax problems

One of the advantages of freight factoring over other forms of factoring is that it provides carriers with higher advances, which helps position trucking companies for stable growth. Additionally, the line is designed to grow with your business, as long as your shippers have good commercial credit ratings. This makes freight bill factoring an ideal solution four growing trucking companies that may have cash flow problems because of slow paying shippers.

Filed Under: Transportation

Invoice Factoring For Commercial Landscaping Companies

February 23, 2012 By

Companies in the commercial landscaping business usually have to offer commercial customers up to 60 days to pay for their services. On the other hand they need to pay employees, suppliers, rent, and other expenses on the regular basis. Basically, they have a situation where revenues are coming in slowly but expenses are going out quickly. If the landscaping company does not have the financial resources to manage this, it risks running into cash flow problems. And if those cash flow problems are not addressed properly, they can lead to a downward spiral.

One way to solve this problem is to factor your accounts receivable. Factoring is a form of financing that provides an advance for your slow paying accounts receivable from credit worthy customers. This reduces the financial stress of waiting for customers to pay, and provides the liquidity you need to operate your landscaping business. Invoice factoring works by partnering with a factoring company that handles the advances and settlements. Note that your customers still pay under regular schedule and they are not required to pay any sooner.

To qualify for factoring your company must have commercially credit worthy customers. This is critical because factoring companies view the credit worthiness of your customers as the main collateral for the transaction. However, this is not the only requirement. To qualify for factoring you must also meet these criteria:

  1. You must invoice for delivered, completed, and accepted work
  2. Your accounts receivable must not have any liens
  3. Your company must be free of liens and judgments
  4. Company owners must have a good reputation and experience in the industry

One of the advantages of invoice factoring over other business financing solutions is that the financing line is flexible. The line is usually designed to grow with your sales, as long as your customers have good commercial credit. This feature makes invoice factoring an ideal solution for growing commercial landscaping companies that have working capital issues that stem from slow paying customers.

Filed Under: Landscaping

Factoring Financing For Underground Utility Locating Companies

February 23, 2012 By

Running into cash flow problems can be a common challenge for small and growing underground utility locating companies. These problems usually originate from how accounts receivable are handled. It’s a common practice to offer customers up to 60 days to pay their invoices. At the same time, most small companies have constant demands on their cash flow from payroll, supplier payments, rent, and other critical expenses. If the gap between accounts receivable payments and company expenses is not managed properly the company will run into working capital problems.

One way to handle this situation is to use invoice factoring financing. Invoice factoring accelerates the revenues that are tied to your slow paying accounts receivable.  The transaction works by partnering with a factoring company, that advances funds for your slow paying invoices while holding your accounts receivable as collateral. This provides your underground utility locator company with the needed funds to operate the business and take on new customers. When used correctly, factoring can minimize concerns about slow paying customers and provide your utility locating company with an ongoing source of funding.

The most important requirement to qualify for invoice factoring is to have credit worthy commercial or government customers. This is critical because factoring companies rely on the credit worthiness of your customers as collateral for the transaction. Also, your company should meet these criteria:

  1. You should only invoice for completed and delivered work
  2. Your accounts receivable should be free of encumbrances
  3. Company owners and managers should have industry experience
  4. The company should be free of legal and tax problems

One critical advantage of invoice factoring over other business financing solutions is that your line is designed to grow with your business. Most factoring lines will grow dynamically with your sales if your customers and transactions meet the factoring criteria. Because of this, invoice factoring can be an ideal solution for growing underground utility locating companies that have cash flow problems.

Filed Under: Construction

Invoice Factoring Financing Explained

February 22, 2012 By

Factoring is a business financing tool that can help companies that are having cash flow problems due to slow paying customers. These types of cash flow problems are common for small businesses that have commercial sales and have to offer 60 day payment terms. While offering payment terms is a common practice, it can create serious problems for companies that don’t have the financial resources to wait that long for payment.

