For many business owners, contract financing offers an excellent cash flow solution. Today’s well-funded, well-established contract financing companies work quickly and efficiently to provide businesses of all sizes the cash they need for operating expenses. The good news for business owners: contract financing provides working capital without debt, because it’s not a loan. Contract financing companies simply advance business owners what they’ve already earned and will earn on their contracts with customers.
Basically, contract financing is a type of short-term financial arrangement where the contract finance company provides advance funding to a business that fulfills single or multiple contracts and orders. The business receives payment for their ongoing work upfront from the contract financing company, even if the contracted work has not been completed and the client has not paid yet. This kind of financing is critical for cash flow and growth for any business that performs work on contract.
If your company is paid only after your contract or order has been completed, you may have questions about how contract financing works. Interstate Capital, one of the country’s leaders in contract financing, provides answers to common questions below.
What is contract financing?
Many times companies have ongoing or fixed contracts with their customers. Problems arise when you have to wait 30, 60 or even 90 days for your customers to pay, but you need capital now for payroll and other expenses every week. Your company may not have 90 days of reserve funds to keep operating. A contract financing company advances you the cash that you are due, minus a small factoring fee. Small businesses often seek out contract financing when they land a larger-than-usual order or contract and need to make sure they have enough working capital to fulfill the needs of the customer.
How does contract financing work?
With contract financing, you will send your monthly or periodic invoices to the financing company. Within hours or a few days (depending on the contract financing company’s terms and conditions), you will receive the advance payment either by direct deposit or by wire into your checking account. The contract financing company then collects payment directly from your customers when they pay, in 60 days, 90 days, or whenever your contract had specified.
Who offers contract financing?
This type of financing isn’t generally available from banks or traditional financing institutions. Contract financing firms, also known as factoring companies, provide this service.
Interstate Capital has been providing flexible contract financing solutions to North American businesses for nearly 25 years at affordable contract financing rates. This contract financing company tailors funding programs to businesses in various industries. One of the reasons businesses choose to partner with Interstate Capital is the company’s emphasis on customer service and processing speed: you can be approved for funding promptly after your application paperwork is complete and you typically receive same-day payment on your submitted contracts.
At Interstate Capital, financing solutions are available for both small and large contracts.
What are the benefits of contract financing?
You can reap a number of benefits when you work with a good contract financing firm. First, unlike borrowing from a bank or other lender, you won’t be putting your business at risk by incurring debt. Second, you will speed up your cash flow and be able to keep up with paying staff or other monthly expenses. Third, you can outsource the cumbersome process of ensuring your invoices are paid as the contract financing company will collect directly with your client, saving you time and the expense of hiring collectors.
In addition, you can quickly and easily qualify for contract financing at Interstate Capital, enabling you to receive your funds right away. Interstate Capital analyzes your application based on the creditworthiness of your customers, not your own credit report. Once you qualify, your own credit report can improve as you will be able to honor your financial commitments on time with your new infusion of cash.
When should you use contract financing?
If your business works on contract or fills orders and is typically not paid until the work is completed or the order is delivered, then you could consider contract financing. This funding method gives you the ability to pay expenses and maintain your cash flow, regardless of your client’s payment terms.
You could also consider this type of financing if you need a quick solution to cash flow problems. With some factoring companies, especially an independent company like Interstate Capital, you can be approved for financing very quickly – much more quickly than the loan approval process at a bank. When business owners partner with Interstate Capital for contract financing, they are often impressed by how quickly they are set up and receive the funding they need to complete their work.
If your business has secured contracts, but needs working capital to fulfill those contracts, then Interstate Capital’s flexible financing solutions can assist you in getting the cash flow you need to succeed. Because Interstate Capital evaluates your application based on your customer’s payment history, you can qualify even if you’ve been turned down for a bank loan or line of credit in the past due to lack of collateral or your credit rating.
This short-term solution ensures that your business has the cash flow it needs to complete your contract or order.
Need more information about contract financing? Contact Interstate Capital or click here for an instant rate quote today:
About Interstate Capital
Interstate Capital has funded over 10,000 companies since 1993, making it one of the oldest and largest factoring companies in the alternative funding market. Interstate purchases nearly $1 billion dollars of invoices annually from hundreds of clients in a wide range of industries throughout North America and each client receives individual attention from a dedicated account manager. Get in touch with us so that you can learn more about our contract financing programs. Let us customize a program for you!