One common problem for commercial landscaping companies in Canada is that corporate customers usually pay their invoices in 30 to 60 days. However, the landscaping company has a number of expenses that need to be paid regularly. This forces the landscaper to cover its expenses out of its own reserves while waiting for customers to pay. This can be a substantial problem for small and growing landscaping companies that have not had the opportunity to build cash reserves. When left unchecked, this problem can grow and create a serious working capital shortage. One way to fix this problem is to accelerate revenues using factoring financing.
Factoring solves this problem by advancing funds against the landscaping company’s invoices. A factoring company handles the advance and holds the invoices as collateral. This provides the commercial landscape company with the working capital it needs to meet expenses and handle growing opportunities. The transaction is settled once the invoices are paid on their regular schedule.
One of the advantages working with a factoring company is that they are used to working with companies that have cash flow problems and therefore offer plans that are more accessible that conventional finance products. The most important requirement to qualify for invoice factoring is to have customers with good commercial credit. This is critical, because your customer’s credit and ability to pay invoices is the collateral for the transaction. Aside from that, your company must also:
- Be free of legal and tax problems
- Invoice for completed work
- Have no encumbrances on its invoices
Perhaps the most important benefit of invoice factoring is that the funding line can grow dynamically with your revenues. This means that your funding line can accommodate growth, as long as your customers are credit worthy and as long as your company meets the factoring company’s funding criteria. Because of this, factoring is an ideal solution for growing Canadian landscaping companies that have growth opportunities that are hindered by working capital problems.
Most companies in the food service industry that work with corporate accounts are used to the fact that corporate clients always demand net 30 to net 60 day payment terms. While this is a common business practice in Canada it also poses a serious challenge to small and growing food service companies that can’t afford to wait that long to get paid. Unless properly managed, this situation can lead to working capital problems that eventually spiral out of control. One way to help address this problem is to use invoice factoring financing.
Invoice factoring solves this problem by providing an advance on your slow paying invoices from credit worthy corporate customers. This gives your company the working capital it needs to meet critical business expenses and relieves the pressure of dealing with slow paying customers. The transaction is structured using a financial intermediary called a factoring company. The factoring company advances the funds to your company while holding your accounts receivable (invoices) as collateral. They settle the transaction once your customer pays in full on their usual schedule.
Qualifying for factoring is easier than qualifying for other business financing products. The most important requirement is that your customers must have good commercial credit. This is critical because the whole transaction is based on your customers ability to pay your invoices. Aside from that, your company must also meet these requirements:
- Your invoices must be for completed services
- Your invoices must be free of encumbrances
- Your company must not have legal or tax problems
One of the advantages of using factoring financing is that the funding line can grow with your revenues, provided that you are selling to credit worthy customers and provided that you meet the factoring criteria. This makes factoring an ideal solution for growing Canadian food service companies that have great opportunities constrained by working capital problems.
Managing cash flow can be very challenging for Transportation companies. This is because unless you have a quick pay agreement, most shippers will pay their invoices in 30 to 60 days. On the other hand, you have expenses, such as driver salaries, fuel, and repairs, that need to be paid sooner than that. This can create a problem for freight and trucking companies that don’t have a large enough cash reserve to cover these expenses while waiting. If left unchecked, these cash flow problems can prevent the company from growing, or worse, send it into an unrecoverable financial tailspin. One way to solve this problem is to use freight bill factoring.
Freight factoring is a form of financing where a factoring company advances funds to your trucking company using your invoices as collateral. This provides you with the working capital you need to run your business and minimizes the problems created by slow paying customers. Most factoring financing facilities are used on an ongoing basis to help alleviate working capital shortages.
