Most commercial cleaning and janitorial companies are small businesses – started by entrepreneurs who had an idea and plenty of motivation. Few, however, have plenty of capital. But that is understandable because janitorial companies tend to be easy to start – buy some supplies, hire some people and you are ready to go.

But there is a big catch to this business model – commercial clients don’t pay for janitorial services upfront. Rather, they pay on a net 30 to net 60 days. This means that you only get paid a month or two after completing the work. In the meantime, you still need to buy more supplies and pay your employees.

If your company is well capitalized, waiting to get paid is not usually a problem. On the other hand, if your company is not well capitalized, waiting can be a very serious problem. The simple solution to this challenge is to get business financing. This is almost always a problem for the company since few janitorial companies have substantial assets to use as collateral – and institutions need collateral to issue business loans. More often than not, the business owner will need to put their house (or other assets) as collateral to secure the business loan. However, business loans are not the only alternative.

One solution is to use invoice factoring. This financial tool provides you with a quick payment for your invoices, boosting your cash flow and enabling you to meet your expenses. To qualify for factoring you need to have invoices from credit worthy clients. This makes it an ideal solution for janitorial companies that handle commercial work for large clients.

Most factoring transactions are structured in two payments. You get the first payment, usually 80% of the invoice, as soon as the work is done and you invoice your client. You get the second payment, the remaining 20% less the financing fee, as soon as your client pays the invoice in full.

One advantage of factoring is that it enables you to leverage your client’s credit to your advantage. Furthermore, it’s a dynamic product that is tied to your sales. This means that your financing line increases as your sales to credit worthy clients increase. This makes it ideal for small janitorial companies who are experiencing growth.

Most businesses will need some form of business financing to succeed. One of the most common forms of business financing is a line of credit. As opposed to a business loan, a revolving line of credit can be drawn upon when needed. For example, companies like them because they can be used to manage the ups and downs of cash flow. Lines of credit have the added benefit of being (on average) cheaper than most other forms of business financing.

Lines of credit do have drawbacks though. One of the more important drawbacks is that they are subject to very strict underwriting guidelines. This makes them accessible only to companies that have plenty of assets, solid profitability and a good management team. Few small companies can qualify for them.

Their other drawback is that they have fixed maximums. That means that if you reach the line’s ceiling and need additional funds, you are usually out of luck. You will need to submit your account for re-consideration to your lending institution and request and increase. This may happen – or not.

There is an alternative to conventional lines of credit that has been gaining traction in the past few years. It’s called factoring. Invoice factoring is a financing tool that is directly ties to your sales. It allows you to get an advance on your net 30/60 invoices, eliminating the wait and providing immediate liquidity to handle company expenses and new projects. Since it’s dynamically linked to your sales it grows in tandem with your company. This makes it an ideal source of financing for small companies that are in a growth stage.

Factoring provides an easy proposition – you invoice your customer using traditional net 30 terms, but you get an 80% advance from the factoring company. This provides predictable cash flow, which enables you to run your business more effectively. You get the remaining 20%, less a financing fee, once your client pays the invoice in full.

Although factoring is not suited for every business, it’s ideal for companies that have heavy payroll and a lot of activity. Some examples include transportation companies, staffing agencies, security companies and construction subcontractors.

Finding business financing for any small or medium sized company in the construction industry has always been a challenge. As an industry, construction has always been difficult to finance. This is in part because each contract carries a lot of risk since many things can go wrong. Also, each contract has many players – the project owner; the general contractor; the subcontractors ; the financing institutions; which increases financing complexity.

Although demolition companies are considered to be in the construction trade, they are not always as affected by their issues and can be easier to finance. Demolition work tends to be done at the start of the project and is not subject to the usual overruns of other subcontractors.

Most demolition companies tend to get paid 30 to 60 days after invoicing. This is a common business practice but it can create serious cash flow problems. Few companies can wait that long to get paid and still cover their own payroll, rent and business expenses. Unless the company has substantial cash reserves, it will run into problems.

Most company managers will try to cover the cash flow gap with a business loan. However, few companies can qualify for business loans in this environment. Institutions will only provide business loans to companies that are well collateralized, have strong management and have impeccable financial statements. Few demolition companies will meet this criteria.

There is an alternative that is available to most construction subcontractors. It’s called construction factoring. Construction factoring solves the cash flow problem by advancing funds against construction invoices. Instead of waiting 30 to 60 days to get paid, you get an advance from the factoring company. The transaction is settled once the GC or commercial client pays.

One major difference between factoring and a business loan is that the factoring company considers your invoice to be strong collateral, provided it’s from a good commercial client or GC. Factoring is dynamically tied to your sales, and grows as your company does.

Factoring can provide predictable cash flow to companies who cannot afford to wait up to 60 days to get paid by clients.

