WHAT'S IN THIS GUIDE
Significant amounts of money can change hands with each commercial real estate transaction. But all too often, the time between negotiation and getting paid can be many months, stifling cash flow and preventing you from taking on larger clients and growing your business.
Market risk and volatility, affordability, and delays in new construction can make it challenging to take your B2B or commercial business to the next level. Real estate invoice or accounts receivable factoring solves cash flow challenges.
It’s a well-known fact that businesses need access to cash. This is especially true in the real estate industry. If you’re a commercial broker or real estate agent working with businesses, it can be difficult to promote your business, add new customers, or earn commissions with limited cash flow.
Real estate factoring is a source of short-term funding that solves cash flow issues. By selling one or more unpaid business invoices to a factoring company, like FundThrough, you get the cash you need (minus a small factoring fee) ahead of 30, 60, or 90 day payment terms, and your customer pays FundThrough—to improve liquidity without adding new debt.
When your customers are late paying, the less cash you have on hand to make payroll, manage rent payments, pay off other debt, taxes, and grow your business. Factoring your accounts receivable gives you cash ahead of long payment terms, speeding up your cash flow.
Plus, qualifying for real estate financing of your outstanding receivables isn’t based on your personal credit score or history. Factoring instead looks at your creditworthy customers. And, unlike many banking institutions, factoring offers quick approvals and an online application process.
Real estate factoring is not an asset-based loan. It doesn’t look at your B2B business reputation, business success, your business bank statements, business assets, or business model. Rather, it is a real estate financing option for B2B companies with limited cash flow or cash flow variability—without adding additional credit risk.
The resounding answer is yes. Invoice factoring of your outstanding invoices and real estate can work together. Here’s why:
Business owners need fast funding to take on new clients. Business opportunities and long term contracts often can’t wait until you have the cash flow to fund expenses. Invoice factoring lets you take advantage of new prospects instead of missing out.
Your business is somewhat seasonal. In some areas of the country, the real estate market slows down during certain times of the year. That can mean you’re crunched for cash. Unpaid invoices from slow paying customers can make cash flow issues even worse. Invoice factoring provides the cash you need during down times.
Clients are chronically slow-paying. When you’re growing your real estate business, it can be difficult to turn down business, even when clients take 30, 60 or 90 days to pay their outstanding invoices. Real estate invoice factoring can take the worry out of when you’ll be paid.
You need immediate cash. If an emergency cripples your business, even for a short time, you need to know you have the liquidity to survive. But if your accounts receivables are tied up, you can’t always access the cash or working capital you need. In an emergency, invoice factoring can provide the cash you need fast.
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 real estate 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 traditional 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.
Receivable 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. FundThrough provides factoring for the construction industry, healthcare industry, medical factoring, B2B and service-based businesses, and more. Some factors specialize in only a few industries.
Advance rates on your outstanding receivables can range from 60% to 100%, depending on the factoring company and sometimes the industry.
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.
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.
Cash flow is the number one problem for most start-ups and small businesses, especially if they’re growing. This is also true for commercial real estate. 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 dedicated customer service rep is there when you have questions. Find out what FundThrough’s clients have to say, and start factoring your unpaid invoices today.