One advantage of factoring over other forms of business financing is that it’s comparatively easy to obtain. The most important requirement is that your customers must have good commercial credit. This is because your invoices that are payable by them are the collateral that backs the transaction. Aside from that, your company must meet these requirements:
- Your invoices must be free of encumbrances
- Your company must be free of legal and taxation problems
- Your invoices must be for delivered loads
Perhaps the biggest benefit of working with a factoring company is that their financing products are flexible and can adapt to your growing revenues. This makes invoice factoring an ideal solution for growing Canadian trucking companies that have great opportunities that are hindered by working capital problems.
Most freight forwarding companies that work with commercial accounts usually have to wait up to 60 days to get paid by customers. Offering payment terms is a common practice in Canada and large corporate customers usually demand – and expect – to get them. This can be a problem for smaller freight forwarders that don’t have the financial resources to wait to get paid because they need funds to meet their own obligations. One way to deal with this problem is to use a form of financing known as freight bill factoring.
Freight bill factoring solves this problem by accelerating revenues that are tied to slow paying freight bills. It works by having an intermediary financing company, called a factoring company, advance funds to your freight forwarding company using your invoices and freight bills as collateral. The transaction closes once your customers pay on their usual schedule.
One of the advantages of freight factoring is that it’s easier to obtain than most common business financing products. To qualify, your company must work with credit worthy shippers. This is critical because the creditworthiness of your shippers is what the factoring company is relying on. Aside from that, your company must meet these requirements:
- Your invoices must be for delivered loads
- Your invoices must be free of encumbrances
- Your company must not have any legal or tax problems
The most important benefit of freight factoring is its flexibility. Most factoring plans are designed to be dynamic and can grow with your revenues, provided that your sales are to credit worthy customers and provided that your company meets the factoring criteria. This makes factoring financing an ideal solution for growing Canadian freight forwarders that have solid growth opportunities that are being hindered by cash flow problems.
One of the biggest challenges for growing janitorial companies is waiting for customers to pay their invoices, since it’s a common practice in Canada to offer payment terms to large companies. Janitorial companies have to offer terms in order to remain competitive since large corporate customers usually demand them – and expect them. The problem is that smaller janitorial companies cannot afford to offer payment terms. They need to be paid sooner so that they can meet their own expenses – namely payroll and supplies. One way to solve this problem is to use a financing tool known as invoice factoring and discounting.
Invoice factoring enables you to monetize your slow paying invoices. The transaction is structured through a factoring company that advances funds to your company while holding your invoices as collateral. The transaction closes as soon as your customers pay. This provides you with the working capital you need to pay expenses and take on new clients. Most factoring transactions are structured as follows:
- Your company sends a copy of the invoice to the factoring company
- The factoring company makes an initial advance of 80% (this varies)
- Your customer pays the invoice (after 30 or 60 days)
- The factoring company advances the remaining 20%, less fees
Qualifying for factoring is easier than qualifying for other types of business funding. The most important requirement is that your customers must have good commercial credit. This is very important because the whole transaction hinges on their ability to pay. Aside form that, your company must meet this criteria:
- Your invoices must be free of encumbrances
- Your company must be free of legal and tax problems
- Your invoices must be for completed work
One important advantage of factoring financing is that the funding line is flexible and can grow with your business, provided your customers have good commercial credit. This makes factoring financing an ideal financing solution for Canadian janitorial companies that have growth opportunities that are challenged by cash flow problems.
Waiting up to 60 days to get paid by customers is fairly common in the software industry, especially if the customer is a large corporation. This can create a problem for small software service shops that don’t have the financial resources to handle their operational expenses while waiting for payment. One way to solve this problem is to use invoice factoring.
Factoring enables your company to offer payment terms to your customers while minimizing the impact of slow payments. It works by partnering with a factoring company, who advances funds against your invoices while holding them as collateral. This gives your software company the funds it needs to meet it’s payroll and operational expenses. The transaction closes once your customers pay their invoices in full.
