Pallet manufacturers for shipping goods fill a needed service in the transportation industry. Their customers can range from large shippers to small distributors. Often they can wait weeks or months to get paid by those customers. Sometimes the gap between completing and delivering hundreds of pallets and receiving payment for that work can prevent a pallet manufacturer from ordering more materials and pursuing more customers.
Factoring companies can help resolve that cash flow crunch by paying the manufacturer upfront for their completed work. Rather than tie up their working capital in accounts receivable, the manufacturer can use the money they earned to expand their inventory and reach out to new potential customers. They can also take on more profitable contracts and customers with longer payment terms.
With factoring, they are able to meet their fixed financial obligations and pay their suppliers. A factoring company does not require the manufacturer to have a long credit history or extensive collateral; instead they look at the creditworthiness of their customers.