Invoice Factoring Building Cash Flow
Author: Stephanie Clarke
Date posted: 11.18.22

The emerging furniture business, located in Dallas, Texas, is making a name for itself in the market with sleek, modern designs and sustainable wood choices. Without the use of a wide variety of tools, each component is painstakingly produced by hand. Following the publication of a recent article in a magazine highlighting the company, an avalanche of orders has occurred. Because there were now more orders, additional workers had to be recruited.

While most consumers promptly pay their bills, others appear to have forgotten that they even placed an order. The first down payment required from the consumer is just fifty percent of the total price, with the remaining amount being due upon delivery of the finished product. Payroll was having a hard time keeping up with the employees’ weekly payouts because some of the invoices were overdue by 30 days. If they are unable to continue paying their employees, they may have little choice except to begin declining sales.

 

The owner wanted to learn more about his available choices for obtaining a loan. They were aware that they had income coming in and that they would be able to pay it back once the invoice was paid, but they lacked the necessary equipment and assets to put down as collateral for the loan, which was a requirement for most loans. They also didn’t want a more extended repayment period that went on for several years.

When considering all their available choices, they came across invoice factoring. It allowed them to borrow money against unpaid invoices to pay their employees. There was no need to make payments as the finance charge was deducted from the invoice when it was paid, no collateral was needed as the invoices themselves were used, and if a customer didn’t pay the invoice, the company would sell the furniture elsewhere and repay the loan that way.

 

Because they had already had a successful year in terms of sales, the application process was quick, and they received a response promptly. It did take some time, as both the business and the customers need to be approved for this type of loan, but it went through seamlessly. The invoices were submitted, and they were given their maximum advance based on the totals.

In the end, they were able to borrow against eighty percent of their past-due invoices, and the factor rate was reasonable; therefore, it was a sensible and cost-effective choice for them to make.

 

Within the first sixty days, they had settled all their overdue accounts and had sufficient funds remaining to hire a few additional employees. As a result of the increased customer base and robust growth, the company has determined that it must relocate to a more spacious warehouse.

 

Although they continued to have a few clients who were late on a payment, they were aware that they did not need to be concerned and that they could use invoice factoring to their benefit.

About The Author | Stephanie Clarke

Stephanie has a bachelor's degree in psychology and has been a professional writer for over 15 years. Her client list includes New York Times bestselling authors, publishing houses, prominent public figures and successful business owners. She resides with her family in Florida.

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