Invoice factoring financing solves this problem in the simple and way. A financial intermediary, called a factoring company, advances funds to your company and uses your invoices as collateral for the transaction. This provides your company with the needed working capital to cover operational expenses and to pursue new growth opportunities. The transactions are settled once your customers pay on their regular schedule. Most transactions are structured as follows:

  1. You invoice your customer for completed work or delivered product
  2. You submit your invoice to the factoring company
  3. The factoring company advances about 80% of the invoice
  4. Once your customer pays, you get the remaining 20% (less the factoring fee)

The most important requirement to qualify for factoring is to have credit worthy customers. This is important because the whole transaction uses their credit, rather than your credit, as collateral. Aside from that, your company should also:

  1. Be free of legal and tax problems
  2. Have unencumbered accounts receivable
  3. Have owners with experience in the industry

One major advantage of working with factoring companies is that they are comfortable working with businesses that have cash flow problems, and can provide them with flexible solutions. Most factoring lines are designed to dynamically increase with your sales as long as your customers and your company meet the factoring requirements. This makes invoice factoring a flexible solution for growing companies that are facing working capital problems.

Filed Under: Factoring

Purchase Order Financing Qualification Requirements

February 22, 2012 By

Qualifying for purchase order financing is easier than qualifying for most conventional business financing solutions. However, to qualify for funding, your company will need to meet some requirements. Through a process called “due diligence”, purchase order financing companies will evaluate your transaction to determine if the transaction is a good match for funding.

This article will help you understand what purchase order finance companies are looking for when they evaluate a transaction and will also help you determine if your transaction is likely to qualify. Most purchase order finance companies will look at five areas when evaluating a transaction:

Does the transaction qualify?

To qualify for purchase order funding, a transaction must be a straight resale transaction. This means that your company must buy the goods from a supplier and sell them to the customer without any modifications, except for packaging and labeling. Also, the transaction must:

  • Have a minimum value of $50,000
  • Have a gross profit margin of at least 20%, although 30% is preferable.
  • Be non-cancelable
  • Must not be for a guaranteed/consignment sale.

Do my customers qualify?

A critical component of the purchase order finance transaction is the credit worthiness of your customers. The purchase order finance company is funding the transaction based on your customers ability to pay for the order on a timely manner. Because of this, purchase order finance companies will perform a detailed review of the credit worthiness of your customers.

Does my supplier qualify?

Just as important as your customers, the funding company will also review your suppliers to ensure that they have the reputation and capabilities to deliver the product that you’re asking for, in the quality and the quantity that you require. However, you should do your own supplier due diligence before contacting a po finance company.  One thing to note is that if your supplier has financial problems and needs a prepayment to be able to afford production, they will likely not qualify.

Does my company qualify?

As part of their due diligence, PO financing companies will also look into your company. They will review your company’s financial statements and other information to ensure that it has the ability to fulfill the order, should it get the funding. They will also review public records to ensure that there are no legal or tax problems that could derail the transaction. Purchase order financing can be used by start up companies provided that the owners have contributed some capital to the corporation.

Do the company owners qualify?

Lastly, the PO finance company will also look at the background and reputation of the company owners. If you think about it, a small company is only as proficient and effective as its owners, which is why this is very important. The owners should have industry experience and be free of legal and other problems that could encumber the company.

Conclusion
These are not all the requirements to qualify for purchase order funding,  but they cover the majority of them. When required, funding companies will ask for additional information based on specific transactions or situations. However, this article should give you a very good idea if you are a good match for PO financing.
Filed Under: Purchase Order Funding

Factoring Financing For Geotechnical Drilling Companies

February 21, 2012 By

Most geotechnical drilling companies that run into cash flow problems do so because their expenses have to be paid quickly while their  revenues come in slowly. The drilling companies are usually faced with recurring expenses such as payroll, equipment, supplies, and other items that have to be paid on a regular basis. On the other hand, most commercial customers and general contractors pay their invoices on net 30 to net 60 day terms. And unless your company has the financial resources to manage this, it will run into liquidity problems.

