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Factoring?

SoCalSignGuy

By SoCalSignGuy
in General Message Board

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SoCalSignGuy Drive By Register

SoCalSignGuy

Posted
Posted

Hey everyone,

I have a couple of larger jobs coming up and a bit of money out in receivables. How does factoring work? My understanding is that they pay you 95%, or so, of the invoice for quick payment, vs. waiting the full term.

1) Any companies that you would recommend?

2) What terms should be built in to ensure that an invoice is 'factorable'?

Any other tips/suggestions are appreciated.

Thanks.

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geraldi Master Craftsmen

geraldi

Posted
Posted

I worked for someone who did this once. They took 15% of the invoice. The account goes from your customer to them. So the customer knows whats up. Plus, if your customer is late, they will call and want the money immediatly. Possibly ruining that relationship. You have to have a signed contract and a signed invoice from the customer stating the work is complete and that they are staisfied. And, I don't think they pay on past invoices. Only from the time you sign the contract with them.

It was not good for him. I would suggest takling the invoices to you bank and getting an accounts receivable loan, if that is an option.

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YYZ Master Engineer

YYZ

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Posted (edited)

It would have to be a one time customer and someone you're not worried about either A) ruining a relationship with, or B) looking weak financially. As gerardi mentioned, I think this has to be signed and sealed at the time of your order and not something to do after the fact, otherwise I believe it's referred to as invoice discounting.

If you're willing to take a discount - why not offer it to the customer directly? We get creative with our discounts in order to get favorable payments, so it may not hurt to place a call to a decision maker and speak openly. Say you've got some very big projects or investments pending and you'd like to free up your financials to assist in the new projects - any business can understand this logic. Offer them 3% or 5% or whatever you feel it might take. They might be happy at getting a discount.

If it's a repeat customer, however, it might not be a good precedent to set - as they might start withholding payments until you start offering discounts every time.

Just realized this was my 666th post. Up the Irons!

Edited by YYZ
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