Whether machine shops make parts of metal, plastic, glass, or wood, all require specialized equipment. Owners of machine shops know that this is a capital-intensive industry: their initial equipment purchases can take a large investment. Today’s equipment can utilize cutting edge automated and computerized functionalities, all of which add to the costs.
One of the challenges in this industry is paying off that large investment and taking care of fixed expenses, such as salaries, rent, and insurance, while you wait for your customers to pay. Sometimes the gap between completing and delivering your finished products and receiving payment for that work from your customer can prevent you from ordering the materials you need for the next job and taking on more customers.
If you don’t want to borrow additional money and add to your equipment loans, look into the advantages of factoring, an alternative funding method that eases your cash crunch without incurring any debt. A reputable factoring company will buy your invoices and pay you upfront for your completed work. You don’t have to wait 30, 60, or even 90 days for your customer to pay. With factoring, you can pay your suppliers and make payroll. In addition, a factoring company does not require you to have a long credit history or extensive collateral; instead they look at the creditworthiness of your customers.
Factoring Tips for Machine Shops
Look for a factoring company that has worked with other machine shops or manufacturing businesses. You want to partner with professionals who understand your business and the operating costs of a growing machine shop.