Factoring for Manufacturing Companies

Imagine this: You get a product request from a new client. While you manufacture, package and ship the product, you send an invoice to the client. Depending on your payment plan, clients could take 30, 60 or 90 days to complete each invoice, creating a gap in your cash flow. With our factoring for manufacturing companies, you receive a cash advance on your outstanding invoices and transfer invoice ownership to our accounts receivable team at Porter Capital. Then, we wait for payment in full from your client and send you any remaining balance minus our fee!

Taking major loans from banks may help manufacturing businesses get the funds they need to manage cash flow, but it drives the business into heavy debts. Using invoice factoring to support manufacturing business can help entrepreneurs avoid debts and meet their cash flow requirements to buy equipment, repair parts, and maintain payroll.

Yes. Your manufacturing company can use factoring to purchase new equipment. In fact, here are some benefits of this funding strategy:

• Has lower risk: The logical and practical choice to make is to finance the equipment instead. The leftover money can then go to other areas of your business to further improve it.
• Provides a competitive advantage: Updated equipment puts you in a position of advantage ahead of your competitors because it significantly improves your operations. When operations are improved, it can lead to more customers flocking your business which yields more profit.
• Protects against inflation: Manufacturing equipment isn’t cheap. To recoup the money required to buy it, you’re going to have to wait for a few months to a year. The problem with this is that the price of the equipment can increase in the future. You’re essentially locking it down at a fair price if you finance manufacturing equipment according to the market value. In other words, you can get the equipment at a lower price.
• Allows for a greater tax advantage: The financing payment that’s made for the equipment is tax-deductible. Usually, you’ll need to depreciate it every year when you buy new equipment. When you can collect the depreciated amount of the equipment from yearly tax deductions, your equipment may be considered obsolete. Through equipment financing, your lease payments are an expense, which is tax-deductible from your business’ income every year in the lease term. It can also be written off in depreciation faster, making it easier for you to get returns.
• Improves purchasing power: A business must not spend more than make more, which is why keeping an eye on your cash or credit limit is a crucial part of running your business. It’s very unfortunate whenever you know that you can’t afford a piece of equipment despite the growing need. Financing your equipment lets you buy it alongside monthly repayments that won’t significantly affect the company budget. In the long term, it can lead to better production capacity, which can yield more profits.
• Improves credit score: Similar to a person’s credit score, your business’ credit score is just as important. The only difference is that your business will be evaluated based on how risky it is if you can make the monthly repayments or not. As long as you make the monthly repayments, you have nothing to worry about because it does nothing but contribute to a good credit score.