Manufacturers face unique cash flow challenges. As a manufacturer, you need to pay your suppliers and cover your payroll promptly to keep production running, yet you have to wait weeks or even months to receive payments from your customers. This lengthy gap between the date you send your invoice for the products leaving your factory floor and the date that your customer will pay you can seriously impact your cash flow. As a manufacturer, you need to be aware of the risks of this delay and explore all the options available to you to avoid delays in getting your raw materials and paying your workers.
Using the services of a factoring company can free up your working capital and enable you to grow your business. A factoring company that specializes in the manufacturing industry will purchase your unpaid invoices for delivered products and advance you up to 90 percent of the value up front. Once they receive the payment from your customers, they will forward you the balance, less a small factoring fee. Unlike a loan, invoice factoring for manufacturing converts your existing receivables into cash that you can use to cover your current expenses.
You have no restrictions on how you apply the funds you receive by factoring your invoices: you could use the working capital to update your inventory, purchase new materials, take advantage of bulk purchase opportunities at discounted rates, pay employees or expand your product line. You can factor as much as you want, as often as you need, making factoring a far more flexible solution than traditional financing.
Most factoring companies can provide you with credit checks for new suppliers, which can save you time and money and prevent credit losses. Your buying flexibility is also increased – having cash on hand will allow you to negotiate better early-pay discounts with suppliers.
Here’s an example of a manufacturing factoring transaction:
- You have a purchase order for $1,000 of product, issued by a credit-worthy customer; the terms of purchase are 30 days.
- The factoring company agrees to purchase your sales invoice at a rate of 0.59% per invoice every 10 days.
- The factory company advances you $850 upon confirmation that the customer has received the goods.
- When the factoring company receives the $1,000 payment from the customer, they will remit you the remaining $150, less the fee of $17.70, so you will receive $982.30 of the $1,000 invoice for that customer
Interstate Capital has funded manufacturers of all sizes and specializations since 1993
As one of North America’s largest and best-funded independent factoring companies, Interstate Capital employs some of the top factoring professionals in the country, including specialists working with manufacturers. They make decisions quickly without outside interference and can get you approved and funded in a matter of days.
With millions of dollars funded annually into the manufacturing sector, Interstate Capital experts know your business model and your challenges.
Contact them today for a free factoring rate quote and transform the way your business does business!