Factoring Financing For Manufacturing Businesses

Most manufacturing companies eventually need business financing to grow. It’s just the nature of this working-capital-intensive business. For example, most manufacturers have regular expenses, such as raw material suppliers, equipment leases, rent, and staffing costs. These expenses add up quickly.

However, the revenues to cover these expenses often flow in slowly because most commercial, industrial, and government clients ask for payment terms.

Payment terms drain cash flow

Offering payment terms to clients is fairly common in the industry. The problem is that many manufacturing companies don’t have the resources to offer payment terms. They need to get paid sooner to cover business expenses. As a result, manufacturing companies that offer terms can often run into cash flow problems. Ultimately, these problems can grow and threaten the business.

Finance your invoices

The problem is relatively simple: the manufacturer offers terms that it can’t afford to offer. This problem would not exist if clients paid sooner. Convincing clients to pay sooner is difficult, but you can achieve similar benefits by financing invoices.

This solution provides you with immediate funding, solving your cash flow problem. It is an alternative to getting a business loan for your manufacturing company.

Invoice financing works by partnering your business with a factoring company who finances your invoices from creditworthy customers. When you deliver your products, the factor provides you with an advance. The transaction settles once your client pays the invoice in full, on their regular schedule.

Advantages

One advantage of invoice financing is that it allows you to offer net-30 to net-60 day terms and helps you avoid cash flow problems. However, the most important benefit of invoice financing is its flexibility to adapt to your growing business.

The line can increase as your sales grow – often quickly. You can use the line to finance your company’s strategic growth by taking on new customers, allowing you to grow beyond your current financial limitations.

Qualification

Qualifying for invoice financing is often easier than qualifying for a line of credit or comparable business loan. The credit quality of your customers is critical because the factor uses your receivables as collateral. Also, your company should not have serious tax problems or be involved in legal disputes. Because of these requirements, many small and mid-sized manufacturing companies can qualify for this solution.

Invoice financing is an ideal alternative for manufacturing companies with cash flow problems due to slow-paying customers and needing immediate funding.

Get more information

We are a leading factoring company and work with  manufacturing companies. For information, get an instant quote or call  us at (877) 300 3258.