Financing for Janitorial and Commercial Cleaning Companies

Providing janitorial services to commercial, institutional, and industrial clients has many advantages. These clients require regular services and their contracts can be very profitable.

However, working with commercial clients has one challenge: most pay their invoices in 30 to 60 days. Waiting up to 60 days to get paid can be a problem for most janitorial and commercial cleaning companies. Most have weekly expenses, such as supplies and salaries, and can’t afford to wait long for payment. They need to get paid sooner.

Growth can be expensive and difficult

Also, growing a commercial cleaning business can be expensive. Adding new clients often means also having to hire additional staff and having to buy more supplies. If your new clients pay slowly, you have to pay for these expenses out of your own pocket and wait up to eight weeks to get paid back. Unfortunately, few companies can afford to grow this way.

The only way to grow your company is to improve your cash flow. You can improve your cash flow in two ways: early payment discounts or invoice factoring.

Solution #1: Early payment discounts

Some companies can improve their cash flow by offering early payment discounts to their clients. Basically, they offer their clients a discount – usually 2% – if they pay in 10 days or less. While early payment discounts can improve cash flow, they have some drawbacks.

Discounts for early payment are voluntary and not predictable. Your client can choose take them – or not – based on their cash flow. You never know when they will pay. Furthermore, some clients may take the discount but still pay you in 30 to 60 days. Unfortunately, this scenario happens often. Recovering the unpaid portion of the invoices is difficult and can upset your client relationship.

The greater problem is that you have set a precedent with your client that you offer discounts. Clients can – and may – use it against you to demand further discounts once your cleaning contract is up for re-negotiation.

Solution #2: Finance slow-paying invoices

A better way to solve this problem is to finance your invoices using a factoring program. This solution can provide your janitorial and commercial cleaning with immediate cash flow. You can use these funds to pay salaries and buy supplies. More importantly, you can use factoring to grow the business since you can finance invoices from new clients and get paid immediately.

The financing process is fairly simple. You work with a factoring company who finances your invoices in two installments. The first installment covers up to 80% of the invoice (this amount varies) and is deposited to your account as soon as you submit the invoice for financing. The second installment, the remaining 20%, is deposited to your account once your customer pays the invoice. The service fee is deducted from the second installment. For more information about the funding process, read this article.

Invoice factoring is easy to get

One of the most important advantages of factoring is that it’s easier to get than conventional financing. The most important requirement to qualify for this type of financing is to have good commercial or industrial clients. If your clients have good commercial credit and pay their invoices reliably, you have a good chance of qualifying. Aside from having good customers, your company has to be:

  • Free of legal or tax problems (or have a tax plan in place)
  • Managed by experienced individuals

This solution is available to small and mid-sized companies.

How much does invoice factoring cost?

The cost of factoring your invoices varies based on the size of your company and the credit quality of your customers. In general, smaller companies pay 2.5% to 3.5% per 30 days. Larger companies can pay as little as 1.15% per 30 days.  To find how much an invoice factoring solution would cost you, get an instant quote.

Will factoring help my janitorial company?

Invoice factoring can help your company if your main problem is that you cannot afford to wait up to 60 days to get paid by commercial clients. Factoring can improve your cash flow and help you pay business expenses.

Get a factoring quote

We are a leading factoring company and can provide your janitorial and commercial cleaning company with a competitive factoring quote. For an instant quote, fill out this form or call us toll-free at (877) 300 3258.