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Boost your cash flow in days
WHAT'S IN THIS GUIDE
Cash flow is a chronic problem in manufacturing. The cost of production has to be funded before you get paid for a product, and net terms are often 30, 60, 90 days or more.
Manufacturing invoice factoring, aka accounts receivable factoring, can provide the much-needed capital you need to cover operating costs and grow your business while waiting while waiting for your customers to pay. But just how exactly does factoring for manufacturing companies work, and how do you know if it’s right for your manufacturing business? This guide has you covered with everything you need to know about factoring services for manufacturing.
Invoice factoring is a financial service in which a business sells its accounts receivable (invoices) to a third-party factoring company at a discount, in return for immediate cash. This arrangement provides the business with quick access to funds, improving cash flow and liquidity, while the factoring company takes responsibility for collecting the invoice from the business’ customer. Factoring is commonly used by manufacturing companies to bridge the gap between delivering goods and receiving payment, allowing them to continue operating smoothly without being constrained by slow-paying customers.
Here’s how factoring for a manufacturing company typically works at FundThrough:
1. Create or connect your account in minutes.
Create a free account or connect your QuickBooks, and provide information about your business.
2. Choose which invoices to fund.
Upload invoices into FundThrough or pull in eligible invoices from QuickBooks. We provide unlimited funding for your business based on the size of your outstanding invoices. Select which invoices you want to fund, and submit them in one click (after customer set up).
3. Get Funded.
Upon approval, funds are deposited into your business bank account as soon as the next business day. Put your capital to work for growth projects, payroll, equipment, hires, and more.
Manufacturer factoring offers several advantages to manufacturing companies. Here are some of the key benefits of manufacturing factoring:
1. Improved Cash Flow: One of the primary benefits of invoice factoring services is the immediate infusion of cash it provides. Rather than waiting for customers to pay their invoices, you can access funding for the invoice value upfront. This helps bridge the cash flow gap and provides funds to cover operational expenses, such as raw materials, payroll, and other immediate financial obligations.
2. Quick and Easy Access to Funds: Manufacturer invoice factoring is typically a fast and straightforward process compared to traditional financing options like bank loans. Once you have an established relationship with a factoring company, subsequent funding can be obtained quickly, often within a couple of business days. This rapid access to funds can be vital for manufacturers who need to seize business opportunities, fulfill orders, or address unexpected expenses promptly.
3. No Debt Incurred: Unlike a loan, invoice factoring does not create debt. It is not a form of borrowing, but rather a sale of accounts receivable. This means that your business is not taking on additional financial liability or burdening its balance sheet with debt. Manufacturer invoice factoring can be a useful option for companies that want to avoid traditional debt financing, or that do not qualify for traditional bank loans.
4. Flexible Financing Option: Invoice factoring provides flexibility. The funding amount is based on the value of the invoices, allowing your business to access funds in proportion to your sales volume. As your company grows and generates more invoices, the available funding can increase accordingly. This scalability makes invoice factoring an adaptable financing solution that can support the changing needs of your business.
5. Outsourced Accounts Receivable Management: When invoices are factored, the factoring companies for manufacturing take over the responsibility of collecting payments from customers. This relieves you of the administrative tasks and costs associated with accounts receivable management, such as invoicing, tracking payments, and collections. By outsourcing these functions to the factoring company, you can focus on your core competencies and save time and resources. (If this concerns you, see how we work with your customers.)
It’s important to note that while the manufacturing invoice factoring process offers numerous benefits, each company’s situation is unique. Be sure to carefully evaluate the costs, terms, and reputation of the factoring company before entering into a factoring agreement to ensure it aligns with your specific financial needs and goals.
Choosing a manufacturing invoice factoring company is a lot like choosing any lender: you have gather relevant information and evaluate it in the context of your situation. We recommend you learn about the following for any manufacturing invoice factoring company you’re considering.
We give you quick, easy funding through our tech-powered platform, making factoring the best experience it can be. When you work with FundThrough, you can also expect:
It’s right for your business if you have a cash flow need and outstanding invoices for creditworthy customers. Manufacturing factoring solves cash flow challenges where they begin, with long net terms.
Invoice finance for manufacturers is a financial solution that enables manufacturing companies to access working capital by using their unpaid invoices as collateral. You get an advance on your invoice that you pay back yourself to the factoring company in agreed-upon instalments. While it eliminates the need for customer contact, invoice finance for manufacturers requires managing accounts receivable on your own.
Invoice financing for manufacturers works similarly to factoring by using unpaid invoices as collateral to access immediate cash flow. You submit your outstanding invoices to a factoring company, who gives you an advance on the value of your unpaid invoice. You put your money to work immediately. Then, you repay the advance yourself through instalments to the factoring company. Rates are similar to factoring, ranging from 1 percent to 6 percent, but the interest rate is usually split up across the payments. Advance rates for invoice financing range from 80 percent to 100 percent.
When evaluating financing options for your business, it’s important to consider various factors to determine the best fit. To help you make an informed decision and select the one that best meets your business needs, we’ve broken down the pros and cons of some of the most popular manufacturing financing options.
A line of credit (LOC) is a lot like a credit card. You can withdraw 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.
Pros
Cons
Like all forms of funding, business credit cards can be helpful in the right situations.
Pros
Cons
Account receivable factoring for manufacturing is not a loan. The application process is quick. There is no repayment obligation as long as your customer pays their invoice, no high interest rates, and no debt to record on your company’s balance sheet. Plus, many more companies will qualify for factoring for manufacturers.
Pros
Cons
Interested in possibly embedding FundThrough in your platform? Let’s connect!