WHAT'S IN THIS GUIDE
If you run a security guard company, you may find yourself waiting weeks or even months to receive payment for your outstanding invoices. This can create cash flow issues that make it difficult to manage operating expenses like payroll, or your ability to take on growth opportunities. Especially if your business is new and doesn’t have the credit history (or the time!) to qualify for traditional bank financing, you may wonder what your funding options are. That’s where security guard factoring comes in.
In this guide, we explore how invoice factoring for security guards works, the benefits and limitations of factoring, and what to look for in a factoring company. We’ll also cover what you should look for when choosing the right factoring company to meet your specific needs. With security guard factoring, you can get paid quickly for your outstanding invoices, freeing up cash flow so that you can focus on growing your business.
Security guard invoice factoring is a financing option that provides you access to cash quickly based on your outstanding invoices. It also sometimes goes by the term security guard invoice financing (though factoring and financing are different). In a nutshell, with security guard factoring, you sell your unpaid invoices to a factoring company in exchange for cash ahead of the original payment terms. The factoring company advances you the value of your invoice (minus a fee), then takes on the responsibility of collecting payments from your customer. Once the invoice is paid by your customer, there’s no further obligation.
Security guard factoring provides several benefits, including:
Improved cash flow: Security guard factoring allows you to receive immediate payment for your outstanding invoices, providing a quick and reliable source of cash flow.
Making payroll: Thanks to steady cash flow from faster payments, your security firm can make payroll with less stress.
Flexible financing: Factoring is a flexible financing option that meets the specific needs of a security company. Just make sure your factoring agreement lets you choose the invoices you want to factor, and has no monthly minimums or long-term commitments.
No debt: Unlike traditional loans, factoring does not create debt for your company. You also aren’t giving away equity in your business, so you remain in control.
Reduced administrative burden: Factoring companies handle collections and other administrative tasks related to invoice payments, allowing you to focus on your core business operations.
Increased working capital: Factoring gives your business the working capital it needs to cover operational expenses, make payroll, and invest in growth opportunities.
Here’s how FundThrough’s security guard factoring process works:
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As with any financing option, both security guard factoring and banks loans come with their own pros and cons. Here are some of the benefits and potential drawbacks for each funding option:
Invoice factoring is a reasonable option to consider when you’re facing cash flow challenges and need a cash infusion quickly. It’s also a helpful additional funding source to complement bank financing.
Costs for a new or growing security guard 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 to cover these expenses.
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 security guard 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.
Like all forms of funding, business credit cards can be helpful in the right situations.
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 security guard factoring company, or payroll funding guard company if you’re specifically looking for a partner to help you make payroll, is a lot like choosing any lender: you have to know which questions to ask and evaluate the answers in the context of your situation. Here’s what we recommend asking:
Most factoring companies work with most industries, but not all. Some factors specialize in only a few industries.
FundThrough works with security guard companies.
The advance rate is the portion of your invoice that the factor gives you immediately; they hold the rest until the invoice is paid and then forward you the remaining balance minus their fee. 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 fee.
See FundThrough’s pricing here. We don’t charge any hidden fees.
A minimum is the amount you must factor every period (month, each quarter, or every year) or a requirement to fund all invoices to a customer. 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 or medium security guard businesses, especially if they’re growing. Invoice factoring companies typically consider several situations before offering you an advance.
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Factoring invoices is a sound financial strategy if you:
FundThrough pays invoices in days for industries outside of this list as well.
Interested in possibly embedding FundThrough in your platform? Let’s connect!