Because service providers tend to have fewer physical assets, equipment, inventory, and products that can be easily turned over or used as collateral, it can be challenging to maintain cash flow and working capital. If your company is a start-up or you have little credit history, getting a loan, line of credit or other funding can also be difficult. Besides, banks can take weeks to make loan or line of credit decisions.
A service provider is a person, company or organization that delivers services. Service provider companies might include:
As a service provider, it’s not uncommon to wait 30-90 days to get paid on outstanding accounts receivables by your customers. Factoring for the service industry frees up cash and working capital, without incurring debt or the worry of adding liabilities to your balance sheet. Factoring is not a loan. Instead of making monthly payments, you get cash for the full total of the invoice, less a fee.
Instead, factoring is a simple cash flow solution for service providers. It provides the cash flow your business needs to grow based on your customer’s unpaid invoices.
This is how it works:
Accounts receivable factoring for service providers involves financing outstanding invoices from slow-paying customers. This bridges a gap in cash flow, allowing your business to buy equipment, make payroll, add new customers, and grow your business.
You provide existing, outstanding invoices to a factoring company, like FundThrough, that advances the full invoice value less a small fee. Your business can often get paid in as little as one business day, upon approval.
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 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/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 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. company’s 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 service providers.
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.
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 for service providers. 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!