Business owners know that more cash on hand means faster growth. So, why do countless companies leave funds locked up in invoices that won’t be paid for 30, 60, 90 days or more? With invoice factoring, that money can be in your hands today, enabling you to grow revenue, reduce costs, boost productivity, and increase efficiency – four key areas that help drive profitability.
Invoice factoring is one of the simplest forms of financing for businesses yet offers more features and benefits than conventional bank financing. Chief among these features is the inclusion of cost-free account receivable management.
“It’s not just a funding solution. It’s a back-office solution as well,” emphasizes Brian Gagel, Managing Director, General Factoring at eCapital. “We are like a back-office collection service, reaching out to clients’ customers on a regular basis just to make sure that they have all of their invoices, that there aren’t any issues, and that they pay in line with the payment terms. That helps collections come in smoothly.”
Drive your revenues up
When cash flows into your business earlier, you have more flexibility to invest in the equipment, inventory, and people you need to expand your operations and boost revenues. Getting money working faster is especially important for companies that are relatively new, growing quickly, and investing to establish themselves as players in a competitive landscape.
“We deal with a lot of start-up companies, a lot of businesses that are in active growth mode and they need access to working capital,” says Gagel. “We can provide that quick access through our easy underwriting process and quick credit approvals.”
Importantly, invoice factoring may make it possible to offer longer payment terms to customers, because you’re not bearing as much of the business drag of waiting for full payment. That, too, has the potential to drive your revenues up and improve profits.
Get your costs down
Having more funds available can also open up significant cost-saving opportunities. Maybe your suppliers offer bulk purchase or early payment discounts. Or, maybe you’ve maxed out your credit facility with a supplier and must pay that down to receive your next shipment. In addition to reducing interest on supplier credit, improved cash flow helps your business move forward.
“If you’re tied up with a facility limit with your supplier, you can’t make money on the back end of the sale,” Gagel points out. “Invoice factoring can help you act when needed.”
The favorable trade-off between the cost of invoice factoring and the cost of delayed payments becomes even clearer when you consider that invoice factoring is a relatively low-cost form of financing. Select factoring companies, including eCapital, offer flexible pricing options with deals structured as interest on advanced money, a flat rate on the face value of the invoices, or a mix of the two.
Refocus efforts and build productivity
Engaging an external back-office team to manage invoice payments gets reliable specialists on the job – and delegating with confidence lets your own team redirect their attention toward activities that make more of a contribution to your company’s bottom line.
“You can network or pursue sales opportunities or secure that next contract because you’re not focusing on the collections efforts,” says Gagel. “You have a whole team focusing on that on your behalf. That’s a big free-up to help increase productivity for the business.”
Another benefit, of course, is that invoice factoring provides faster access to working capital that you can choose to invest in productivity-enhancing tools and technology.
Bring on more efficiency
Accounts receivable management from a factoring partner provides an add level of efficiency. But maybe the most important efficiency advantage has to do with mindset. What could you accomplish with one less thing on your to-do list? And how would it benefit your company to know with certainty exactly when you’ll receive the biggest chunk of the payment from your next invoice?
“If you’re not focused on where the next dollar is going to come from, and instead have easy access to working capital, that provides a lot of relief to businesses – even the best of which are often operating in a cash crunch,” Gagel says.
Why choose eCapital for invoice factoring?
Industry leading advancements in technology and superior customer service to maximize customer experience sets eCapital apart. In addition, we have flexible products that can be tailored to different needs, with the option of recourse or non-recourse factoring, ledgered or bulk factoring, and selective factoring in which our client keeps management of invoices from certain customers in-house.
Each account has assigned experts from our cash processing and collateral analyst teams, as well as an account executive who makes all the daily funding decisions and can provide proactive strategic insights – for example, recommending adding some runway to support growth when a client’s credit balance starts to approach the facility limit.
“It’s more than just the day-to-day services. It’s also forward-looking and focused on what we can do to help you continue to grow,” says Gagel. “Invoice factoring is beneficial across all industries, including the transportation, staffing, apparel and manufacturing sectors. Without it, companies are limiting their growth opportunities – and they miss out on working with great people at eCapital.”
When you consider that, globally, the cost of late payments for small and medium-sized businesses may add up to $3 trillion USD every year, just imagine the savings if everyone got paid quickly.
Learn more about invoice factoring, and contact an eCapital consultant about how it can enhance your profitability.
How does invoice factoring compare to a commercial line of credit?
|Commercial line of credit||Invoice factoring|
|Hard to qualify if you’re a start-up, small or medium-sized business||Easy to qualify if you have creditworthy customers|
|Adds debt to your balance sheet||Does not incur debt or dilute equity|
|Regular repayment schedule||No regular payment schedule, just a small fee when each invoice payment is advanced|
|More debt means higher interest costs||More business growth and more factoring can earn you a better rate|
|Financial covenants can restrict growth||Grow as much as you want with minimal to no covenants|
eCapital is an innovative alternative lender with the flexibility, resources and forward-thinking approach to manage even the most difficult financial challenges. Working in collaboration with our clients, we shape customized factoring facilities to meet the working capital needs and cash flow requirements specific to each business. Strong client relationships anchored in mutual trust has been an essential part of our business model since 2006.
For more information about how invoice factoring supports business through all stages of development, visit eCapital.com