3 Ways Invoice Financing Can Help Your Business

Factoring Benefit #1 – Take On The Slow Payers

What?!? Purposely take on accounts that have slow payers? That is right…

Everyone who deals in any significant volume has a couple of accounts that just kill the cash flow. It is not that there isn’t plenty of profit; it just takes the customer forever to pay.

The problem is that these accounts can often be your BIGGEST accounts. Or, if you are like many other small businesses, you may have passed on a large order because you knew the client simply pays too slowly.

With factoring, you can afford to wait for the slower paying companies by taking an advance on the invoice and increasing your sales volume.

Factoring Benefit #2 – Pay Your Suppliers Early

Hey, everyone has a cash flow issue – some worse than others. But not one of your suppliers would mind getting paid a bit sooner.

The best part is, that paying your suppliers on time will enhance your company’s reputation and all the while, your bank account.

Most suppliers offer an “early pay” discount. If you are factoring invoices, you will have a stable cash flow allowing you take finally take advantage of these lucrative discounts.

Factoring Benefit #3 – Avoid Bad Deals

One of the best parts about working with a factor company is their ability to help you “pre-screen” potential clients.

Not only will your factoring agent tell you whether the new account is a good risk when it comes time to factor invoices, they can also help you avoid the bad companies altogether. In turn, losing less on bad or unpaid invoices will go a long way to your bottom line.

No matter what your reason, Factoring account receivables is certainly worth checking out when debating between lines of credit or simply selling invoices.

What do you look for in a good factoring program? Check out this list for comparing factoring companies.

Just take a quick look at these highlights from the 2008 Asset-Based Lending and Factoring Surveys recently released by the Commercial Finance Association in June 2009 to see where opportunity is knocking in the United States.

Factoring Highlights

• Factoring experienced an annual volume of $136 billion in 2008 compared to $20.2 billion volume in 1976, the first year reported for the survey results.
• While the growth was a nominal .5% compared to 2007, it still reflects stable volume during volatile economic times.
• The major regional market for factoring continues to be the Northeast (47%) followed by the West (24%) and the Southeast (20%). The Midwest and Southwest comprised just 5% and 4% respectively of market share.
• The textile/apparel industry prevails as the primary client base for large scale factoring companies while transportation and business services contributed to much of the small factor volume.
• Non-recourse factoring makes up 77% of transactions with the remainder consisting of full or partial recourse factoring.
• Notification factoring comprised 78% of the volume with non-notification contributing the other 22%.

Asset Based Lending (ABL) Highlights

• The Asset-based lending industry reached $590 billion in 2008, an 8.3% increase over the prior year.
• The regional market allocation for ABL was more consistent across the United States but was still led by the Northeast (27%). It was followed by the Southeast (25%), the Midwest (20%), the West (16%), and the Southwest (12%).
• Just 12 states represented almost 65% of ABL outstanding loans.

The Commercial Finance Association releases this informative survey each year. Adrej Suskavcevic, the trade association CEO, shared these comments, “Businesses in need of capital should look beyond traditional bank loans and realize there are lenders that are able to help business meet their capital needs.”  To view the full press release and survey results you can visit the  Commercial Finance Association.

In face of a tightening credit market the need for alternative financing is on the rise. This is just part of the reason factoring made Yahoo’s Top Ten Jobs List for 2009. Yes, that is opportunity you hear knocking!