The most common cash flow problem that companies have occurs because clients pay their invoices in net 30 (or net 60) day terms rather than paying immediately. Some companies have reserves that can be used to cover business expenses while waiting to get paid. However, most small and medium sized businesses don’t have adequate reserves and cope with this problem by juggling vendor payments.

Juggling and delaying vendor payments works to an extent. But if your business is growing, you will soon find that juggling payments alone won’t do the trick. Eventually you will run into serious cash flow problems that could affect your company’s ability to operate. And if the problem grows, you may be at risk of missing your most important payment: payroll.

The simple solution to the problem is to use business financing to cover any cash flow shortages until clients pay. Getting business funding in the current environment is complicated since institutions are only providing business loans to solid companies. To qualify for a business loan, most companies must have impeccable financing statements, experienced management and collateral that can be pledged as security for the loan. Few small or medium sized companies can meet these characteristics.

There is one alternative way to solve this problem – you can get a quicker invoice payment using a tool called invoice financing. With invoice financing, your client does not pay sooner. Rather, a financial intermediary provides an advance against your invoices. This gives you the liquidity you need to operate your company, without having to worry about when your clients will pay. You then settle the transaction with the financing company once your client pays the invoice in full.

Invoice financing is easy to obtain and available to most small and midsized companies. Since the finance company is funding your invoices, it’s important that you work with clients who have good commercial credit. The fact that financing is tied to your invoices also makes it very flexible as it will grow with your sales.
Invoice financing won’t benefit everyone though – the product is best used by companies whose biggest problem is that they can’t afford to wait 30/60 days to get paid by clients.

Food distribution companies tend to be cash flow intensive, They are constantly receiving products from suppliers, delivering products to clients, paying vendors and collection on invoices. This activity doesn’t always flow very smoothly – at least as cash flow is concerned. For example, it’s very common for small and midsized companies to have to pay their vendors in 10 days or less. At the same time, when they make a sale, large corporate clients insist on paying their invoices in net 30 to net 60 days.

This creates a discrepancy between the outflows of money (vendor payments) and inflows of money (invoice collections). The cash flow gap can cause serious problems unless managed correctly. At first most business owners try to juggle vendor payments – perhaps delaying some for a few days. If your business if growing, this strategy will not work for the long term.

A better alternative for some is to get business financing and use it to cover operations while waiting to get paid. One challenge with this strategy is that business loans are hard to obtain. Applicants need to have very solid financial statements, sufficient assets and an experienced team in place. These requirements put a business loan out of the reach of most small and medium sized food distributors.

There is an alternative way to solve this cash flow problem – and it’s easier to get than a business loan. It’s called invoice factoring. Factoring provides an advance on your net 30 invoices, providing the funds you need to operate the company while waiting for your clients to pay. The transaction is facilitated by an intermediary called a factoring company and the transaction is settled once your client pays the invoice in full.

To qualify for factoring, you must have a business that is free of judgments, liens and encumbrances and you must work with credit worthy clients.

Factoring provides predictable cash flow and frees the owners to spend their time where it gives the best return – growing their business.

Most transportation company owners have to constantly juggle responsibilities. They have to handle vehicle repairs, driver payments, insurance payments, office expenses and more importantly – collecting invoices. Collections can be source of problems for many transportation companies (or freight brokerages) since most clients pay their invoices in 30 to 60 days . Few can afford to wait that long.

One way to handle slow payment is to try and negotiate a quick pay – basically asking your clients to pay quickly. Some will do it. Others won’t, or at least will only offer it if you give them a discount. Although they are not always reliable, negotiating a quick pay can be beneficial in most cases.

If quick pays won’t work, your best alternative is to secure business financing to ensure you always have funds on hand to cover business expenses. This can be difficult for most owners since institutions require that all applications have stellar credit, assets that can be held as collateral and many years of experience. This will rule out business loans as an alternative for most small and midsized trucking companies. However, this is not necessarily a big problem since a business loan is not always the solution to this problem.

For many, freight bill factoring will be the better alternative. Freight factoring, as it is commonly known, can provide the equivalent of a quick pay by using an intermediary. The intermediary, called a factoring company, advances you funds against your freight bill. The transaction is settled once your client pays the invoice in full.

One of the advantages of freight bill factoring is that it provides predictable cash flow, enabling you to comfortably handle your business expenses. It eliminates having to worry about when your clients will pay.

To qualify for freight factoring you need to work with credit worthy clients. Also, your company needs to be free of liens, judgments and other encumbrances. Because of this, freight bill factoring is an ideal solution for small and growing trucking companies and freight brokers.

The number of business financing alternatives that are available to small and medium sized companies has dropped dramatically as a result of the financial crisis. Until recently, most owners could get a business loan by posting their house as collateral. Now that real estate prices have dropped substantially, banks find themselves saddled with worthless collateral and are being extremely careful with their loan portfolios. Only companies that can show profitable operations for a number of years, strong financial statements, demonstrated management leadership have a reasonable chance at getting business loans. Everyone else will need to find an alternative.