The simple way to fix this problem is to shorten the length of time that it takes to collect revenues. One common technique is to offer customers a 2% discount if they pay in 10 days or less. While this can work very well, it also has one inherent risk. It leaves your customers in control of your cash flow. And if your customers decide to start paying slowly again, you will run into the same problems. For many drilling companies, a better solution is to use invoice factoring.

Invoice factoring accelerates the revenues that are tied to slow paying receivables. This provides your company with the liquidity it needs to pay its ongoing expenses, while at the same time enabling it to capitalize on new opportunities. The transaction works by partnering with a factoring company, who advances funds for your slow paying invoices while holding them as collateral. Your company gets immediate funds, while the factoring company waits for payment. The transaction is then settled once the end customers pay their invoices on their regular schedule. When used correctly, accounts receivable factoring can provide an ongoing source of working capital and can minimize the concerns associated with slow paying customers.

One of the most important requirements to qualify for invoice factoring is to have credit worthy customers. This is because the credit worthiness (basically the paying ability) of your customers acts as the main collateral for the transaction. However this is not the only requirement. Your company must also:

  • Invoice for completed and accepted work
  • Have its accounts receivable free of encumbrances
  • Not have any tax or legal problems
  • Have an experienced owner or management team

One critical advantage of factoring over other solutions is that the factoring line can grow dynamically with your sales. Factoring companies can structure lines so that they are flexible, as long as your company meets the funding criteria. This makes accounts receivable factoring an attractive solution for growing geotechnical drilling companies that have cash flow problems.

Filed Under: Construction

Invoice Factoring Financing For Aviation Parts Suppliers

February 21, 2012 By

Many aviation parts suppliers run into cash flow problems because of how accounts payable and accounts receivable are managed. Generally, suppliers demand quick payments, which means that accounts payable turns fairly quickly. On the other hand, most aviation customers pay their invoices on net 30 to net 60 day terms. This means that accounts receivable turns fairly slowly. Basically, suppliers are asking for quick payments whereas customers are paying their invoices slowly. And unless the aviation parts supplier has the  financial resources to handle this, they will end up having working capital problems.

One way to address this problem is to try and reduce the time that it takes to get invoices paid. It’s common to offer customers a 2% discount if they pay an invoice in 10 days or less. While this is a good strategy, it also has an inherent risk. It leaves your customers in control of your cash flow, and they could slow down their payments at any time. For many aviation part suppliers, a better strategy is to use invoice factoring.

Invoice factoring solves this problem by accelerating the revenues that are tied in slow paying receivables. This provides your company with the working capital it needs and minimizes the problems caused by slow paying customers. Factoring transactions are structured by using a factoring company that acts as a financial intermediary. The factoring company advances funds for your invoices and then holds your receivables as collateral. This effectively accelerates a substantial portion of your revenues and provides the necessary working capital to operate the business, pay suppliers, and pursue growth opportunities.

The most important requirement to qualify for factoring is to have credit worthy customers. This is because their credit worthiness and their ability to pay invoices on time acts as collateral for the transaction. Additionally, your company should also:

  • Invoice for delivered and accepted products
  • Have its accounts receivable unencumbered by liens
  • Be free of legal and tax problems
  • Have an experienced management team

One of the most important advantages of factoring is its flexibility. Factoring companies can design lines that grow with your sales, provided that your customers and your company meets the factoring criteria. Because of this, factoring can work very well for growing aviation parts suppliers that are experiencing working capital problems due to slow paying customers.

 

Filed Under: Aviation

Factoring Financing For Chemical Manufacturing Companies

February 20, 2012 By

Most small chemical manufacturing companies run into working capital problems because of the way accounts receivable and accounts payable are managed. Most suppliers, especially those that work with small companies, usually demand quick payments. Because of this, the turnaround of accounts payable is fairly quick. Large customers, on the other hand, tend to pay their invoices on net 30 to net 60 day terms. This means that the turnaround of accounts receivable is fairly slow. Basically, you have to pay your expenses quickly but your customers pay their invoices slowly. And unless your company has substantial cash reserves, this will lead into a cash flow problem.

