Tag: business funding

Invoice Factoring 101

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Accounts receivable issues can be difficult for many companies to bear, especially smaller firms and startups.  In these trying financial times, chasing invoices can quickly become the full-time job for many business owners. When times are tough, payments can dry up, leaving your company without the vital lifeblood it needs to grow and thrive. Invoice factoring allows ambitious businesses to release cash flow still tied up in unpaid invoices – helping you to grow, even when cash-strapped clients have you waiting for payment.

What is invoice factoring?

Simply put, invoice factoring is a way for any business that sells products or services to other commercial vendors and then waits for payment to leverage their accounts receivables to work for them, not against them.  Rather than waiting for slow paying vendors, you can convert account receivables quickly by selling invoices to a factoring company for a nominal discount.

Invoice factoring is quite different from the traditional loan-based programs offered by banks.  Most banks base loans on credit history which can be difficult for small companies and startups.  With the Plus Funding programs, we focus on the credibility of your clients.

As opposed to a financial institution that can take several months to approve your loan, in most instances, Plus Funding can approve your company in a matter of days.  Additionally, a key benefit is that because invoice factoring programs are not loans, there will be no debt on your company’s balance sheet.

How can my company get started right away?

The steps involved in invoice factoring with Plus Funding are simple and clear:

  • Your customer (XYZ Co) requests goods/services from you.
  • You deliver these goods/services to XYZ Co.
  • You issue an invoice to XYZ Co.
  • You sell this invoice to Plus Funding.
  • Upon verification of the invoice (typically 1-2 days with a preexisting facility in place), Plus Funding will advance cash (typically 70-85%)
  • XYZ Co pays Plus Funding.
  • Upon receipt of the payment, Plus Funding releases the difference (reserve) between the collected amount and the advance, minus the factor’s discount fee.

For more detailed process, please visit Our Process page.

Our services are custom designed to fit each client’s specific needs.  Our fee structure is efficient and effective, many times as affordable as “early bird” or pre-pay discounts offered by many companies.  Our knowledgeable staff is friendly and courteous, helping you to enhance and maintain your working relationships with clients.

Invoice factoring can be a benefit to virtually and company.  Contact Plus Funding today and start leveraging your accounts receivable for growth and stability right away.

Case Study: Purchase Order Financing

We would like to share a case study that showcases Plus Funding’s ability to help companies succeed and thrive from our factoring services. Plus Funding Group assisted a company that imports high-end women’s shoes.

Shoe manufacturing business growth purchase order financing
Thanks to purchase order financing, one company is now selling products at large-scale department stores like this!

When PFG began working with this company a year ago, they were making about $200,000 a season with $800,000 annually. The company sold their products on Amazon and some smaller boutiques, and used manufacturing plants in both Spain and China. The annual cost of production was around $120,000.

However, the company needed to pay 30% of their production cost up front in order for their producers to begin work. The other 70% was paid when the goods were ready to be shipped. These conditions meant that the company was required to pay the $120,000 production costs before they were even able to sell the shoes. Without some sort of financing options, this company would be tying up valuable cash in the form of inventory.

PFG made this company more liquid by providing purchase order financing. What PFG did for this company was provide the manufacturer with the 30% up front costs of the goods, and then gave the manufacturer the remaining 70% production costs that were needed to ship the shoes. This allowed the goods to reach the United States where they were then shipped to distribution centers and sold to customers. PFG then collected on the invoices from the customers on the behalf of this company.

Once the goods were shipped out, PFG did the necessary factoring on the company’s invoices and collected the monies from all of the company’s clients. This resulted in a gross profit of $80,000 that was collected, and these funds were sent back to the client company. Initially, the company had $200,000 in purchase order financing before they got started. They also needed the $120,000 in other costs such as production and freight to fulfill their purchase orders.

PFG initially financed the manufacturing costs to the factories, freight, etc. The whole process from purchase order to delivery was 60 days, and the whole production cycle from purchase order to finance was 120 days. In the meantime, the company was able to generate $80,000 (minus PFG’s fees, which were between $10,000 – $20,000) and essentially get their profit without putting down any money from their own profits.

Prior to PFG, this company was only able to handle small orders. After PFG’s help, the company is expected to make between $400,000 to $500,000 in business in the Spring 2014 season alone. Now that they have the financing that they needed, they are able to be more aggressive and go after bigger customers. This has caused a shift in the customer base and will allow this company to service larger clients like Nordstrom and Hautelook.

Net profit for this company has gone from $80,000 to $200,000. PFG still finances the whole production including the freight, with the time cycle remaining the same. This company now knows that they can finance their operation successfully and because of this are now driving growth. The only constraint to their growth will be based on sales and production. Financing should never become a bottleneck, which is why PFG is there to help businesses such as this one grow and thrive.

Photo Credit: JasonParis via Photopin cc