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In the manufacturing industry, it is not unusual to offer long-term payment plans to be competitive, encourage clients to place larger orders, or establish a strong, trusting relationship with clients.
However, margins in the manufacturing business sector can be tight. Manufacturers have many expenses including purchasing raw materials, pre-paying sub-contractors and suppliers, purchasing equipment, renting space, and paying employees. Because of this, manufacturing companies with low cash flow balance may not be able to afford offering trade terms to customers. Fortunately, there is a solution called manufacturing invoice factoring helps manufacturers offer competitive terms to clients while maintaining healthy cash-flow balance to sustain and grow their business.
Manufacturing invoice factoring is a financing plan that helps solve cash flow and working capital issues for businesses who operate in industries where it is common to offer long payment terms. Usually anywhere between 30 to 120 days. Instead of loan, traditional invoice factoring involves selling outstanding invoices to a third-party company called the factoring company. The factoring company will give the manufacturing company an advancement based on the value of the invoices with the requirement that the customers will pay the invoice back. In 2012 Fundbox pioneered a new way for invoice factoring. It is called Invoice Financing and it is different than factoring in several ways:
With manufacturing invoice factoring, companies can continue to fulfill orders while taking on new ones.
Any manufacturing business with reliable client base can benefit from manufacturing invoice factoring. As long as the manufacturing business can prove to the factoring company that their clients are known to pay on time and have high-volume orders, factoring companies will be more than happy to work with them on setting up a financing plan.
With Fundbox the minimum criterion to qualify for Fundbox Invoice Financing includes:
Manufacturing invoice financing (a.k.a. receivable financing) is an alternative to manufacture invoice factoring. Like invoice factoring, invoice financing resolves low cash flow and working capital issues. They provide access to cash by advancing fund based on invoices.
The main differences are that with invoice financing:
|Manufacturing Factoring||Manufacturing Financing|
|Actual Amount Advanced|
|Speed of Funds|