Should I use factoring or purchase order financing?
It all depends on your situation and what type of receivables you're holding. If you are trying to fill a specific, large order, you probably want P.O. financing. If you want to incrementally grow your business and need money for a variety of reasons, factoring is probably best. The decision really comes down to whether you have outstanding accounts receivables or purchase orders. Figure out what your operating capital needs are and we can help you evaluate the best path.
What is factoring used for?
Growth. Making ends meet. Opportunity in a moment of great potential, or relief in a time of distress. Factoring works any time you need immediate operating capital. You could use it to maintain inventory, purchase equipment, make payroll, procure supplies, upgrade hardware and software, take advantage of vendor discounts, pay taxes, or fulfill a big order - anything that keeps your company growing.
Who benefits from factoring?
Factoring is a great solution for anyone who needs operating capital and can't get it from the bank. It works for businesses in nearly any industry that are making sales and trying to grow. It isn't, however, for everyone. Give us a call to find out how we can help.
When should I factor my invoices?
When the gross margin on the next sale is greater than the cost of factoring. When the money saved with trade discounts, reduced administrative and collection costs offset the cost of factoring. When accepting new business (and keeping it by factoring!) increases your bottom line. See Why Prairie Business Credit.
What does factoring cost?
The fee varies by the amount of time it takes to collect the receivables. Typically, the fee ranges from 2-5% of the invoice's face value. Prairie Business Credit doesn't charge monthly fees, so you only pay when you get cash.
Does Prairie Business Credit try to help my business, or just give me cash?
Prairie Business Credit's goal is to advance your business. As part of the factoring fee, Prairie Business Credit provides credit checks, customer aging and performance reports, record keeping and collection advice, and assistance. These services collaboratively reduce your risk of bad debt.
How does factoring affect my credit rating?
When you factor your invoices, you have cash to pay off debts or make investments. You can pay suppliers and creditors on time. This will help your credit and make you eligible for better discounts and terms from suppliers, and eventually make you a desirable customer of that bank that can't help you today!
Can Prairie Business Credit manage our accounts receivable?
Absolutely. We understand all the ins and outs of managing a business's finances. It's an important part of our service to make factoring work for you. Usually, you will save money by letting professionals like us responsibly handle your accounts receivable. If you think there's a possibility that your finances are not being managed effectively, it's probably the case. Give us a call.