Within the manufacturing industry, to be competitive, it is usual to offer payment plans that are long term. However, at times the margins in this sector can be tight. Manufacturers have to take care of various expenses including buying raw materials, buying equipment, pre-paying the suppliers and sub-contractors, paying employees and renting spaces. Due to this, manufacturing companies that have low cash flow might find it difficult to offer trade terms to their customers. Fortunately, for the manufacturing companies, there is a solution in the market in the form of manufacturing factoring. With the help of manufacturing factoring, manufacturers can offer competitive terms to their customers by maintaining a good cash flow for the growth of their business.
Manufacturing factoring, in simple terms, is a financing plan for the manufacturing companies, assisting them to solve their cash flow problems and working capital problems. Instead of a traditional bank loan, manufacturing factoring is a better choice as it involves selling out the outstanding invoices to third party factoring company. On the basis of the invoice value, the factoring company offers advance cash to the borrowers. With the help of manufacturing factoring, the manufacturing companies can fulfill the orders of their customers and also take new orders.
Any manufacturing company with a reliable customer base can avail manufacturing factoring services from a factoring company. Here is how manufacturing factoring works:
Credit check might be optional while applying for manufacturing factoring as the financing companies may use different tools to find out the reliability of their clients without depending on
Borrowing companies get 100% of the advancement beforehand
Borrowing companies get a control of their services
Getting approval of the application is faster
Manufacturing factoring is a cost-effective way to outsource your company’s sales ledger while saving some time to manage other business activities
Manufacturing companies can have the required cash flow to buy manufacturing plants, equipment, repair equipment, pay for the replacement of equipment and other such costs
With manufacturing factoring, the companies can be protected from any other bad debts
As cash is released sooner, companies can clear all payments and get the business on track
Manufacturing factoring is a perfect solution for companies who face cash flow problems due to slow paying clients. No matter how big your business is, there will be some period when you would need to arrange cash for managing some expenses. There will be some situation where your working capital would be unstable. Manufacturing factoring services assist the manufacturing companies to take care of all the business-related expenses, stabilize the working capital as well as get instant cash to take the business ahead.
If you are a manufacturing company with outstanding invoices, if you want extra cash to buy manufacturing equipment or if you want to arrange cash for setting up your new manufacturing unit, you can think of applying for manufacturing factoring.