WHAT'S IN THIS GUIDE
The technology sector is a fast moving industry — companies innovate and make decisions that grow their business in almost record time. While the IT industry is very broad, it doesn’t matter if the company has to do with hardware, software, consulting, or other professional services, they all need cash flow to take on big projects. We know the pressure of being in a cash crunch and working under tight timelines, as we’re entrepreneurs too, so we’ve been there ourselves!
One of the biggest cost centers in the tech industry is labor. No matter what stage your business is in, you’ll need staff such as software developers to build the next version of a platform, or cybersecurity consultants to ensure you can take on more clients. Unfortunately, payment terms for big clients are often long, and bills like payroll still need to be met. That’s where a solution like invoice factoring for tech companies can help. Tech company factoring gets your outstanding invoices paid ahead of lengthy net terms, so you’ve got the necessary capital on hand to cover expenses like payroll and go after projects that will let you grow your company.
Information technology invoice factoring is a form of short-term financing when you sell your outstanding invoices in exchange for a payment advance. The factoring company then works with your customer to settle the invoice according to the original payment terms.
In a nutshell, factoring tech companies give your technology company funds in days so you don’t have to wait months on net terms. You can then put your funds to work hiring employees with specialized skills and investing in materials, applications, and other tools to serve your customers.
Holding receivables on the books for months means your cash flow is stifled, and the working capital needed to grow your company is held up. Invoice factoring for tech companies can help you get outstanding invoices paid faster, but there are so many more additional benefits of factoring you might not have thought about, including:
Knowing how the factoring process works will help you decide if it’s the right funding method for you and your business. It will also help you be able to better evaluate different factoring tech companies.
After our simple set up, submit invoices for funding in FundThrough without time-consuming paperwork. Here’s how it works:
1. Create (or connect) your account. The first step in IT factoring is to create a free account or connect your QuickBooks or OpenInvoice account to FundThrough’s dashboard. Setup takes just a few minutes. After that, provide some basic information about your business to get started.
2. Select which invoice(s) to fund. You can upload into FundThrough’s online portal directly, or pull in eligible invoices from QuickBooks or OpenInvoice. We provide unlimited funding for your business based on the size of your outstanding invoices. Simply choose the invoice(s) you want to fund, and submit them in one click (after initial customer setup).
3. Get funded, then, get back to business. Upon approval, funds are deposited into your business bank account as soon as the next business day. You can then get busy putting your capital to work for growth projects, covering payroll, purchasing equipment, making strategic hires, and more.
IT companies might use the funds from factoring to:
Each of these different funding options have pros and cons to consider, so that you can make the best decision for your company.
Costs for a new or growing IT 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 business loan provides businesses with a lump-sum payment to help fund business activities. It is a form of debt, and will require you to repay the amount of the loan (plus interest) over an agreed upon period of time.
A business line of credit (LOC) is a lot like a credit card. You can borrow/withdraw money up to a certain maximum amount determined by your financial institution. You can use the funds to cover day-to-day expenses and pay back your debt. It’s ready for you to draw on it again when needed.
Like all forms of funding, business credit cards must be used wisely or things can go sideways very quickly. Business credit cards work much the same as a personal credit card, however, it is tied to your business and meant for business-related purchases.
Receivables factoring for information technology companies involves selling your outstanding invoices to a factoring company, who then advances you the payment (minus a small fee). The factor works with your customer to collect payment for the invoice according to the original net terms.
Choosing an IT 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. Experience in your industry will make the factoring company easier to work with as they’ll already have an understanding of how your business works and the unique challenge you face. FundThrough has experience working with IT companies of all kinds to grow their business while also covering ongoing operating expenses — with the track record to prove it.
At FundThrough, we provide you with a dedicated account manager and a specific customer service contact to work with so you always receive prompt, transparent communication. This level of dedicated customer service can help make getting funded faster and easier.
Advance rates can range from 60% to 100%, depending on the factoring company and sometimes the industry.
FundThrough advances 100% of the invoice amount, less a small fee.
FundThrough pricing = 100% advance rates minus a flat fee. One upfront price. No hidden fees.
A minimum is the amount you must factor every period (month, each quarter, or every year). Some factoring tech 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 IT businesses, especially if they’re growing. Invoice factoring companies typically consider several qualifications before offering you an advance.
Interested in possibly embedding FundThrough in your platform? Let’s connect!