The greatest challenge for many independent and growing cable installers is determining how to finance their business. Most of these companies are small and were started by entrepreneurs with vast industry experience but little capital.
The main advantage for cable installers is the fact that their clients – cable companies and large contractors – often have good credit and award large contracts. However, most of those contracts require you to provide the cable company with commercial payment terms of 30 to 60 days. Consequently, you can wait up to two months to get paid for your work.
The problem: slow cash flow
Most installers and cable sales / marketing companies encounter financial problems because they need to get paid sooner and can’t provide credit terms. Many have immediate expenses, such as cable installation supplies and payroll.
If you have a financial reserve, this demand should not be a problem. But most small cable installation companies do not have reserves, and they use all their funds to run the company.
The solution: factor your invoices
Getting cable companies to pay invoices faster can be difficult. They have established payment procedures and seldom pay any sooner. However, you can get many of the benefits that you would get from fast payments by financing your invoices, also known as factoring.
Factoring gets your company an immediate advance on slow-paying invoices from cable companies and other commercial clients. Instead of waiting up to 60 days to get paid, you get immediate funds to pay suppliers and employees. The factoring company holds your invoice as collateral for the transaction, which closes when your clients pay on their usual schedule.
Leverage your invoices and your clients
Factoring companies finance invoices based on the credit strength of your clients, rather than on your corporate credit. Small cable installations companies whose greatest assets are solid contracts from creditworthy clients can often qualify, as long as their invoices are not encumbered and they don’t have serious tax problems.
You can use invoice factoring to offer credit terms to your clients because you won’t need to wait up to 60 days to get paid. You can finance your invoices whenever you need money to run your business.
How does invoice factoring work?
Your invoices are financed through a simple transaction in which the factoring company purchases your receivables in two installments. The first installment covers 80% of the total amount of the invoice and is wired to your account when the installation work is completed and you invoice the cable company.
The fact that most cable installers bill companies for completed work each week (or every two weeks) makes financing the transaction easier. Once the cable company pays the invoice on their regular schedule, the factor transfers the remaining 20% (less fees) to your account to conclude the transaction.
Many cable installers use an invoice factoring line regularly to ensure they always have cash on hand to cover expenses. For more information, please read “What is factoring?”
Is invoice factoring the right solution for you?
Invoice factoring can be right for you if your main financial problem is that you can’t afford to wait up to two months to get paid by clients. In this case, invoice factoring can help turn things around by providing the financing to grow your business.
Get more information
We are a leading factoring company and can provide you with competitive terms. For information, get an online factoring quote or call (877) 300 3258.