Qualifying for a factoring financing line is relatively easy when compared to other business financing solutions. The most important requirement is that your customers must have good commercial credit. This is important because their credit and their ability to pay invoices are the main collateral for the transaction. Additionally, your company must meet this criteria:
- Invoices must be for delivered and accepted projects
- Invoices must be free of encumbrances
- Your company must be free of legal and tax problems
One of the advantages of working with factoring companies is that they are used to working with small companies. Most factoring lines are designed to be flexible and can grow dynamically with your revenues, provided that your sales are to customers with solid credit. This makes factoring an ideal solution for Canadian software service companies that have growth opportunities that are being challenged by cash flow problems.
Most companies that handle industrial sales and service of hydraulic equipment usually have to sell their products and services on credit. Basically they have to give their customers between 30 and 60 days to pay their invoices. This is a common business practice in Canada and hydraulic product suppliers that want to remain competitive usually have to offer terms. However, this can create a problem for some hydraulic suppliers that don’t have the financial resources to be able to wait that long to get paid. In this case, companies can mitigate the effects of slow paying invoices by using a form of business financing called invoice factoring.
Invoice factoring solves this problem by providing an advance on your slow paying invoices from credit worthy commercial customers. The factoring company holds your invoices as collateral and provides the funding you need to pay your operational expenses and obligations. The transaction is settled once your customers pay their invoices in full. Note that your customers don’t need to pay sooner and they pay on the regularly scheduled dates.
The most important requirement to qualify for factoring is to have customers with good commercial credit. This is critical since your customer invoices are the collateral that is used for the funding transaction. Aside from that, your company must also meet these criteria:
- Your invoices must be for completed and delivered sales
- Your invoices must be free of encumbrances
- Your company must not have any legal or taxation problems
One of the biggest benefits of using factoring is that your financing line can easily grow with your sales, provided your customers have good credit and provided your company meets the criteria for factoring. This makes factoring an ideal solution for Canadian hydraulic equipment supply and repair companies that have growth opportunities that are challenged by cash flow problems.
One common problem for technology staffing firms in Canada is that customers usually pay their invoices in 30 to 60 days. However, the staffing agency needs to pay its own employees every week (or two weeks). Basically, the agency has to cover expenses out of its own reserves while waiting for customers to pay. This can be a substantial problem for small and growing technology staffing agencies that have not had the opportunity to build cash reserves. One way to deal with this problem is to use invoice factoring for staffing agencies.
Factoring solves this problem by using a financial intermediary, called a factoring company, that advances funds using your invoices as collateral. This gives your staffing agency the funds it needs to meet payroll, while the factoring company holds the invoices until payment. When used correctly, an invoice factoring line can alleviate cash flow problems, and help ensure that the staffing agency has enough cash at hand to meet its obligations.
One of the biggest advantages of factoring financing is that it’s relatively easy to get. The most important requirement is that you commercial customers must have good credit. This is critical because in effect, their credit is the main collateral that you are using for the transaction. Aside from that, your company must also meet these requirements:
- Your invoices and time cards must be for completed work
- Your invoices must be free of encumbrances
- Your company must not have any tax or legal problems
Perhaps the most important benefit of a factoring financing line is that your funding facility can increase dynamically and adapt to your revenue growth. This makes factoring financing an ideal solution for Canadian technology staffing companies that have great growth opportunities but are challenged by cash flow problems.
Most food service companies have to give their commercial customers up to 60 days to pay their invoices. While this is a common business practice in Canada, few food service companies can afford to wait that long to get paid. They have a number of operating expenses that need to be paid, usually quickly. Larger companies handle this situation by building a cash reserve that can be used to cover expenses while waiting. Smaller companies usually don’t have a cash reserve and tend to run into cash flow problems. One way to solve this problem is to use factoring financing.
Invoice factoring can help companies that have cash flow problems by providing an advance on their slow paying invoices. A financial intermediary, called a factoring company, provides the advance and holds the invoices as collateral. The transaction closes once the invoices are paid by your customer. Note that your customer pays their invoices on their usual schedule.
