Learning the Value of Invoice Financing

How faster access to working capital gives SMBs a competitive advantage.

The Challenge

To find a way to increase working capital to bid more competitively on government contracts while paying independent contractors on time.

The Solution

Factoring invoices with longer payment terms meant faster access to cash flow and more flexibility to grow their business.

The Story

Our client has a very important mission to support the educational goals of special-needs children. The organization works with instructional and behavioral aides, nurses and other professionals within the District of Columbia Public Schools to develop an approach that will help each child flourish and grow. This unique niche requires dynamic methods to maintain adequate cash flow to keep the business in operation.

“A few years ago, we went to an open bid contract model. We knew we needed to become more competitive, and in most cases, we also understood that our profit margins would be shrinking. This meant our need to maintain operating capital would be even greater.”

Our client had to find a way to increase the working capital that was available to fund their business. As an employer of independent contractors, they need to pay on time to attract and retain the highest possible level of talent. But government agency payment terms created a cash flow problem.

“When dealing with any government agency they’re not always going to pay at the end of a net-30 or net-60 day invoice. At the end of the government fiscal year, that timeframe can stretch even longer.”

During a worker’s comp audit, our client was asked if they had considered accounts receivable factoring, and they had not. eCapital was brought in to help, and tailored an invoice factoring solution to help them meet their goals.

“eCapital stepped in and helped bridge the gap for us. Factoring gave us the ability to pay the contractors when we invoiced, as opposed to waiting 60 days. This has been a great relationship for us.”

When compared to traditional banks, eCapital is the most logical and cost-effective choice. Our client had experience with taking a traditional loan from a bank to meet payroll. According to them, that one transaction was almost equal in cost to a full year’s worth of invoice factoring from eCapital.

“eCapital definitely plays a role in our success as a smaller company. eCapital is twice as reliable as a hard lender and twice as cost-effective.”

What This Means For You

Factoring is a good solution for your business if you:

  • Trade with other businesses
  • Issue Invoices with up to 90-day payment terms
  • Are an established business or a startup
  • Are unable to obtain traditional bank financing
  • Are unable to increase an existing line of credit
  • Want to finance growth or expand into new markets
  • Need to cope with season fluctuations

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