Invoice Factoring B2B for the Manufacturing Industry
Manufacturing businesses that have to wait 30-90 days sometimes even longer for customers to pay their invoices may find themselves in a tight cash flow situation. If they don’t find capital to cover their operating expenses their expenses can outpace their income.
One excellent option that is often overlooked is the assets in a company’s accounts receivable. They may sell their accounts receivable for a discount and get immediate access to cash to help cover things like payroll, trade purchases, business expansion, and day-to-day operating expenses.
Instead of looking toward hard-to-obtain bank loans to cover cash flow needs, manufacturers should consider using an accounts receivable invoice factoring service to access the capital found in their customers’ invoices.
What is Invoice Factoring B2B for Manufacturing Companies?
Invoice factoring, which is also called accounts receivable factoring, is a form of alternative financing. The factoring service agrees to purchase its clients’ outstanding account receivables at face value, minus a discount.
This form of financing helps businesses obtain cash much faster than it would take for their customers to pay them, which could take 30-90 days even in some cases up to 120 days.
Once their credit is approved and terms are agreed upon between the factoring company and manufacturing client, the manufacturer sells their customers’ unpaid invoices to the factoring company.
The factoring company verifies the invoice is valid with the manufacturer’s customer (debtor) by obtaining proof such as a bill of lading and then advances the funds minus a reserve to the client.
The factoring company then works with the customer (debtor) to collect the face value of the invoice. Once the debtor pays the invoice the factoring company returns the reserved money minus the discount to the client.
Accounts Receivable Invoice Factoring is a positive resource that helps manufacturing businesses grow, cover payroll, meet operating expenses, and cover cash flow needs.
It is the right solution for any B2B needing immediate cash.
Is Accounts Receivable Factoring a Loan?
No, factoring your accounts receivable doesn’t work like a bank loan. Your accounts receivable is an asset that you sell. There is no loan repayment. It will not impact your credit score. There is no lengthy credit approval process that takes months.
In fact, many companies seek out factoring companies when a bank can’t help them. It’s your money, minus the discount or factoring fee.
The factoring company will advance the client funds based on the credit worthiness of both client and the client’s customer (debtor), both are important, but more weight is given to the customer’s (debtor’s) credit worthiness.
Once both client and customer are vetted, the approval process is quick and easy. In most cases, cash advances can be paid within hours, not weeks or months.
How Does Invoice Factoring B2B Help Manufacturing Businesses?
Invoice factoring helps your business get paid fast, bypassing the 30-90 days most companies have to wait for customer payment. Having access to your capital upfront allows you to grow your business, cover payroll, invest in equipment, or cover daily operating expenses. Capital is a must for an expanding business.
Using an accounts receivable invoice factoring service can help you in the following ways.
How Great Funds Factoring Helps Your Manufacturing Business Get Paid Faster
At Great Funds Factoring, we understand that there are many financial challenges that even the most successful businesses can go through and the stress that it can cause. We believe that good communication is key to developing a strong working relationship with our clients and will strive to be personally available to answer questions about receivable factoring.
During the discovery process, we aim to get a better understanding of your business needs, gain your trust, and determine if open account receivable factoring is a fit for you.
After you submit your credit application, Great Funds Factoring, LLC will review your credit application along with other documents required such as bank statements, master customer list, and financial statements.
When the due diligence is completed, Great Funds Factoring works on the approval process. Usually, the entire process both underwriting and approval review takes one to two business days. Once approved, we send you the proposal and all documents needed to set up your account.
As you send invoices to your customers, we verify them and advance your funds immediately to your account, while holding a small amount in reserve until your customer pays their invoice.
Recourse vs. Non-Recourse Factoring
Great Funds Factoring offers recourse factoring, which is more cost-effective for manufacturing companies. With this type of factoring service, we will work with the debtor to verify the invoice is accurate and viable via proof of delivery. We will then monitor outstanding A/R and work with them to collect payment.
However, if after a period of time, the debtor does not pay GFF and all efforts have been made to collect, the debt goes back to the client and they are responsible for covering the obligation.
With non-recourse factoring, the factoring company assumes all risks if the customer doesn’t pay. This option is more expensive and requires a greater in-depth credit review and scrutiny.
Types of Manufacturing Companies That Use A Factoring Service
ANY MANUFACTURING business that needs access to capital can benefit from a manufacturing-friendly factoring service. One excellent resource for quick cash is the manufacturer’s own money that is locked away in its accounts receivable.
If your business is needing money to fund growth, and cover payroll and other expenses then Great Funds Factoring, LLC is an excellent B2B partner.
The list below are some examples of manufacturing partners that we work with but we service all sectors in the manufacturing industry.