Most food service companies that use factoring, use it as a revolving financing line. This helps ensure that the company has enough cash on hand to meet its obligations. One of the advantages of factoring invoices is that it’s comparatively easy to obtain. To qualify for funding, the food service company must meet this criteria:
- Commercial customers must have good credit
- Invoices must be for completed work/product
- Invoices must not have any encumbrances
- The food service company must not have any legal or tax problems
One important benefit of factoring financing is that the financing line is designed to increase as your revenues from credit worthy commercial customers grows (and as long as your company meets the funding criteria). This makes factoring an ideal solution for Canadian food service companies that have growth opportunities that are being affected by cash flow problems.
Most software development companies that work with Canadian corporate customers have to wait up to 60 days to get their invoices paid. This can put a serious strain in the company’s cash flow because few businesses can wait that long to get paid. They need the money sooner to be able to cover payroll and other critical expenses. Larger companies don’t have this problem because they have cash reserves that can be used to cover expenses while waiting. Smaller companies usually don’t have reserves, which leaves them at a disadvantage. One way to solve this problem is to use invoice factoring.
Invoice factoring provides operational financing to your company using your invoices as collateral. A financial intermediary, called a factoring company, advances funds to you software development company and holds your invoices as collateral. This provides your software development firm with the money it needs to cover important operational expenses. The transaction closes once your customers pay their invoices. Note that your customers still pay on their regular payment schedule.
One of the advantages of using invoice factoring is that it’s easier to obtain than other sources of funding. To qualify, your company needs to meet the following criteria:
- Your customers need to have solid commercial credit
- Your invoices need to be for completed work – or completed project segments
- Your invoices need to be clear of encumbrances
- Your company needs to be free of legal and tax issues
The most important benefit of using factoring financing is that the funding line is flexible and can grow with your business – provided that your customers have good commercial credit and provided that your company meets the funding criteria. This makes factoring an ideal solution for growing Canadian software development companies that have good growth opportunities but also have cash flow problems.
Most Information Technology companies need to give their commercial customers up to 60 days to pay their invoices. Offering payment terms is a common practice in Canada and most businesses do it as a way to remain competitive. However, this puts small and growing businesses that can’t afford to wait to get paid at a disadvantage. In many cases, some I.T. companies will simply not pursue certain clients because they can’t offer the terms they demand. For many companies, a better solution is to use invoice factoring.
Invoice factoring helps companies with cash flow problems by accelerating the revenues that are tied in slow paying invoices. Your customer does not have to pay sooner though. Rather, a factoring company advances funds to your I.T. company and holds your invoices as collateral for the transaction. The transaction settles once your customers pay in full. Most Information Technology companies that use factoring financing use it on a recurring basis to ensure that they always have funds at hand to pay for salaries and other critical business expenses.
One of the advantages of factoring financing over other forms of funding is that it’s easier to obtain. To qualify for factoring, your company needs to meet these criteria:
- Invoices must be for completed work
- Invoices must be free of encumbrances
- Your company has to be free of legal/tax problems
- Your customers must have good commercial credit
The biggest advantage of factoring financing is that it enables your company to leverage your customer’s credit to your advantage. Furthermore, the financing line can also grow with your sales, provided that your company meets the funding criteria. This makes invoice factoring and ideal solution for Canadian I.T. companies that are growing and need funding to overcome their cash flow hurdles.
One of the biggest financial challenges for delivery service companies in Canada is that most commercial customers pay their invoices in 30 to 60 days. This can create a problem for small and growing delivery companies that need funds sooner to be able to pay company expenses – such as payroll, vehicle repairs, fuel, and supplies. One alternative is to ask the customer for a faster payment, however, this strategy can backfire if the customer refuses to pay sooner. Another alternative that has been gaining popularity is to use factoring financing.
Invoice factoring solves this problem by providing you with an advance on your slow paying invoices. This gives your company the funds it needs to operate and relieves the pressures created by slow paying customers. The transaction works using a financial intermediary called a factoring company, that advances funds for your invoices and holds them as collateral. Most delivery service companies that utilize factoring use it as a revolving financing line that can be deployed at any time, ensuring that funds are always available to meet expenses.
