As a retail food broker you’re probably very familiar with the fact that large customers will always demand that you give them credit terms. This is especially true for retail chains, which usually ask for anywhere between 30 days and 60 days to pay an invoice. Having to offer terms can be financially challenging for companies that don’t have the capital to do so. This problem gets compounded because most suppliers will usually insist in the quick payment. This leaves you with money flowing out faster than its flowing in. And if this situation is not managed correctly, it can create serious problems.
One way to fix this is to ask customers for faster payment. This is usually possible if you offer something in return – such as a 2% discount if they paying 10 days or less. However, not every customer will accept to pay faster. And those that do, will always keep the option of changing their payment speed if their own circumstances change. So while your situation may be improved, you still end up with him predictable cash flow. For many retail food brokers, a better solution is to use factoring.
Factoring provides similar benefits to quick customer payments without actually requiring your customers to pay any sooner. The transaction works using a financial intermediary, called a factoring company, that advances money using your invoices as collateral. The factoring company will usually advance about 80% of your outstanding invoices. This provides your company with the needed liquidity to meet important supplier payments. It also increases the speed at which you receive your revenues, which provides for smoother operations. Factoring transactions are settled once your customers pay in full, at which time you get the remaining 20% less a factoring fee.
One important advantage of factoring is that your customers are not required to pay any sooner. They can keep paying on their usual schedule. It enables you to offer terms with confidence, while still getting most of the benefits of a quick payment. Additionally, accounts receivable factoring have simpler collateral requirements than most bank financing lines. The most important requirement is to have credit worthy commercial customers. This is very important because the factoring company uses your invoices to secure the transaction. Additionally, your company should be well run and not have major legal or tax problems
One important advantage of invoice factoring is that the financing line is flexible and will adapt to your business growth. Your financing will increase as your sales grow, as long as your company makes sales to credit worthy customers. This feature is seldom found in other business financing programs. This makes invoice factoring an attractive option for growing retail food brokers that are challenged by slow paying invoices.


