One way to solve this problem is to use the business financing tool known as invoice factoring. Invoice factoring unlocks the money that is tied in slow paying invoices, and provides your chemical manufacturing company with the needed working capital to meet expenses and tackle new opportunities. The transaction works by partnering with a factoring company that advances funds against your accounts receivable, while holding it as collateral. Ultimately the transaction is settled once your customers pay under usual schedule.

When used correctly, factoring can alleviate working capital problems and help ensure that your company always has cash at hand. The most important requirement to qualify for factoring is to have commercial and industrial customers with good commercial credit. This is critical because the factoring company is relying on the credit worthiness of your customers to finance this transaction. There are also other requirements that your company will have to meet, such as:

  1. You can only finance invoices for delivered and accepted product
  2. Your invoices must be free of encumbrances
  3. Your company must not have legal or tax problems
  4. Your management team must have experience in the industry

Most factoring lines are structured to be flexible. This means that the factoring line can grow with your sales, as long as your company meets the factoring funding criteria. Additionally, factoring companies are used to working with small businesses that are challenged by working capital problems. This makes factoring a great alternative for chemical manufacturing companies that are going through growing pains.

Filed Under: Manufacturing

Factoring Financing For Companies in The Oil and Gas Industry

February 20, 2012 By

Getting business financing for small and new companies in the oil and gas industry can be challenging. While the industry is very profitable, most business financing institutions still remain wary of financing small companies regardless of industry. Many institutional lenders have very strict guidelines regarding who they can finance. To qualify for funding, most companies need to have impeccable financial statements, substantial assets that can be collateralized, and multiple years of profitable operations. Needless to say, few small and growing oil and gas companies can meet this criteria. At the same time, it’s usually new and growing oil and gas companies that need financing the most because they are at the highest risk of running into cash flow problems.

Most cash flow problems originate from the difference between how accounts payable and accounts receivable are handled. Expenses, which go through accounts payable, usually need to be paid quickly because suppliers always demand prompt payment from small companies. On the other hand, invoices that are paid by clients (through accounts receivable) are paid on the net 30 to net 60 basis. This is because large oil and gas customers demand lengthy payment terms. In other words, you have to pay your invoices quickly, but your customers pay their invoices slowly, which in turn creates a working capital problem.

One way to solve this problem is to use the business financing tool known as factoring. Factoring financing accelerates the revenues that are tied in slow paying invoices from large customers. It provides the working capital that you need which enables you to meet your obligations on time, and to  to capitalize on new opportunities.

Invoice factoring transactions are structured through a financial intermediary that advances funds using your invoices as collateral. The transaction with a factoring company is then settled once your customers pay their invoices in full on their usual schedule. Obtaining a factoring financing line it’s relatively easy, at least when compared to other financing products. The most important requirement is that your customers must have solid commercial credit. This is critical because the whole transaction is based on using the credit worthiness of your customers as collateral. Aside from this, it is also important that:

  • Your company can only invoice for completed product or services
  • Your invoices be free of encumbrances
  • Your company be free of legal and tax problems
  • Thee owners have experience in running and oil and gas related company

Invoice factoring lines are very flexible and can adapt to the growth of your business. When used correctly they can provide an ongoing source of working capital, helping ensure that your company always has cash at hand to execute its plans. This makes accounts receivable factoring an ideal solution for growing oil and gas industry companies that have cash flow problems.

Filed Under: Oil & Gas

Factoring Financing For Freight Brokers

February 17, 2012 By

Getting business financing for a new or growing freight brokerage can be challenging. Most financial institutions have very strict lending guidelines that require them to have substantial collateral, impeccable financial statements, and a two to three-year long track record of success. Unfortunately, few freight brokerages and logistics companies can meet this criteria. And it is new and growing freight brokerages that need financing the most because they’re the first to run into cash flow problems.

Most freight brokers run into cash flow problems because they need to pay drivers in days, but shippers can take up to 45 days to pay them. This means that the trucker payments must come from their own resources. Few freight brokers can operate their business this way for very long.

