The global automotive industry is projected to grow to just under nine trillion U.S. dollars, or about 11½ trillion Canadian dollars by 2030¹. This factors in all the small businesses that support the big brands—the car and truck manufacturers, distributors, parts suppliers, and others.
Each automotive industry segment faces challenges—downtimes, seasonal slowdowns, inventory and inventory delays, sales (or lack of sales), finding employees, and competition, just to name a few.
Many of these challenges result in snags in cash flow, in part due to business customers who need 30, 60, or 90 days to pay an invoice. Invoice factoring for the automotive industry is a practical financing option for small businesses who need to accelerate their cash flow.
With invoice or accounts receivable factoring, you sell your eligible invoices to a factoring company, like FundThrough, and get paid the cash you need quickly, ahead of long payment terms. Depending on how quickly you need working capital, you may not have the time to wait through a drawn-out application process for a loan or line of credit.
And, unlike a loan that only gives you a finite amount of capital that you pay back with interest, factoring with FundThrough advances you 100% of the invoice amount, minus a small fee. There’s no long pay-back period—the advance from the factoring company is money you’ve already earned from a delivered product or service.
Generally, there are five basic steps to factoring:
Plus, even if you have a blemish on your credit report, you can still often factor your invoices. Factoring doesn’t base its credit analysis on you but instead on the creditworthiness of your customers. Not only that, but factoring is flexible — you choose which invoices to factor.
In the past, factoring was largely misunderstood. Business bank loans and lines of credit were the traditional and accepted forms of financing, along with credit cards. Each of these different funding options have pros and cons to consider.
Costs for a new or growing automotive business can be significant. You may need to purchase equipment and inventory, pay employees, and keep up with rent, taxes, and marketing. You may consider taking out a business loan.
A line of credit (LOC) is a lot like a credit card. You can borrow money up to a certain maximum amount determined by your financial institution. You can cover day-to-day expenses and pay back your debt, only to borrow again when needed.
Like all forms of funding, business credit cards must be used wisely or things can go sideways very quickly.
Invoice factoring is not a loan. The application process is quick, there is no repayment obligation, no high interest rates, and no debt to record on your company’s balance sheet. Plus, many more companies will qualify.
Choosing a factoring partner is a lot like choosing any lender. It pays to do your homework. There are also several questions to ask prior to starting the application process:
Most factoring companies work with most industries, but not all. Some factors specialize in only a few industries.
FundThrough works with B2B companies in the automotive industry. We provide receivable financing for automotive supply companies and more.
Advance rates can range from 60% to 100%, depending on the factoring company and sometimes the industry.
FundThrough— 100% of the invoice amount, less a fee.
A factoring company should be able to provide what factoring fees it charges upfront. But some companies may make it difficult to determine the total costs of using their service. FundThrough offers transparent pricing so you know prior to signing an agreement.
FundThrough pricing – 100% advance rates minus a flat fee. One up front price.
A minimum is the amount you must factor every period (month, each quarter or every year). Some factoring companies offer plans that require minimums, while others do not.
FundThrough doesn’t require minimums. Only fund when you need to.
Cash flow is the number one problem for most start-ups and small businesses, especially if they’re growing. This is also true in the automotive sector. Invoice factoring companies typically consider several situations before offering you an advance.
Factoring invoices is a sound financial strategy if you—
FundThrough takes the legwork out of accounts receivables financing. It’s fully automated platform is easy to navigate, it’s fee structure is transparent and a customer service rep is there when you have questions. Find out what FundThrough’s clients have to say, and start factoring your invoices today.
Interested in possibly embedding FundThrough in your platform? Let’s connect!