How Machine Shop Factoring Can Help a BusinessPosted by Factor Funding Co. on September 7, 2012
Do you own a machine shop? If so, you may be dealing with sudden cash crunches from time to time. Invoice factoring may be a suitable way to address these needs without the commitment of long-term financing. Learning all about machine shop factoring can help you decide if you'd like to take advantage of this financing plan.
Why Might a Company Need Machine Shop Factoring?
One of the main reasons a manufacturer or a machine shop may need to take advantage of invoice factoring has to do with the uncertainty of invoice payments. Since there can be an extended period of time between the date when a project is finished and the date when payment is finally received, some businesses find themselves facing a severe cash crunch. This is particularly true if an unexpected expense such as an emergency repair arises.
Another reason that may cause a machine shop owner to consider invoice factoring involves the difficulty of obtaining credit from traditional lenders. Some banks and financial institutions may be unwilling to extend lines of credit to manufacturers that have not been open for a long period of time. Other machine shops that may have trouble getting financial assistance include those who may not have an extensive credit history. For these entrepreneurs, invoice factoring may be an ideal funding source.
How Machine Shop Factoring Can Help a Business
Machine shops have several regular operating expenses that may require additional funding. These include paying for raw materials and paying for common utility costs. In addition, shops that are interested in expanding their target market may also want to spend funds on new advertising campaigns in an effort to grow their client base. Company owners may also want to increase their cash flow to pay their vendor invoices early so that they can claim a trade discount.
Advantages of Machine Shop Factoring
Factoring companies offer several advantages for machine shop owners. Some factors do not require owners to factor a minimum number of invoices each month, which means that companies who may decide to factor a large amount of invoices one month can take as long as they need to decide to factor again.
While there are fees associated with machine shop factoring, these fees are generally small, often costing three to six percent of the total invoice value. It is best to find a company that explains all of the associated fees upfront so that you don't have to worry about covering hidden fees later on. Some factors also provide fast funding, depositing invoice funds in as little as 24 hours.
After assessing the needs of your machine shop, you may decide that invoice factoring is a convenient way to increase your cash flow quickly. If you take advantage of machine shop factoring, you can get the funds you need to meet your pressing business expenses.