One way to deal with this problem is to ask shippers for quick pays. While asking for quick pays can work well at times, it leaves your cash flow at the mercy of your customers. For many freight brokerages, a better option is to select freight bill factoring, a financing solution that has been gaining popularity.

Freight Bill factoring accelerates the revenues that are tied in slow paying freight bills. This gives your freight brokerage the funds it needs to meet its payment obligations and to accept new customers with confidence. Freight factoring transactions are structured using a factoring company, who advances a substantial portion of your accounts receivable while holding the A/R as collateral. The transactions settle once your shippers pay the invoices in full.

Qualifying for freight factoring is relatively easy, at least when compared to other business financing solutions. It’s important that your shippers have good commercial credit, because the factoring company is relying on their credit as the collateral for the transaction. Aside from that, your freight brokerage should also:

  • Invoice only for delivered goods
  • Have all its documentation and permits in place
  • Have freight bills that are free of liens
  • Be free of legal and tax problems
  • Be operated by individuals that are knowledgeable in the business

One of the most important benefits of factoring is its flexibility. Most factoring companies design their funding lines to be flexible, which accommodates sales growth. When used correctly, factoring your freight bills provides the working capital your company needs to operate while minimizing the concerns associated with slow paying customers.

Filed Under: Transportation

Factoring Financing For Telecommunications Equipment Maintenance Companies

February 17, 2012 By

Getting financing for a new or growing telecommunications equipment maintenance company can be challenging. Most financial institutions will require that the company have substantial collateral, impeccable financial statements, and a long track record of success before providing financing. This places a number of companies at a disadvantage, especially those that have cash flow problems.

Most cash flow problems in the telecommunications industry stem from the fact that commercial customers can take as long as 45 days to pay an invoice. However, the telecommunications equipment maintenance company has to pay for supplies, employees, and other expenses, all while waiting to get paid. Few companies have the financial resources to operate like this for a long time.

One simple way to solve this problem is to request faster payments from customers. It’s common to offer a 2% discount to customers that pay in 10 days or less. While this strategy can work, it has a serious drawback. It leaves your customers in control of your cash flow, and they could choose to delay their payments at any time. For many, a better alternative is to use invoice factoring, a business financing tool that has been gaining popularity in the industry.

Factoring solves this cash flow problem by accelerating the revenues that are tied to slow paying receivables. Basically, a factoring company advances funds to your company and holds your accounts receivable as collateral. The transactions get settled once your customers pay on their usual schedule. This enables your company to enjoy better working capital while minimizing the worries associated with slow paying customers.

The most important requirement to qualify for an accounts receivable factoring line is to have commercial telecommunication customers that have solid credit. This is important, because the factoring company is relying on their credit to finance your invoices. Additionally, your company should also meet this criteria:

  • There should be no liens on your accounts receivable
  • You should only invoice for completed work
  • Your company should not have legal or tax problems
  • The owners or managers of the company should be experienced

One of the benefits of using a factoring line is that it’s designed to grow with your business. The line is tied to your revenues through your invoices and can easily be increased as long as your customers have good credit. Most factoring companies offer flexible solutions that are designed to help companies that have growth opportunities that are challenged by working capital problems.

Filed Under: Cellular / Telecom

Factoring Financing For Office Cleaning Companies

February 17, 2012 By

The two most important expenses for an office cleaning company are payroll and supplies. Both of these expenses are periodic and must be paid on time. However, this can be a problem because most commercial customers pay their invoices after 45 days or more. This can create a challenge for office cleaning companies that don’t have the financial resources to wait that long for payment. These companies usually have limited options. They can choose to juggle expenses, delay expenses, or call customers to request a quicker payment. Neither of these options is very appealing. One new alternative solution to this problem that has been gaining popularity is invoice factoring.

