Apparel factoring: What is it?
Apparel factoring is an easy short-term source of payment for completed work without borrowing and taking on more debt. Apparel factoring and textiles factoring have been tried-and-true cash flow solutions in the clothing business since the Industrial Revolution. Today more and more apparel manufacturers and distributors are re-discovering this effective funding approach. Companies of all sizes are choosing fashion factoring and getting paid upfront on their invoices rather than waiting 30, 60, or even 90 days for their customers to pay. You get paid upon delivery, not after weeks and months of waiting.
Here are a few reasons why apparel factoring and textile factoring have been gaining popularity:
- Instant working capital. Apparel companies work in a fast-paced, ever-changing business environment and today’s trends toward accelerated runway-to-retail production mean that the fashion industry is moving faster than ever. Savvy design houses and distributors know that opportunities can materialize in a flash – and they need instantly accessible working capital to take advantage of new business opportunities.
- Funds for growth. With apparel factoring, you can turn your infusion of cash toward expanding your lines, increasing your marketing and advertising, upgrade your technology – whatever steps you’d like to take to grow your company.
- Early payment and volume discounts.Receiving payment upfront means that you can pay your vendors upfront and take advantage of their early payment or cash discounts. At the same time, you’ll be improving your own credit score by keeping current with your payments. You can also order in bulk and enjoy significant volume discounts.
- Unexpected expenses.When an apparel manufacturer has significant funds sitting in a stack of outstanding accounts receivable waiting for payment, that company can’t respond quickly when unforeseen circumstances delay production. Whether the company faces expensive equipment repairs or replacement, apparel factoring can ease a financial crunch.
- Non-stop need for material and labor.While customers can delay payment, your textile suppliers and employees won’t wait. With textile factoring, you have the funds you need to pay for fabric. You can keep your production going and your payroll current, even during high seasonal demands.
- Longer invoice payment terms. Both manufacturers and wholesale distributors are challenged when their customers negotiate long payment terms. Factoring your invoices enables you to stabilize your cash flow and use the funds you’ve earned right away. Apparel companies can accept orders from customers, regardless of required payment terms.
The process is simple. After your factoring company purchases your unpaid invoices, you receive an advance of up to 90% of the value of those invoices. After your customer pays the factoring company in full, you receive the balance, minus a small factoring fee. These funds are not a loan, but rather a simple advance.
Qualifying for fashion factoring is easy and fast. Your application will be evaluated on the credit histories of your customers, not your own credit report or collateral. You can receive same-day funding on approved invoices and you can use the funds however you would like.
Interstate Capital offers many other factoring services for various industries.
Contact Interstate Capital’s experts for a free cash flow consultation and to learn more about the benefits of apparel factoring.