4 Reasons Why Invoice Factoring Works for the Security Services IndustryPosted by Factor Funding Co. on March 31, 2015
As the owner of a security company, you provide your clients with valuable services. As much as they value your business, however, your clients may still leave you scrambling to make ends meet every month when they are unable to pay their invoices on time.
Rather than let your company's bottom line take a hit, you can stay financially afloat by factoring your invoices. Factoring proves to be an ideal choice for security services for these key reasons.
1) Quicker Payments
Because your clients may not pay you upfront for your services, you may find it difficult to keep enough cash on hand to meet your expenses. Factoring your invoices lets you receive up to 90 percent of their value, with the remaining 10 percent, minus the factor's fee, paid to you once your invoice clients settle their accounts.
Most factors charge a fee of one to three percent per 30 day period. Once your factor has verified the clients' accounts and completed the necessary paperwork, you can get your payment in as little as a day, if not a few hours. You avoid having to wait the usual 30 to 90 days to get paid by your customers.
2) Cash Flow Stability
Getting paid faster for your invoices is crucial to keeping your cash flow intact. A reliable cash flow means that you can:
- Pay your employees on time
- Buy supplies like uniforms or vehicles for your security guards
- Purchase office necessities like printing paper, computers, and more
- Pay your business insurance
- Advertise online and in local media
- Pay your office's utility bills
Having this money readily available to you means that you can cover these important obligations without having to liquidate assets or take out an expensive, high-interest bank loan.
3) Flexible Financing and Growth Potential
Unlike a bank loan, which requires a set monthly payment, factoring matches the size and financial capabilities of your security company. The amount of money that you receive from factoring reflects the amount of your current sales or invoice totals.
As such, you will not bound to any payment that you may not be able to afford, particularly if your business suffers a slow month. Even more, factoring also lets you have access to more money as your business grows and expands. You avoid having to refinance a loan or putting in a new application for financing.
4) Easier Credit Approval
With the recession fresh in lenders' minds, banks are notoriously tight-fisted with their money. Many small business owners are turned down for loans, leaving them scrambling to find other funding options.
Security companies particularly make banks nervous because it is well-known that these businesses are not usually paid upfront by clients. Further, if your own credit score is less than perfect and your business is still relatively new to the market, you likely will be turned down for financing through a bank.
In this case, factoring can be your answer when a bank loan seems like an impossibility. Factors look not to your credit score, but will instead scrutinize the scores of your invoice clients. Given the ongoing economic uncertainty, factoring helps security service providers who have been hit hard by the recent recession.
Your security company provides invaluable services to your clients. Even so, you still need to rely on steady payments and a healthy cash flow every month to pay your financial obligations. When you cannot wait a month or longer to get paid for your invoices, you can sell them to a factor. Factoring can an ideal funding choice for your business because of these unique advantages.