Invoice factoring solves this cash flow problem by accelerating the revenues that are tied in slow paying invoices. Basically, a factoring company advances funds to your office cleaning company, while holding your accounts receivable as collateral. They settle the transaction with your company as soon as your customers pay. Factoring enables you to reduce the time it takes your company to monetize your invoices, and improves your working capital. When used correctly, factoring can help ensure that your company always has the cash on hand to meet obligations and tackle new opportunities.

The most important requirement to qualify for invoice factoring is to have credit worthy commercial or governmental customers. This is because their invoices, basically their ability to pay, acts as collateral for the transaction. Aside from that, your company should also meet the following criteria:

  1. Your accounts receivable should be free of liens
  2. You should only invoice after completing your work
  3. Your company should be free and clear of legal and tax problems
  4. The company owners should have experience in the cleaning business

One of the most important advantages of accounts receivable factoring is its flexibility. Most factoring lines are designed to grow with your sales, as long as your company meets the qualification requirements. This makes factoring a great solution for office cleaning companies that have cash flow problems, but also have a substantial growth opportunities.

Filed Under: Business Services

How To Finance an Importing Business

February 14, 2012 By

In this article were going to look at a way to finance an importing business. Specifically, we’re going to look at the case where a US-based importer gets a large purchase order from a US customer. For this transaction, the importer has to place an order with a foreign manufacturing firm who will produce the goods and then ship them to the US. Once in the US, the goods will be delivered to the end customer and paid for on net 30 terms.

This type of transaction can create cash flow problems to importing companies that are not well capitalized. This is because they will need to prepay the manufacturing company with a letter of credit before production begins. And once the goods are delivered to the end customer, they will still need to wait 30 days before they get paid.  And since production can take a month or two, this means that it may take them anywhere between two months to four months before realizing their investment. This type of transactions, especially if they are large, can strain the company’s cash flow.

One way to finance these types of transactions is to use purchase order financing. This business financing tool enables importers to fulfill large purchase orders from credit worthy customers. And when used correctly, it can provide the needed working capital to help ensure that the company can always fulfill large orders.

Purchase order funding works by partnering with a po financing company. The purchase order finance company handles paying your foreign supplier, usually by issuing a letter of credit or similar instrument. This enables the foreign supplier to manufacture and deliver the goods. In the end, the transaction is settled once the goods are accepted and paid for by your customer.

However, not every purchase order qualifies for this type of financing. To qualify, the order must meet these criteria:

  • Gross profit margins must be at least 20%
  • You must sell finished goods from your supplier (with no modifications)
  • Your commercial or government customer must have good credit
  • Your supplier must have the capabilities to deliver your order
  • Your company must not have any legal or tax problems
  • Your accounts receivable must not be encumbered by liens
  • The company owners must have experience and reputation in the industry

It’s fairly common to combine purchase order financing with invoice factoring. Generally, the factoring line is deployed as soon as the end customer accepts the goods and is used to close the purchase order financing line. When done correctly, combining these two products will lower the total transaction cost.

Filed Under: Purchase Order Funding

Factoring Financing For Manufacturing Companies

February 12, 2012 By

Most manufacturing companies tend to have regular recurring expenses to cover payments for suppliers, payroll, equipment, rent, and other items. However, most manufacturing customers pay invoices on a  30 day to 60 day payment schedule. So while the money going out through Accounts Payable is usually going out quickly, the money coming in through Accounts Receivable is usually flowing in slowly. Although this is not a problem for large manufacturing companies that have adequate financing or a substantial reserve, this situation can create a serious working capital problems for everybody else.

One way to solve this cash flow problem is to use invoice factoring. Invoice factoring helps reduce the time it takes you to convert your Accounts Receivable into cash, which provides the working capital your company needs to meet operating expenses and tackle new opportunities.

Invoice factoring does not require your customers to pay sooner. Rather, an intermediary financing company called a factoring company advances funds to your company while holding its accounts receivable as collateral. The transaction settles once your customer pays the invoice under the usual payment schedule.

