This article is by Brian Ofsie, a Senior Vice President at Delancey Street. At D.S., Brian Ofsie works with clients and creates custom funding strategies that help clients get the working capital they need in a cost effective manner. Brian Ofsie has many years of experience, and has funded 10’s of millions of dollars.
Intro from Brian Ofsie discussing invoice factoring
In the manufacturing industry, it’s not unusual for factories to offer long term payment plans. This allows the factory to be competitive, and it encourages clients to place significantly larger orders, and it establishes strong relationships with clients.
Margins in the manufacturing industry are tight. Manufacturers have a lot of expenses including purchasing raw materials, pre-paying sub contractors, and suppliers, buying equipment, renting space, and more. Because of this, manufacturing companies with low cash flow are unable to offer favorable terms to their clients. Fortunately, manufacturing invoice factoring can help manufacturers offer competitive terms to clients – while at the same time, maintaining healthy cash-flow balances in order to sustain and grow their business.
Manufacturing invoice factoring is a type of financing that helps you solve cash flow issues. For businesses who need to offer 30-120 days, invoice factoring is a god-send. According to Brian Ofsie, with traditional invoice factoring, you can sell outstanding invoices to a third party company – called the factoring company. According to Brian Ofsie, the factoring company gives the manufacturing company a business cash advance based on the value of the invoices, with the expectation the customer will pay the invoice back. Even if you don’t qualify for a small business loan, Delancey Street can help.
At Delancey Street, we purchase invoices and can even take over collections from your customers if needed. We offer cheaper fees than our competitors, and there are no setup or maintenance fees. There’s no cost to sign up. We can advance up to 100% of your invoice value. Traditional invoice factoring companies usually shave 10-20% from the top of the invoice amount. With manufacturing invoice factoring, you can continue to fulfill orders while taking on new ones.
Most manufacturing companies eventually need this type of business financing to grow. Payment terms often drain your cash flow. According to Brian Ofsie, offering payment terms to clients is fairly common, but the problem is that many manufacturing companies don’t have the resources to cover their business expenses.
Use Delancey Street to finance your invoices
Often, many manufacturers offer terms it can’t afford. If clients pay sooner – then you have no issue, but that rarely happens. Convincing clients to pay sooner is difficult. With invoice financing, you can get immediate funding, and it solves your cash flow problems. It’s a great alternative to getting a business loan for your manufacturing company. Invoice financing companies like Delancey Street look at the credit worthiness of your customers, among other factors. We look at when you deliver your products, how long the business relationship has been in existence, and a number of other variables. This results in a “factor rate.” The transaction is considered settled once your client pays the invoice in full.
Advances of Invoice Factoring
According to Brian Ofsie, the advantage of invoice financing is that it allows you to offer net-30 to net-60 day terms. It helps you avoid cash flow problems. The most important aspect of invoice financing is that you can adapt and grow your business. Qualifying for invoice financing is easier than qualifying for a line of credit or business loan. The credit quality of your customer is very important because the factoring company is using your receivables as collateral. It’s important your company doesn’t have serious tax problems, and it should not be involved in legal disputes.
About the author
Brian Ofsie is a Senior Vice President at Delancey Street and handles ESOPs. For more information, or to reach him, you can visit https://www.delanceystreet.com.