Using Factoring Companies to Help Make Payroll.
At Fast A/R Funding we get a few calls a week from firms that are having cash flow problems and have a deadline in order to make payroll. Since this can be very stressful for the business owner and the factoring companies trying to fund them I thought I would write a quick blog with a list suggestions that businesses looking for a factoring company can use to make sure that their factoring facility is established as quickly as possible so they can make payroll.
First, I think it is a good idea to give a quick bullet point review of how factoring works and how it can help you make payroll.
- By providing cash to companies based on the current value of their accounts receivable/invoices, Factoring Companies can be a great source of money for companies in a tight cash flow situation.
- Most factoring companies will provide between 70% and 90% of the face value of invoices. The specific percentage depends on the credit strength of the company looking to factor and its customers, the term of the receivables 30, 60, 90 days, etc and the industry in which the company operates.
- The biggest operational change a company that factors needs to make is that their customers will need to pay the factor directly.
A few suggestions to establish your factoring facility as quickly as possible:
- Prepare a Package - Spend the time to prepare a package for the factoring companies. This package should have a short summary of the history of the company, its owners, the industry and the customers. Keep it short and to the point. Finance people love bullet points. Keep it under two pages.
- Be Honest - If you have issues in your personal credit or current problems that the company tell the factoring company about them. They are going to find out anyway so be upfront. This is a great way to build trust and rapport quickly.
- Pick your Battles - Don't spend a lot of time negotiating all the details of the factoring agreement. Remember, you are on a short deadline. Try and keep the term of agreement as short as possible and only negotiate the most important issues, advance rates and pricing.
Fast A/R Funding is an invoice factoring firm that specializes in financing small businesses through a totally online process.
To learn more about our process give us a call or click the link below. 888.833.2286
