I am wondering if anyone knows of a good company to recommend that can provide invoice financing? Our invoice to payment turnaround is sitting around 90 days on average and this put our newer business into some cash flow issues at times.

Here are some of the current problems we're running into:

1.) While we've been in this business for years, a few of us broke away from our last company to start this brokerage. Most financing companies we've found are looking for at least a year in business and this current LLC is about four months away from that.

2.) We are licensed with the state and the companies we invoice can only make a payment to us, so this kills the true factoring portion of the equation. While it's perfectly ok to sell our invoices, the payment still has to come to us first.

3.) Our invoices have NET terms, but in this industry, you're at the mercy of the companies. We've even had the same property/company pay 15 days after invoice and next time pay 50 days after invoice. They always pay, but you can't ever pinpoint when.

4.) I don't think this matters as it's never been mentioned, like the stuff above has, but we have an SBA loan with Accion.

We currently have $100K+ (we wouldn't want to sell it all) in outstanding invoices waiting to be realized. Initially, we would much rather give up a percentage of our invoices and address the cash flow issues. All of our invoicing is real estate service based, so taking a little monetary shave, isn't really a big deal.

Any recommendations? Thanks!

Do you have agreements with your purchasers to pay within some timeframe? I assume you've already tried pressing them? I put language in all of our service providers contracts preventing factoring cause those companies are the absolute worst.

Kw receivables in Kingwood Texas has treated us well in the past.

I'm a partner in Nickel Bridge Capital. We can help you out.

https://www.nickelbridgecapital.com/

Shoot me an email: kit@nickelbridgecapital.com

We are based in College Station. Looking forward to hearing from you!

Have you approached your bank about an asset based loan? You can typically borrow about 70% against open AR. Given the length of time it's taking to get paid you'd have to make sure the loan was structured in a way that would not disallow those receivables that were at 90 days but that can be negotiated.

Brief example:

You have $100K in AR aged liked this:

C $35K
1-30 $30K
31-60 $20K
61-90 $10K
90+ $5K

You'd submit a report monthly or perhaps quarterly that would show that aging, possibly in detail. They would lend 70% against "good" AR and at a minimum they'd want to disallow that 90+ bucket so if that's a bigger portion of the total than the 5% above you'd have to negotiate that in ahead of time. The two rules to be aware of are that they'll want to completely exclude anything that's too old and that if the portion of the total that's too old exceeds a pre-defined threshold they'll exclude the entire base which effectively calls the loan.

One thing to be aware of when borrowing against AR is how you manage your cash. You've already been paid. you're now collecting the bank's money. I know that seems obvious to some but I've had more business owners than I can count that get frustrated after a huge week of collections and the cash balance doesn't really change. It changed a month ago when you advanced the loan, today you're just repaying that loan.

That aside this is an option. One thing you may run into that may be an issue with factoring is what does the SBA lender have liens against and will the new lender take a second position for those assets? A factoring company would basically buy the invoices which may be undercutting the SBA lender's position which might be a problem.

Good luck and be careful.

Quote:

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Our invoice to payment turnaround is sitting around 90 days on average

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Why do you allow this?

I had a client who was a factor. This was a long time ago, and I'm sure it depended on the industry, but the factor percentage I was told was about 70 percent. I never asked them the obvious question I'll ask you: If you cut your bill by 30 percent (or whatever your factoring company is cutting) to your client, can you get them to pay within 10 days? Have you asked your client that?

I realize there are many reasons why you may not want to cut your bill and have the factor do it (financial statements, client paying full price, etc.) but your company being in its infancy may be different.

I quit doing business with companies that didn't pay their invoices within a reasonable time (and 90 days isn't reasonable) a LONG time ago. The first question I would ask them is how long they allowed THEIR customers to float their invoice.

Couple of things based on my experience. We do work for varying government agencies so the idea of payment terms is filed under the folder titled "Rainbows and Unicorns". Some agencies pay well sometimes, but typically we run 90 days. We ALWAYS get paid... eventually.

So factoring or AR financing would allow us to grow the business - it is construction and we can only stretch terms so long with our trades, but typically the average terms with them will be well under 30 days. But this option is costly and you can run across some creepy folks in this sector. Do your diligence.

For us, the challenge was more complex in that the work has to be bonded. This ultimately kills traditional factoring and other forms of A/R financing as no surety is going to allow you to either sell the receivable or allow a bank (or other lender) to take a first lien position on the receivables.

If you could get your customer comfortable paying to a lockbox that the financing firm controls, that may work. Otherwise, you may need wealthy business partners that can help you personally guaranty a line of credit - or at the amount you indicated you may be able to do this on your own until you build up cash reserves to self-finance the lengthy payment cycle.

Nickel Bridge Capital funds up to 96% of the receivable invoice, depending on the amount and the term of the invoice. The remaining percentage of the invoice is all we charge. It's that simple! All we require is a copy of your invoice, a copy of your contract, a brief explanation of your need and a summary of the work to be performed.

• No line of credit required
• No set up fees
• No upfront line of credit fees
• No personal guarantees
• No credit checks
• No commitments
• No interest on late payments
• No late payment fees
• 30, 60, 90 and 120 day term invoices funded