General Finance

7 Industries That Benefit from Factoring

Posted by Factor Funding Co. on October 30, 2018

As the economy rebounds, many industries have had to adapt, cut back on costs and find new avenues of financing. Because banks and credit unions are still skittish about lending money, an increasing number of businessmen and women have been able to stabilize their cash flows by relying on factoring. Factors have helped a wide variety of companies survive during the tough economic climate. These industries in particular have demonstrated the benefits that can come with factoring their invoices.

1) Staffing Agencies

Staffing companies help people find work and bring in money when the job market is otherwise slow. Even so, these companies themselves can experience cash flow troubles for several reasons. Some of the more common reasons that these businesses suffer money problems include:

  • Seasonal slow downs
  • Aggressive credit terms set by clients
  • Slow paying invoice customers
  • Rapid company growth and increased client demands

Any of these challenges can put strain on an agency's cash flow. However, when this business factors its invoices, it can stabilize its revenue and use the cash for matters like:

  • Making payroll
  • Expanding client bases
  • Paying bills like utilities, rent, mortgage or inventory

The staffing company can have the money it needs without having to wait for its invoices to be paid by clients first.

2) Manufacturing Companies

Having a positive cash flow is vital for manufacturing companies. When the cash flow becomes stagnant or even decreases, a company in this industry could go out of business or suffer a severe setback because it cannot fulfill its orders. Some of the risks that come with this industry include:

  • High production costs
  • Tariffs
  • Rising transportation and fuel costs
  • Fluctuating currency values

However, when a manufacturing company factors its invoices, it can use the money to:

  • Make payroll
  • Invest as a means of bringing in more revenue
  • Expand into new markets
  • Upgrade factories and buy new equipment

Manufacturing can continue without slow-paying invoice customers jeopardizing the business's ability to function and maintain its normal pace of serving its clients.

3) Construction

Like manufacturing companies, construction companies likewise can experience cash flow issues for a variety of reasons. Some of the more common risks to a company's cash flow include:

  • Rising costs of construction supplies like brick, lumber and mortar
  • Slow-paying clients
  • Seasonal slow downs
  • Unexpected company growth and demand for company's services

Because these risks may not be able to be predicted or controlled, a company's owner can meet the cash flow demands by factoring the unpaid invoices. The money that he or she receives today can be used to:

  • Pay staff
  • Bid on new projects
  • Buy supplies and equipment
  • Pay obligations to suppliers and vendors

The construction industry in particular relies on steady cash flow and predictable financial resources. Company owners can use factoring to keep the money coming in, even during tough economic climates and seasonal fluctuations.

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4) Healthcare Businesses

Healthcare businesses are vital to the public's wellness. Even so, a company in this professional arena may experience cash flow problems because of:

  • Slow-paying patients or insurers
  • Rising cost of medications and supplies
  • Demand on a company's services
  • Updated industry standards and government requirements for compliance

Because a healthcare business may not be able to compel people to pay their invoices faster, it can get the money it needs today by factoring its invoices. It can use the cash for:

  • Buying new medical equipment
  • Paying vendors
  • Making payroll
  • Paying rent, mortgage and utility expenses

As the demand for healthcare services grows, it is vital that businesses in this industry strengthen their cash flows. They can accomplish this necessity by relying on factoring.

5) IT

Information Technology is a very competitive industry. While large companies usually have access to working capital, a reliable source of cash flow is one of the greatest challenges to the growth and success of a small business.

Some of these costs include:

  • Payroll expenses
  • Operating costs and expenses
  • Funding for expanding into new markets

Factor Funding can help IT companies avoid cash flow problems created by slow-paying customers. Some of the benefits of invoice factoring include:

  • Access to an IT industry factoring expert who will guide you through the process
  • Easy application and approvals process
  • Company owners past credit history is not a factor
  • No restrictions on how your company uses the money

6) Pharmaceutical companies

The survival of your pharmaceutical company depends upon a steady, predictable cash flow to meet its expenses.

A new or small- to medium-sized pharmaceutical company probably does not have the same readily available capital resources as its larger or well-established competitors. The reasons for this might include:

  • Lack of an established credit history
  • Insufficient earnings record to satisfy bank underwriters
  • Poor personal credit record of the owners

Factor funding offers pharmaceutical companies cash flow solutions that can convert your invoices that are awaiting payment into immediate cash. Some of these payments include:

  • Paying payroll and other current operating expenses
  • Replenishing inventory
  • Financing expansion
  • Funding research and development into new products
  • Meeting the capital needs associated with growth

7) Energy

Energy management and cost savings is essential to the growth of companies. Unfortunately, your company’s growth can be slowed or halted by slow paying customers.

We know the challenges faced by a growing company like yours can include:

  • Growth opportunities that require significant capital investment
  • Large companies demanding aggressive credit terms
  • Slow accounts receivables placing a strain on cash flow
  • Fluctuating sales volume due to seasonal or other factors

We can offer your business the cash it needs to meets its obligations and take advantage of opportunities, including:

  • Weekly payroll and daily operating expenses
  • Sudden available growth opportunities requiring capital investment
  • Staffing and other expenses needed to fulfill contractual obligations to customers

A variety of industries today benefit from factoring. This financial option helps many businesses survive and grow in spite of the tough economic conditions.

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Written by Factor Funding Co.

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