Factoring for Security Companies

Posted by Factor Funding Co. on March 5, 2013

Security and protection companies often face their own unique struggles in the business world. If you're running one of these businesses, no doubt you're familiar with the amount of money and effort you have to invest in a job for a client, only to have to wait up to two months to receive payment for your hard work. If you're tired of falling behind on your company's bills, invoice factoring may be just the answer you've been searching for.

How Does the Invoice Factoring Process Work?

What's involved in the invoice factoring process? Basically, all you have to do is sell the amount of invoices you'd like to the factoring firm and then wait on the advance to be sent to you. Most factoring companies will send up to 90 percent of the invoice value as the advance, giving you the majority of your payment as much as two months earlier than usual.

Now that you have the lump sum payment, you can go about your business as usual. In the meantime, the factoring firm collects the invoice payment from your customer and then deducts its transaction fee. Afterward, the company sends you the remaining payment and closes the account.

Why Choose Invoice Factoring for Your Security Business?

Why is invoice factoring a good option for your security company? Many security businesses have to face serious costs, including system upgrades, hiring additional officers, or investing in new vehicles and equipment. Since these costs may arise out of the blue, having a flexible line of funding can be essential to continuing to operate your business successfully. Invoice factoring can offer the increased funding you'll need without adding the burden of added debt to your company budget.

What to Look For When Choosing a Factoring Firm

When you're deciding which factoring company to use, there are a few things to consider. First, what is the factoring fee? If you choose your company wisely, you may be able to pay as little as two to three percent on your total transaction as a fee. Another consideration is how the factoring firm will go about collecting on the invoice. Some firms may adopt a hands-off approach and leave the collection process to you, while others might use rather heavy-handed tactics to pursue payment from your customers. It's important to find out about the collection process ahead of time so that you don't risk alienating your clients when it's time to submit payment.

If you'd rather not assume the risk of being stuck with the bill if your customers don't pay, you'll want to choose a factoring firm that offers a non-recourse factoring contract. With this arrangement, you'll be absolved of responsibility if your customers renege on their invoices entirely.

When you deal with late customer payments on a regular basis, your company may be facing a cash flow crisis. Invoice factoring can help you avoid this predicament altogether by giving you access to additional capital when you need it most.

New Call-to-action