The country’s manufacturing sector represents a huge player in the national economy, employing millions and purchasing billions of dollars of raw materials. Although much manufacturing has moved offshore, America’s manufacturers remain a powerhouse that keeps goods in our stores, both here are abroad.
Whether a manufacturer is a new start-up leasing a portion of a factory or a huge multinational corporation with operations spread out in many locations, every manufacturer faces a dual challenge: paying workers and suppliers on time while waiting for customers to pay for the goods they received. While large publicly traded manufacturers have deep reserves and access to the most favorable lending terms from leading banks, these are advantages rarely seen for small companies. That gap between paying the costs of goods and receiving payment for them can create cash flow problems.
Many smaller and newer manufacturers turn to factoring to bridge that gap. A factoring company eases the cash flow crunch by purchasing the manufacturer’s invoices and paying them a large portion of those amounts immediately. Then the factoring company collects from the manufacturer’s customers and when the invoice is paid in full, the manufacturer receives the rest of the amount, minus a small factoring fee.
Factoring Tip for Manufacturing
With factoring, this infusion of cash upfront not only pays for operating expenses but also enables the manufacturer to plan for stability throughout seasonal cycles and for growth. The company can expand their facilities, hire more staff, and purchase more materials for production. Contact a factoring company with experience in the manufacturing industry and find out why factoring has become a popular financing alternative for manufacturers.