Qualifying for factoring is relatively easy. Your company needs to meet the following criteria:
- Your invoices must be free of encumbrances
- Your invoices must be for completed deliveries
- Your company must be free of legal and tax problems
- Your customers must have good commercial credit
One advantage of invoice factoring is that it leverages the commercial credit of your customers. Because of this, your financing to grow with your sales provided that your company meets the funding criteria. This makes factoring an ideal solution for growing Canadian delivery service companies that have cash flow problems.
Commercial paving companies that work for general contractors or for commercial clients usually have to extend payment terms to their customers, providing them with up to 60 days to pay their invoices. Larger commercial paving companies usually have no problem waiting for payments because they tend to have cash reserves or lines of credit that can be used while waiting. Most smaller paving companies don’t have reserves and have a challenging time meeting current expenses – such as supplies and payroll – while waiting to get paid. One way to solve this common financial problem is to use invoice factoring.
Invoice factoring accelerates the revenues that are locked in your slow paying invoices. Your customers don’t have to pay sooner though. Rather, a factoring company advances funds to your paving company and holds your invoices as collateral. The transaction closes once your customers pay, however, many paving companies keep a revolving factoring line to help ensure that their cash needs are always met.
In Canada, qualifying for invoice factoring is easier than qualifying for other types of business financing. Your company must meet the following criteria:
- Your customers must have a good commercial credit rating
- Your invoices must be for completed work
- Your invoices must be free of encumbrances
- Your company must be free of legal/tax problems
One of the advantages of working with a factoring company is that your financing line will be tied directly to your sales, and will increase dynamically to accommodate growing revenues. This feature makes factoring an ideal solution for commercial paving companies in Canada.
Factoring solves this cash flow problem in a simple way. An intermediary company, called a factoring company, advances funds you your company using your invoices as collateral. This provides your hospitality staffing company with the needed liquidity to meet critical business expenses and alleviates the problems of having to wait for payment. As a matter of fact, many companies use a revolving factoring financing line to accelerate some of their revenues on a regular basis, ensuring that there are always enough funds to cover expenses or opportunities.
One of the most important advantages of invoice factoring is that it is relatively easy to obtain, when compared to other sources of business financing. The most common requirements include:
- Your customers must have good commercial credit (since their invoices are the collateral for the transaction)
- Your invoices must be free of encumbrances
- Your company must be free of legal/tax problems
- Your invoices/time cards must be for completed work
Most invoice factoring financing lines are very flexible and can grow with your sales, provided that your company meets the qualification criteria. This makes factoring an ideal solution for small and growing Canadian hospitality staffing companies.
Most aviation part brokers sell aircraft parts to to airlines and aircraft owners on 30 to 60 day payment terms. This means that the customer has up to 60 days to pay their invoice for the part that they just bought. However, most brokers need to pay their suppliers sooner than that. So, the aviation parts broker needs to pay for the part immediately and then wait to get paid by their customer. This can create a cash flow problem for brokers that need the funds sooner and can’t afford to wait up to 8 weeks to get paid. One way to solve this problem is to use a financing solution known as factoring.
Factoring allows your aviation parts company to accelerate the revenues that are tied to slow paying invoices. A financial intermediary, called a factoring company, advances money to your company using your invoices as collateral. This provides your aviation parts brokerage with the funds it needs to pay suppliers, and relieves it of the pressure of having to wait to get paid. The transaction is settled once your customer pays the invoice in full.
An important advantage of invoice factoring is that it’s available to small firms and is relatively easy to obtain. To qualify for factoring your company has to meet the following criteria:
- Your customers must have good commercial credit
- Your invoices must be free of encumbrances
- Your company must not have any legal or tax problems
- Your invoices must be for sold and delivered product
When used correctly, invoice factoring can dynamically adapt to your sales and grow with your revenues. The key is that your customers need to have good commercial credit since their invoices are the collateral for financing. This makes factoring financing an ideal solution for growing Canadian aviation parts brokers who have great opportunities but are challenged by cash flow problems.