Most factoring transactions are structured using at two installment system. Your company gets the first installment, around 80% of your Accounts Receivable, once the product is delivered to and accepted by your customer. Your company gets the second installment, the remaining 20% (less the factoring fee), once your end customers pay in full. When used correctly, factoring line can improve your working capital and enable you to better manage your business.

The most important requirement to qualify for factoring is to have credit worthy customers. This is important because the whole transaction hinges on the fact that your customers will pay their invoices, and will pay them on time. Also, your company has to meet the following criteria:

  1. You must only invoice for delivered product
  2. Your invoices have to be free and clear of liens
  3. Your company must not have legal or tax problems

Factoring companies offer flexible financing to manufacturing companies that would otherwise not qualify for conventional business financing products.  Additionally, most factoring lines are designed to dynamically increase with your revenues, provided your company and your customers meet the factoring criteria. Because of this, factoring can be an excellent source of alternate financing for manufacturing  companies that have great opportunities but are being held back by working capital problems.

Filed Under: Manufacturing

How To Finance Large Purchase Orders

February 12, 2012 By

While getting a large purchase order may seem like good news for most companies, getting an order that exceeds your company’s financial ability to fulfill it can be a major problem. And if this situation is not managed correctly, it can lead to serious working capital problems, or to the loss of the customer. This situation is usually worsened by the fact that most suppliers will demand an immediate payment for the order, but may take anywhere between a week and two months to deliver the product to your company. On the other hand, most commercial customers may take up to net 60 days to pay for the order. This can create serious working capital shortages that few companies can afford.

One way  to solve this problem is to use purchase order financing. As its name implies, purchase order funding provides funding to cover expenses associated with fulfilling the order. Specifically, PO financing covers the supplier expense. When used properly, it can help your company win and fulfill large orders with confidence.

Purchase order financing can only be used on specific types of transactions. It only works on commercial transactions that are above $50,000 where the customer is a large credit worthy company, and only in situations where your company is a reseller of finished goods.  Additionally, your profit margins must be at least 20% and the suppliers that you work with must have a good reputation.

After a transaction is reviewed and approved by the finance company, it’s usually structured as follows:

  1. The finance company pays your supplier directly, usually by a letter of credit or similar instrument
  2. Your supplier manufactures and delivers the goods to the end customer
  3. Your company invoices the customer for payment
  4. Once your customer pays, the transaction is settled

Most purchase order funding transactions are also combined with a factoring line. Commonly, the transaction is refinanced using factoring at the time that your company invoices the customer for payment. The reason that many transactions include factoring is because when used correctly, combining both products lowers the total transaction cost.

As opposed to most conventional business financing solutions, purchase order funding is transactional in nature. This means that you can deploy it selectively for large transactions, were funding is required. Because of this, many companies consider PO funding an ideal and flexible solution to solve  working capital problems that are created by large purchase orders.

 

Filed Under: Purchase Order Funding

How To Finance a Purchase Order

February 10, 2012 By

Every so often, a company will get a purchase order that exceeds its current financial capabilities. While getting a large purchase order can be rewarding, it can also be very challenging. If your company doesn’t have the resources to fulfill the purchase order and fails to deliver, it will risk losing the customer permanently. One way to solve this problem is to use purchase order financing.

Purchase order financing is designed to help distributors that have growing purchase orders but don’t have the financial resources to fulfill them. It provides the needed funding to pay suppliers, enabling your company to accept and deliver large purchase orders. When used correctly, po financing can help you grow your company while preserving your equity.

However, purchase order funding is not for everybody. To qualify for funding, your customers must have good commercial credit. This is very important because the po financing company is relying on their credit to fund your transaction.  Additionally, the transaction has to meet the following criteria:

  • It must have gross profit margins of at least 20%
  • Your company must resell finished goods that have been purchased from a 3rd party supplier
  • Your supplier must be capable of fulfilling your order

Purchase order funding transactions are structured as follows:

  1. Your company gets a large purchase order from a credit worthy customer
  2. The transaction is submitted for review and approval
  3. Your supplier is paid, usually through a letter of credit or similar instrument
  4. The goods are transported and delivered to your customer
  5. Your customer pays the invoice, at which time the transaction is settled

Most purchase order financing transactions also combine factoring financing, which lowers total cost. Since factoring usually has lower costs than purchase order financing, it can be used to refinance the transaction once your customer receives and accept the goods.