One alternative is a type of self liquidating transaction called invoice factoring. A self liquidating transaction is one that carries it’s mechanism for its own repayment. This feature makes them a very attractive source of financing to some companies.

Factoring is commonly used by companies that give 30 to 60 days invoice terms to their clients. Although large clients demand these payment terms, many small to medium sized companies can’t afford them. They need to get paid sooner so that they can meet their operating expenses. This is where invoice factoring comes in.

In a conventional factoring transaction, the client makes the sale, sends the invoice to the client and the finances it using a factoring company. The factoring company funds the invoice in two payments. The first payment covers about 80% of the invoice and is given soon after invoicing. The second payment of 20 % (less fees) is sent once the invoice is paid in full. The second payment closes – or liquidates – the transaction.

One immediate advantage of invoice factoring is that it allows clients the ability to offer payment terms to their clients with confidence – knowing that they can get money sooner if their business requires it. Additionally, factoring transactions are based on the credit strength of the invoice backing them. This allows small companies, who sell to large credit worthy businesses, to leverage their roster of clients to get financing.

Factoring is ideal for small and midsized companies whose biggest problem is that they can’t afford to wait 30 to 60 days to get paid.

After long negotiations, your star salesperson makes a big sale to a new client. This is a big enough sales that it could easily make your year. There is only one minor catch – your client is asking for net 30 terms. They will pay your invoice 30 days after receipt. In the meantime, you need to cover all costs of the sale (products and services) plus all your business costs. Should you make the sale?

It’s a tough question to answer. If you are confident that your client can pay the invoice, then making the sale is probably a good idea. If you are not confident they will pay then you should be very careful and remember that it’s only a true sale if the client pays.

But how can you determine if your new client will pay? The best way to determine if your new commercial client is likely to pay their invoice is to check their commercial credit. A good commercial credit report will provide your clients track record of paying clients and will suggest a credit limit. Although credit reports are not perfect, they are a very good tool to have if you need to make a quick decision. If you need to make a credit decision for a very large sale, you should consider buying reports from several providers and doing more thorough credit evaluations. Two well known providers of credit reports are Dun and Bradstreet and Experian Business Credit.

There is another problem with net 30 sales. What if you want to make the sale but cannot afford to wait 30 days to get paid? If you have that problem you should consider factoring the invoice. Invoice factoring is a form of financing which advances funds against your invoices from credit worthy commercial clients. The quick payment by the factoring company also enables you to offer net 30 day terms with confidence, knowing that you can finance the invoice if you need money sooner.

When you factor an invoice you get two payments. The first payment is given upfront, as soon as your invoice the client. It’s usually for 80% of the invoice. The second payment , the remaining 20% (less fees) is given once your client actually pays the invoice.

One of the advantages of invoice factoring is that your financing line is dynamically tied to your company’s sales. This enables to grow your business knowing that you can always tap into the factoring line if you need to fund your invoices.

Although there are many methods to finance and capitalize a company, the financing transaction is usually structured and secured in one of two ways. Either your put up collateral as security or you give up some ownership of your company (equity). Both methods have their benefits and drawbacks. One of the major benefits of using collateral instead of giving up equity is that you retain ownership and control of the business. This can be very important for business owners who want to retain their independence. When you sell equity, the buyers become your new partners – for better or for worse.

Most small and medium sized companies look for financing because they have cash flow problem. Although you can fix these problems by selling equity and recapitalizing the company – it’s not always the easiest solution.

One business financing alternative is to get a business loan. Although business loans are a popular tool to finance a company – they can be hard to get. The current lending environment is very difficult and institutions are only extending loans to very low risk ventures. To qualify, most companies need to have strong financial statements, multi year profits, seasoned management, substantial collateral and good growth potential. Few companies meet these criteria, especially small and midsized companies.

If the cash flow problems are caused by slow paying clients – rather than by low sales – invoice financing may be the right solution. Invoice financing is a simple solution that provides a funds advance on your slow paying invoices. It plugs the cash flow gap, providing the money you need to pay suppliers, employees and other business costs. More importantly, it smoothes out cash flow, providing predictability and allowing the business owner to focus on other tasks.

Most invoice financing transactions are structured as two advances. The first payment is given to you as soon as you invoice your client. It’s usually 80% of the invoice. The second advance, which is 20% less the financing fee, is given once your client actually pays the invoice.

One of the advantages of invoice financing is that is easier to get than other forms of financing. If your business is free of liens and encumbrances and you invoice credit worthy commercial clients, you have a good chance of qualifying.