Most building product distribution companies that work with large contractors or large commercial clients know that to get a sale they will need to offer their customers up to 60 days to pay their invoices. Offering payment terms is a common business practice in Canada. The problem is that few businesses can afford to wait that long to get paid. They have current operational expenses , such as supplier payments and payroll, that must be paid. While this is not a problem for larger building product distributors that have substantial resources, it’s a problem for smaller companies that don’t have cash reserves. One way to address this problem is to use invoice factoring.
Factoring solves this problem by accelerating the revenues that are locked in slow paying invoices. This provides the money you need to run and grow your company. Factoring works using a financial intermediary called a factoring financing company. The factoring company finances your business by advancing funds and using your invoices as collateral. The transaction closes once your customers pay their invoices on their regular scheduled payment date. When used correctly, factoring can alleviate the issues associated with slow paying customers and can put your company on a stable financial footing.
One of the important advantages of factoring is that it is relatively easy to get, compared to other alternatives. To qualify, your building product distribution company must meet this criteria:
- Your invoices must be for delivered/accepted product
- Your customers must have good commercial credit
- Your invoices must be free of encumbrances
- Your company must not have legal or tax problems
Most factoring financing lines are structured to grow with your business. Since they are tied to your sales (though your invoices), the line will grow with your revenues, provided that your company meets the funding criteria. This makes factoring an ideal solution for growing building product distribution companies in Canada that have growth opportunities that are being affected by cash flow problems.
Waiting up to 60 days to get invoices paid by customers can be a major challenge for distributors and wholesalers. Many times they will have to pay their suppliers before they can collect on their invoices, created a potential cash flow problem. This problem affects smaller distributors more often because they have not had the opportunity to build a cash reserve.
Most companies try to solve this problem by negotiating better payment terms with their suppliers, while at the same time offering quick payment discounts to their customers. This solution will work for many companies but will not always fix the root problem. In the end, a late customer payment may still throw the business into a tail spin. A better solution may be to accelerate your revenues from slow paying invoices using factoring.
Factoring accelerates your revenues due from slow paying invoices, providing the funds you need to pay suppliers and cover other critical expenses. It gives you predictable cash flow, enabling you to manage your business more effectively. It works by partnering with a financial intermediary – called a factoring company – that advances funds for your invoices and uses your them as collateral. The transaction closes once your customer pays the invoice in full.
One important advantage of invoice factoring is that it’s easier to obtain than other business financing solutions. The most important criteria to qualify is the credit worthiness of your customers. Aside from that, your invoices must be free of encumbrances from legal or tax problems. This makes invoice factoring an ideal solution for distributors and wholesalers who have growth potential that has been burdened by cash flow problems.
For a consulting company, getting a contract with a large company can be both a blessing and a curse. It’s a blessing because large company projects can be very lucrative and can help you grow your business. But they can also be a curse, because most large companies pay their invoices in 30 to 60 days. This can create a cash flow problem for small consulting companies that don’t have the resources to cover expenses while waiting to get paid. The bigger risk in this case is not being able to make payroll or missing other important payments.
The simple solution to this problem is to build a cash reserve that can be used to cover operational expenses. But this can be very difficult for small consulting companies that are growing. Alternatively, you could try to accelerate your cash flow by offering a discount to customers in exchange for an early payment. For example, many companies will offer a 2% discount to customers that pay in 10 days or less. While this can work, it still leaves your cash flow at the mercy of your customers. For many, a better solution is to accelerate their cash flow by using factoring.
Invoice factoring provides your consulting company with an accelerated cash flow from your invoices. It enables you to meet current obligations and helps you take on new opportunities without having to worry about slow paying customers. It works by using a financial intermediary – a factoring company – that advances funds, using your invoices as collateral. The transaction completes once your customers pay their invoices in full.
