Finance factoring

6 Most Common Industries that Benefit from Invoice Factoring

Ezra Cabrera | February 5, 2019


    Finance factoring, or invoice financing, is the process of selling pending invoices to a factoring company at a discounted rate. This is a popular financing solution among small business owners because it offers immediate funding and is suitable for companies in all types of industries. Here are four of the most common industries that benefit from finance factoring:

    1. Construction Finance Factoring

    Businesses in the construction industry often deal with delayed payments. Construction factoring alleviates this issue so the business owner isn’t left waiting months on end to be paid. Whether you’re an independent contractor or a small construction company, finance factoring will help bridge the gap between accounts receivables and accounts payable.

    Having a steady cash flow will allow your business to fund future projects, effectively compete with larger companies, order high-quality materials, and hire extra staff. Another plus is that you won’t have to manage and keep track of your invoices since the factoring company will assume responsibility for that.

    2. Manufacturing Industry

    Business owners in the manufacturing industry are often faced with significant cost requirements, like machinery repair, maintenance costs, payroll, and daily operating expenses. Companies without adequate funding often struggle to stay afloat.

    Invoice financing lets manufacturing business owners sell their pending invoices to factoring companies in order to receive immediate funds. Once you as a business owner fully understands and experiences the convenience of invoice financing, you quickly realize the ease in which it is possible to generate working capital, without delay or stress, allowing you to scale the growth of your business.

    3. Printing and Publishing

    Invoice financing is a viable way for printing and publishing companies to acquire the financing needed to grow and expand. Not only does it allow for a steady stream of cash flow, but you don’t need a remarkable credit score to receive funding. Factors are more concerned with your customers’ creditworthiness, as opposed to your business’ financial history since your customers are the ones paying for the invoices.

    4. Professional Services

    Not every business can wait 30 to 60 days to receive payment for an invoice. You have bills to pay, equipment to maintain, and employees to compensate – you need funds and you need them now. Businesses that offer credit terms to their clients are qualified for invoice financing, and once you’ve submitted your applications to lenders, you can usually receive the funds within 24 hours. Many professional and business service providers like architects, engineers, and legal firms can benefit from this process. Plus it’s easy to qualify. As long as you have outstanding invoices, you are eligible for invoice financing.

    5. Transportation Industry

    Did you know that there are approximately 12 million trucks, rail cars, vessels, and trains that move goods across the United States? Invoice factoring can help fund transportation companies, including freight brokers, owner-operators, and large fleets.

    If you often encounter cash flow issues due to late-paying customers, you can benefit from invoice factoring. Traditional lenders often require a number of years in business and established credit. This might not be an option for companies that are just getting started or others who hit a rough patch.

    Invoice factoring allows you to get secure funding without putting your transportation company in debt. You can use the funds from invoice factoring to pay your drivers, pay for gas and repairs, and buy new trucks and vehicles. The best part is that you’re using the money already owed to you, rather than taking on additional debt.

    6. Security Industry

    Invoice factoring gives your company the funds it needs to maintain a good business reputation within the industry. It allows you to keep up with competition and make your employees feel more secure in their jobs. Since security firms send invoices to their customers, you can use those to your advantage by factoring them. Once you receive the money, you can use it in whatever way you like, as long as it’s for the benefit of your company.

    Invoice factoring is one of the few types of financing solutions that increases as your business grows. Additionally, you don’t need to submit complex paperwork as you would with traditional bank loans. Plus, credit rating isn’t a deal-breaker. With invoice factoring, you can take on larger contracts and hire more staff members.

    Does Your Industry Qualify for Invoice Factoring?

    If you have quite a number of pending invoices from creditworthy customers and you need cash FAST, you will most likely qualify for invoice factoring.

    No matter which industry you belong to, finance factoring can stabilize your business and give you the freedom to leverage your company and take advantage of growth opportunities. It’s best to talk to finance experts who can help you secure the financing you need in order to take your business to the next level.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.