Most midsized companies have always been in a peculiar position when they seek financing. Often times they are too big to qualify for most small business financing packages, and too small to qualify with large financial institutions. Although many providers focus on “middle market” companies, finding the right financing can be a complex endeavor. This has become even more challenging in the current economic environment which strongly discourages institutions form risk taking.

Most midsized companies either need capital for new projects or need funding to smooth out cash flow. Their main focus tends to be on using lines of credit as a way to handle their cash flow problems. Unfortunately, the underwriting standards for a line of credit are similar to those of a conventional business loan. Most institutions require that the company have solid financial statements, good growth prospects and a well seasoned management team. And even if you meet these requirements, success is not guaranteed.

If your company has cash flow problems, there is an alternative source of funding your should consider. It’s called factoring. It’s an ideal solution if your business is affected by customers that pay their invoices in 30 to 90 day but you can’t afford to wait. This problem is very common and it forces companies to dip into reserves (if you have them) while they way to get paid.

Invoice factoring provides a simple an elegant solution to this cash flow problem. It gives your company an advance on invoices from credit worthy customers, providing quick funds that can be used to pay expenses and pursue new opportunities. The transaction is settled once your customers pays for the invoice in full.

Most factoring transactions are structured with two payments. The first one covers about 80% of the invoice and is provided soon after invoicing. The second one is for the remaining 20% (less the factoring fees) and is provided after your clients pays the invoice. Factoring fees vary and are determined by the size of your invoices, your sales and the credit quality of your clients. In most cases qualifying for invoice factoring is a lot easier than qualifying for business loans.

One advantage of factoring is that it is tied to your sales – and it grows with your sales. This makes it an ideal solution for midsized companies that need flexible financing to grow.

Companies that sell to commercial and government customers almost always get paid for their services on net 30 to net 60 day terms. This means that they have to wait up to 60 days from the time of invoicing to be able to collect a payment. Most firms cover expense during this delay by using their cash reserves or relying on a bank line of credit.

This strategy tends to work well, unless you have limited cash reserves and are unable to get a line of credit. Institutions underwrite their lines of credit much like business loans and other business financing products. They require two or three years worth of financial reports about your company. They require that the company and the owners have substantial assets. And, they require that all the records be spotless.

If your company cannot meet the institutions funding criteria you will usually be out of luck, especially in the current economic environment. Conventional underwriting standards are very strict. However, there is an unconventional approach to financing your business that works for many industries.

As mentioned earlier, most companies that have cash flow problems have them because they can’t afford to wait 30 or 60 days to get paid by clients. This gap can be covered using invoice financing. Invoice financing provides an funds advance on your slow paying invoices giving your company the necessary liquidity to cover expenses while waiting to get paid. One advantage of invoice financing over other solutions is that you can leverage the credit quality of your clients to your advantage. In an invoice financing transaction, the funding company buys the invoice at a discount, with the expectation it will be paid in 30 to 90 days. If your clients have good commercial credit, the funding company will likely buy the invoice. This feature enables small companies whose biggest asset is a solid roster of clients to use invoice financing.

A second advantage of invoice financing is that it grows with your sales. Your funding line will usually be determined by the size of your invoices and the credit quality of your clients. This funding flexibility enables small companies with big potential to grow organically.

Trying to get business financing for a construction subcontracting business is extremely challenging and will remain very difficult for the foreseeable future. Most experts predict that it will take years for the industry to regain a stable footing in the economy. And until that happens, most institutions will be very reluctant to provide business loans to subcontractors.

Although the situation may look dire for some, there are many construction subcontractors that are doing very well in this environment. And they span the industry from cell tower construction, to demolition, to carpenters, to HVAC companies. These companies are doing well but cannot get the business financing they need simply because they are in an industry that is currently considered risky by lenders.

Most subcontractors look for business financing because they have cash flow problems that originate because they get paid in 30 to 60 days after invoicing. Basically they deliver the work, send an invoice and wait to get paid. Unfortunately, few have the capital to wait. They needs fund to pay employees, office expenses and suppliers.

One alternative to solve this problem is to use construction factoring. Construction factoring provides an advance on slow paying invoices, providing the cash flow a company needs to meet expenses while waiting for their invoices to get paid. The transaction is fairly simple, a factoring company advances you a portion of your invoice – about 75% as a first payment. Once your client actually pays the invoice, the transaction is settled and you get the reminder second payment of 25% (less the factoring fee).

One advantage of construction factoring over a conventional business loan is its flexibility. The factoring line is not fixed but rather is based on your invoices. It grows with your sales. Furthermore, most factoring companies look at the credit of your GC (or commercial customer) as one of their more important funding criteria. This makes construction subcontractor factoring an ideal solution for small and medium sized companies whose biggest assets are solid clients.

Factoring financing is an effective solution for companies whose biggest challenge is that they can’t wait 30 to 60 days to get paid by clients.