Invoice factoring has emerged as a reliable financial tool for businesses across industries. Also known as accounts receivables financing, factoring allows organizations to obtain funding instantly and conveniently so that they can focus on growth and expansion rather than chasing customers for pending payments.
For a small fee, a factoring company pays cash against your unpaid invoices and takes the responsibility to collect payment from your B2B clients when it’s due. This not only provides your business with easy access to funds, it also frees you from the painstaking task of constantly following up with clients for payments.
Here is how invoice factoring benefits five different industries.
Transportation factoring, also known as trucking factoring, is a great financial tool for transport companies, including owner-operators, to gain access to instant funding by selling their accounts receivables to factoring companies. These funds can be utilized to survive the long payment terms prevalent in the industry and to manage essential costs such as fuel purchase, fleet maintenance and other operational costs.
Managing these expenses can cause a serious cash crunch for a transport business if there is no consistent source of income and if clients don’t pay up on time. Factoring helps a transportation business to overcome the problem of limited cash flow and allows them to maintain a steady stream of working capital.
The construction industry sometimes has unreasonably long credit periods, which can leave contractors grappling with cash deficit as they wait for payments to come through. Construction factoring companies offer tailor-made factoring programs to contractors so that they can have access to fast cash against completed projects.
This gives small and medium-sized construction contractors and independent vendors the freedom to take on regular work and make better business decisions. Furthermore, they no longer need to constantly follow up with customers to get payments cleared on time.
The funds received against your pending invoices enable you to look for more work and venture into big business as you gain the confidence to bid for large projects. You can maintain a stock of materials and hire a larger team of employees without stressing over how you will pay them.
Wholesale distribution companies need large working capital to maintain stocks and keep the cycle of purchase and distribution free of disruption. Long payment terms are routine in the wholesale industry, and organizations often struggle with working capital issues that affects not only their present business but also their future work that they don’t have the funds to go after.
By choosing to factor their unpaid invoices, wholesalers and distributors get to bypass the lengthy credit terms and can infuse their business with capital as and when needed. Factoring plans that are custom-made to meet the needs of the wholesale industry help wholesalers, exporters and importers resolve the numerous issues caused by payment terms that often go up to 120 days, thus helping businesses thrive and grow without having to worry about shortage of working capital.
Also known as staffing factoring or payroll financing, this service caters specifically to hiring agencies, recruitment consultants and headhunters. The norm in the recruitment industry is that an agency is paid once a candidate they place completes a certain number of days in an organization. In the case of contract workers and temporary staff, the staffing company must pay the employee from their own pocket regardless whether the end client has processed their payment or not.
Invoice factoring allows hiring agencies to overcome the problem of delayed payments from clients so that they can keep payroll payments on track and focus on getting new business while existing clients wait out the employment period of new recruits.
Medical institutions must often wait for months on end before insurance companies pay them for services rendered to patients. If not for invoice factoring, this can greatly jeopardize a medical facility’s ability to function and service the community.
A factoring company is a great resource for fast funding when a business needs it most, and the process to acquire the funding is simple and customer-friendly. By factoring the invoices raised to medical insurance companies, hospitals, nursing homes and other medical facilities can bypass the long waiting period to receive payments.
This ensures that they can function effectively and need not rely on the traditional route of bank loans to keep their operations going. Medical factoring companies offer custom-designed factoring plans for hospitals and independent medical professionals to help them thrive and succeed in a competitive environment.