Invoice Factoring For Office Supply Companies

Most growing office supply companies face working capital problems at some point. These cash flow problems arise because you have to pay suppliers relatively quickly, whereas your customers usually pay invoices in 30 to 60 days. This delay often means that the office supply company uses cash reserves to meet expenses while waiting for customer payments. As sales grow, so does the demand on the reserves, which can lead to cash flow issues.

Ask for faster payments

One simple way to solve this problem is to ask customers for quicker payments by offering a 2% discount to customers who pay in ten days or less. While this strategy can be effective, it also has one important drawback: your customers control 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.

Improve cash flow by factoring invoices

Invoice factoring accelerates the revenues tied to slow-paying invoices, providing the liquidity to pay suppliers and other corporate expenses without having to worry about your commercial customers’ payment habits. The transaction works using a financial intermediary — 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 their usual schedule.

Simple transaction model

Most factoring transactions provide the funding in two installments. The first installment, the advance, covers about 80% of your eligible receivables and is paid to your company when you invoice your customers. The second installment, the rebate, covers the remaining 20% (less the factoring fee) and is paid after 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.

Qualification

The most important requirement for an invoice factoring line is to work with creditworthy customers because your customers’ creditworthiness is the collateral that factoring companies rely on. Aside from this requirement, 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 lines are designed to be flexible and to dynamically adapt to growing sales as long as your supply company and your customers meet the factoring criteria. Because of this flexibility, invoice factoring is an ideal solution for growing office supply companies with cash flow problems due to slow-paying customers.

Get more information

We can provide you with a competitive factoring quote. We offer high advances at low rates. For more information, please call (877) 300 3258.