Is Your Manufacturing Company Experiencing Cash Flow Problems?

Unfortunately, for many manufacturers, a common problem that arises at one point or another is an inability to fill orders due to a lack of cash flow.  Whether this lack of cash flow is caused by customers taking too long to pay their accounts receivable, sales that are seasonal in nature, a limited amount of credit history or any other issue, not having a steady cash flow can mean disaster for any manufacturing business.  Although some manufacturers try to use a loan to solve this problem (while others do not even have this option due to a bad or limited credit history), that is not an ideal solution because it does not address the core cash flow issue that manufacturers face: waiting for customers to pay their invoices.  In fact, many manufacturers do not realize that their invoices (accounts receivable) are the largest asset that they possess.  Luckily for you, there is a type of financing that not only recognizes accounts receivable as a valuable asset, but also directly addresses the issue of manufacturer's cash flow problems.

The financing option that is being referred to is known as factoring.  The process of factoring allows manufacturers to directly sell their invoices to a factor (funding source).  This means that instead of issuing an invoice and waiting for months to receive the payment for it, you can get seventy to ninety-five percent of the invoice in less than one day.  After the factor buys the account receivable from you, they will hold onto it until the customer actually pays it.  Once the customer finally pays the invoice, the factor takes a small percentage as a service fee and then returns any remaining percentage to the manufacturer.  Since factoring allows you to receive payment almost immediately after issuing an invoice, you can avoid having a lack of cash flow and all the issues that go along with it!