One major advantage of invoice factoring is it’s flexibility. Most factoring lines are tied to your sales and will grow with them, provided your customers have good commercial credit ratings. This feature makes invoice factoring a great option for small consulting companies that are looking to grow but can’t qualify for conventional financing.
Qualifying for factoring is easier than qualifying for most conventional business financing solutions. Generally, to qualify, you will need to have solid invoices that are free of liens and encumbrances. As part of their due diligence, the factoring company will review the credit worthiness of your customers and invoices. Because of this, factoring is a great option for companies that don’t have long track records, but have good customers and are free of legal and tax problems.
The tool and die industry is very competitive in Canada. This means that profit margins are tight and many times, customers have an advantageous position when negotiating with tool and die makers. Because of this leverage, customers will usually negotiate net 30 to net 60 payments terms. While many larger tool and die companies may be able to afford to wait to get paid – smaller companies can’t wait. Few have the necessary cash cushion to be able to wait for payments, while covering their own expenses at the same time. This can put the company in a serious cash flow problem.
One alternative to solve this cash flow problem is to ask customers for a quick payment – usually by offering them a 2% quick payment discount. While this strategy can work, it still leaves your cash flow at the mercy of your customers you can opt out of making quick payments at any time. One alternative that has been gaining traction recently in Canada is to use invoice factoring to accelerate revenues due from invoices.
Factoring is a form of financing that uses your invoices as collateral. Basically, a factoring company advances funds against invoices from your tool and die company. This provides you with the liquidity your company needs to meet expenses and take on new opportunities. The transaction is settled once the factoring company gets paid by the end customers.
One of the advantages of factoring is that it’s easier to qualify for it than conventional forms of financing. The most important requirement is that your tool and die company should have customers with good commercial credit ratings. This is important because your invoices are the collateral that the factoring company is financing. Aside from this, your company should not have any legal or taxation problems.
One important advantage of factoring is that your financing line is directly tied to your sales capabilities. Your funding line will grow in parallel to your sales to credit worthy commercial customers. This makes factoring an ideal solution for small and medium sized tool and die companies who have good potential but are affected by slow cash flow.
The automotive industry has gone through quite a bit of turmoil in recent years putting a number of companies in financial difficulties. During the turmoil, many automotive supply companies saw their cash flows worsen. In part, this happened because companies started paying their invoices more slowly. Invoices that were paid in 30 days started taking 60 or even 90 days to get paid. This had a ripple effect across the whole supply chain as everyone started paying their own invoices slowly. Small supply companies with little cash reserves where most affected by these problems.
One way to deal with this problem is to offer your client a discount in exchange for a quick payment. It’s common for companies to offer a 2% discount in exchange for a quick payment. This can work well if your clients are willing to take the discount – but ultimately it’s their choice. Ultimately, this can still lead to unpredictable cash flow.
Another alternative that has been gaining popularity is factoring – which can help solve some of the cash flow problems that are created by slow paying customers. Factoring accelerates your revenues from slow paying invoices, which provides your company with the needed liquidity to cover your operating expenses. And since factoring is tied to your revenues, the financing amount can increase with your sales, provided your clients are credit worthy companies.
Most invoice factoring transactions fund invoices in two stages. The first funding is called the advance and covers up to 85% of the invoice. These funds are remitted as soon as the work for the invoice is completed. The second funding happens as soon as your customer pays the invoice in full. This covers any remaining funds, less the invoice factoring fee.
One of the advantages of factoring in Canada is that it’s a lot easier to obtain than conventional institutional financing. Most factoring companies look for clients that meet three criteria:
- They must have solid and credit worthy customers
- They must NOT have legal problems
- They must NOT have tax problems
Easy qualification and flexibility make factoring an ideal solution for small and medium sized auto supply companies that have substantial opportunities, but constrained cash flows due to slow paying customers.
