FVF provides working capital financing solutions to companies in a wide range of industries. Businesses in industries all across the spectrum may be able to utilize commercial financing solutions like factoring, asset-based lending (ABL), working capital lines of credit, accounts receivable (A/R) financing, alternative loans and expansion capital to help meet cash flow challenges, thus enjoying a powerful competitive advantage in the marketplace.
We have listed a few industries where alternative financing vehicles are common, and described how commercial financing tools are typically used in these industries. This list is not all-inclusive, however. If your industry is not listed here, please contact us to discuss how you might benefit from alternative financing tools.
Companies that operate in the IT industry often face cash flow challenges as they wait 30 to 60 days or longer to get paid by their customers. Since they have already paid their vendors, they may be in danger of running out of money while waiting to get paid themselves.
Alternative financing solutions can be a lifesaver for IT companies experiencing this “cash flow lag.” With invoice factoring, for example, the company can receive cash in 24 hours instead of waiting weeks or even months.
Staffing companies are often great candidates for alternative financing solutions. Many staffing companies pay their contractors every other week, but don’t receive payment for their own invoices for up to 75 days or longer, resulting in significant cash flow gaps.
A wide range of factoring solutions can help staffing companies bridge this cash flow gap. These include both recourse and non-recourse factoring, spot factoring, and non-notification factoring. Receiving cash within 24 hours of generating an invoice can spell the difference between success and failure for many staffing companies.
Most manufacturers operate on a cash flow cycle. This is the time between when cash is paid out for raw materials, equipment, salaries, etc. and when accounts receivable are collected from customers and turned back into cash again.
If the manufacturer doesn’t have enough cash on hand to cover the lag that occurs between opposite ends of the cash flow cycle, it may not have enough capital to turn around and reinvest in the raw materials needed manufacture more product, or to cover fixed overhead like payroll, mortgage or rent, utilities, etc.
Alternative financing solutions like invoice factoring, accounts receivable (A/R) financing, asset-based lending (ABL) and purchase order (P/O) financing can help manufacturers bridge this cash flow gap by providing cash when it’s needed. As a result, manufacturers don’t have to worry about running out of money in the middle of the cash flow cycle—before they can collect accounts receivable and realize the profits promised on their P&L.
It’s not uncommon for wholesale distributors to experience cash flow challenges, since they usually have to pay for goods upfront and then wait to get paid by their customers—sometimes for up to 60 days or longer after they have laid out cash for payment. During this “cash flow lag,” distributors are at risk of running out of cash before receiving payment for their invoices.
Many wholesale distributors turn to commercial financing solutions to help finance this cash shortfall. These include invoice factoring, accounts receivable (A/R) financing, asset-based lending (ABL) and working capital lines of credit. Alternative financing vehicles like these and many others can help wholesale distributors stay in business by providing cash when they need it to meet day-to-day working capital needs.
Textiles and Apparel
The textile and apparel manufacturing industries have used alternative financing solutions for many years to meet their unique financing challenges. These challenges result from the cash flow lag that’s created due to a delay between the time when cash is paid out for raw materials and when accounts receivable are collected from customers and turned back into cash again.
Common alternative financing solutions for textile and apparel manufacturers include invoice factoring, accounts receivable (A/R) financing and asset-based loans (ABL).
Court reporting agencies typically hire contract or W-2 employees as court reporters and must pay them weekly or every other week. In most arrangements, the agency’s client (or the law firm) is responsible for paying these employees’ wages, but sometimes they pass the invoice off to their client (the defendant or plaintiff). This either delays payment of the employees’ salaries or forces the court reporting agency to pay them while waiting to get paid by the law firm.
Factoring services and accounts receivable (A/R) financing can provide ready cash to enable court reporting agencies to pay their employees without delay, without having to dip into their cash reserves.
The domestic furniture industry in recent years has become primarily an import-export business. In most instances, furniture importers in the U.S. and Canada must pay for finished goods when they are loaded for shipment abroad, which can put a significant strain on their cash flow.
Invoice factoring, working capital lines of credit and purchase order (P/O) and inventory financing can help ease this cash flow strain by providing much-needed working capital to help cover the gap between the time furniture importers pay for finished goods abroad and when they sell them to wholesalers and distributors in the U.S. and Canada.
To compete and be successful today, printers must invest heavily in expensive, high-end equipment, like six-color Heidelberg presses that can cost $1 million each, as well as highly skilled workers to man the presses. These large up-front expenses can put a serious crimp in a printer’s cash flow.
Alternative financing solutions like accounts receivable (A/R) financing, asset-based lending (ABL) and recourse and non-recourse factoring can provide valuable working capital to help printers meet their unique cash flow challenges.
Companies in the transportation and trucking industries face a number of unique business challenges. Managing cash flow—or making sure that the money coming in matches the money going out—is usually at the top of the list.
Many transportation and trucking companies have discovered that invoice factoring is a reliable and effective alternative to bank lines of credit for financing their working capital shortfalls. Transportation companies need liquidity deal with fluctuations in fuel prices and other expenses related to the movement of goods. By eliminating the time it takes to get paid on invoices, factoring helps transportation companies better manage their business for maximum profitability
Factoring is common in the transportation industry because qualification depends mostly on the transportation company’s customers. A factor will conduct thorough credit checks on all the main customers and follow up until invoices are paid. This is a valuable service that prevents collection problems and bad debt for transportation companies. and growth.
U.S. and Canadian importers often must pay for finished goods when they are loaded for shipment abroad, which can put a significant strain on their cash flow.
Invoice factoring, working capital lines of credit and purchase order (P/O) and inventory financing can help ease this cash flow strain by providing much-needed working capital to help cover the gap between the time importers pay for finished goods abroad and when they sell them to wholesalers and distributors in the U.S. and Canada.
Food & Beverage
Food and beverage manufacturers face unique risks due to the perishable nature and limited shelf life of their products and the possibility of spoilage. For this reason, the industry tends to operate on shorter terms than most other industries and manufacturers usually want to get paid as quickly as possible.
But this isn’t always possible. Some major frozen food companies offer no terms, or very short terms (such as 7 days), at best. This can leave food manufacturers in a tight cash flow squeeze. For example, a manufacturer may have to lay out capital for three production cycles or longer if it is waiting 30-40 days or longer to get paid.
Factoring services—including both recourse and non-recourse factoring, spot factoring, and non-notification factoring—can provide much-needed working capital to help ease this cash flow squeeze on food and beverage manufacturers.