Filed Under: Purchase Order Funding

Factoring Financing For Office Furniture Supply Companies

February 10, 2012 By

Offering payment terms to customers, basically the ability to pay their invoices in 30 to 60 days is a common business practice in the office furniture supply industry. Although it can strain cash flow, companies have to offer payment terms to remain competitive since most customers demand it. This can create a problem for small and growing office furniture supply companies that don’t have the necessary resources to offer payment terms. They are usually left with two choices – neither of which is good. They can offer terms and risk working capital problems. Or, they can decline to offer terms and risk losing customers.

One way to enable your company to offer terms is to use invoice factoring. Invoice factoring accelerates the revenues that are tied to slow paying invoices, providing the liquidity that your company needs to meet its obligations. It works by partnering with a factoring company which advances funds against your invoices and holds them as collateral until they are paid.

Most factoring transactions are structured as two payment installments. The first installment is given to your company as soon as the product is delivered and invoice for. It covers around 80% of your eligible accounts receivable. The second installment is given to your company as soon as your customers pay. The second installment covers the remaining 20%, less the factoring fee.

The most important requirement to qualify for factoring is to work with credit worthy customers. This is because factoring enables you to leverage the credit worthiness of your customers for your own benefit. Additionally, your company should also:

  1. Invoice only for delivered and accepted products
  2. Have accounts receivable that it’s free and clear of liens
  3. Be free of legal and tax problems

When used correctly, factoring can provide an ongoing source of working capital ensuring that the company always has cash at hand to meet ongoing obligations. This makes accounts receivable factoring an ideal solution for growing office furniture supply companies that have cash flow problems due to slow paying customers.

Filed Under: Business Services

Factoring Financing For Office Supply Companies

February 10, 2012 By

Most growing office supply companies will run into working capital problems at one time or another.This is because you have to pay you suppliers relatively quickly. However, your customers usually pay their invoices in 30 to 60 days.  This creates a situation where the office supply company has to use cash reserves to meet expenses, while waiting for customer payments.  And as sales growth, so does the demand on the reserves, which can lead to eventual cash flow issues.

One simple way to solve this problem is to ask customers for quicker payments. One common way to do this is to offer a 2% discount to customers that pay in ten days or less. While this strategy can be effective, it also has one important drawback. It puts your customers in control of your cash flow. For many office supply companies, a better strategy is to use business financing to supplement their cash reserves. One solution that has been gaining traction in recent years is invoice factoring.

Factoring financing accelerates the revenues that are tied slow paying invoices. This provides the needed liquidity to pay suppliers and other business expenses without having to worry about customer payment habits. The transaction works using a financial intermediary, called a factoring company. The factoring company advances funds to your company and holds the invoices as collateral. The transaction settles once your customers pay the invoices in full on the usual schedule.

Most factoring transactions provide the funding in two installments. The first installment, called the advance, covers about 80% of your eligible receivables. The advance is paid to your company at the time that you invoice your customers. The second installment, called the reserve, covers the remaining 20% (less the factoring fee) and is given as soon as your customers pay the invoices in full. When used correctly, a factoring line can provide ongoing working capital and ensure that your company always has cash at hand to meet expenses.

The most important requirement to qualify for an invoice factoring is to work with credit worthy customers. This is very important because your customers credit worthiness is the collateral that factoring companies rely on. Aside from this, your company should also:

  • Invoice for delivered and accepted products
  • Be free of legal and tax problems
  • Have invoices that are free of liens

Most factoring lines are designed to be flexible and to grow with your revenues. They will dynamically adapt to growing sales as long as your company and your customers meet the factoring criteria. Because of this, factoring is an ideal solution for growing office supply companies that have cash flow problems due to slow paying customers.

Filed Under: Business Services
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