CapFlow Funding Group (“CapFlow”) is pleased to announce the appointment of Kevin Gillespie as Vice President and Business Development Officer. Kevin comes to CapFlow with over a dozen years of experience in commercial finance, including Tradewind Finance and Bibby.

“We are excited to have Kevin join us to assist in enhancing and developing our revitalized sales and marketing efforts. Along with hiring Kevin, during 2022 we made significant investments in our branded properties as well as to add other personnel to our sales efforts to increase market penetration to provide liquidity and services to small- and medium-sized business (“SMB’s”), said CEO Andrew Coon.

CapFlow, along with its affiliate, CFG Merchant Solutions, provide an array of products and services to SMB’s, including invoice factoring, purchase order finance, supply chain finance, revenue-based financing (also sometimes referred to as Merchant Cash Advance or MCA), credit card split transactions, equipment leasing, and asset-based loans. CapFlow was founded in 2009 by Mr. Coon and William Gallagher as a response to a dearth of working capital available to SMB’s following the credit crisis of 2007-2008. As of December 31, 2022, the combined companies have provided approximately $1.65 billion in working capital to US-based small businesses.

What are invoice factoring services? 

Invoice factoring is a service provided by alternative financing companies that involves selling your outstanding invoices in exchange for cash, notably known as factoring. The factoring company or “factor” purchases an outstanding invoice, and advances a percentage of that invoice. Additionally, the factoring company will handle payment collection of the invoices directly with your customers. Invoice factoring services provide many benefits for a business, but there are qualification requirements to keep in mind when applying for invoice factoring.  

 

Factoring Application  

One of the most important requirements for invoice factoring is fully and accurately completing an application. Factors typically request invoicing volumes and other personal information. The more detailed information you provide, the more accurate and seamless the beginning steps will be. The industry of the applying company, along with the type of customers invoiced, will help a factoring company determine whether to move forward with the transaction or not.  

 

Your customers make a difference 

Unlike a traditional bank loan, a business’s credit is not a major factor for approval. Instead, they consider the credit risk of the clients they invoice. The main reason for this – the clients will pay the factoring company directly, and do not want to risk nonpayment. It would be in a business’s best interest to consider which customers have solid credit, reputable relationships, and honor debts to get approved. 

 

For invoice factoring services, factors will be more concerned with a client's credit worthiness.

Factors tend to be more interested in your client’s credit worthiness than yours.

 

Have an A/R aging report ready to go 

An accounts receivable aging report lists out any unpaid invoices, notes, and credit memos. This is an important document required for factoring. Factors will typically use this document to track what outstanding invoices you have, how much is owed, and when they will receive payment. This report may also be referred to as a schedule or schedule of accounts receivable.  

 

Invoices = Factoring 

One obvious – yet extremely important requirement for qualification is having invoices to factor. Without any unpaid invoices, you will not be approved for factoring services.  

 

With invoices to factor, invoice factoring services may not be provided.

Without invoices to factor, you will not be able to factor.

 

Tax ID number  

A factoring company will also require a government-issued tax identification number (in some cases your business utilizes an individual’s social security number). They will use this number to verify your organization’s tax status, along with verifying if your business has any outstanding lien(s). 

 

Bank Account 

Many factors may not transfer money to a personal bank account. They tend to wire money to business-only accounts or ACH (Automated Clearing House) transfers. Simply put, if you would like to receive funding from a factor, you will need to have a business bank account.  

 

Business Financial Health 

Factoring companies want to ensure the organization they will potentially work with is financially healthy and sound. To do this, your organization may be requested to illustrate financial reports. These include, but not limited to: Profit & Loss or Income Statement, a Balance Sheet, Aging reports (A.R. & A.P), and bank/deposit account statements. The more readily available these documents are, the most swift and efficient the application process is for your business. 

 

Working with a Factoring Company 

Once a factoring company receives your application, they will tell you what other information they need from you. It is helpful to be prepared for their requirements – the earlier you send the factoring company all documentation, the sooner you can get paid! 

 

Invoice factoring has numerous benefits and can help you grow your business with extra cash in hand. At CapFlow Funding Group, we provide instant liquidity with limited paperwork required.

What are alternative financing strategies? 

Alternative financing is funding provided for businesses outside of traditional bank loans. Alternative lenders offer a range of financing products with flexible requirements. Traditional bank loans tend to be a lengthy and difficult process to qualify for. Fortunately, there are other opportunities available for businesses with some alternative financing strategies 

 

Invoice Factoring 

Invoice factoring is an alternative financing process where a business sells their invoices to a factoring company. In exchange for selling their invoices, the factoring company advances a large percentage of the money owed to the business. They also directly manage payment with your customers. Once the invoice has been completely paid off, the factoring company will send you the remaining balance, minus a small factoring fee for their service.  

Invoice factoring provides businesses with immediate, ongoing cash flow. This will allow businesses to meet their short-term financing needs instead of having to wait 30-90 days to receive payment on invoices. Furthermore, credit score, collateral and loan history are not a major factor in getting approved for factoring. This makes receiving funding much faster and more flexible. 

 

Crowdfunding 

Crowdfunding is another alternative source of funding that allows for businesses to raise money from investors. Through the use of social media and crowdfunding websites business owners have the potential to meet investors and raise funding. This strategy allows businesses to raise money without resulting to venture capital investors. However, if the funding goal is not met, any finance that has been pledged will be returned to the investors. 

With crowdfunding, businesses rely on marketplaces to provide funding for their operations.

 

Merchant Cash Advance 

With a merchant cash advance, an alternative finance company provides businesses with a lump sum upfront, which is then repaid with a percentage of the business’s sales. This option is best for small businesses that need immediate capital. A traditional MCA is structured where the provider deducts a daily or weekly percentage of your debit and credit card sales until the advance has been fully repaid. This funding can be provided within 24 hours and repayments can be adjusted according to how your business is performing.  

 

Revenue-Based Financing 

Another type of alternative financing strategy is revenue-based financing. Revenue-based financing is a loan that a business pays back with a part of their future revenue. This strategy helps businesses successfully raise the capital needed without sacrificing their equity or any collateral. It also does not involve interest payments – repayment is a predetermined amount plus a flat fee. Monthly payments increase or decrease to match the natural fluctuations of a business, meaning you will not be burdened by payments you cannot afford.  

 

Benefits of revenue-based financing include it being cheaper and more flexible than other funding options, your business will retain more ownership and control of your business, there are no personal guarantees, payments are flexible, you may have a faster funding timeline, and more.  

A consistent cash flow is essential to sustain any costs, cost increases and overhead expenses for any type of food manufacturing business. The food and beverage industry know all too well the issues that can be faced with managing cash flow when it comes to day-to-day operations. One of the most common problems that is faced every day by food and beverage companies is having unpaid invoices, with long duration payment terms. Resolutions to this issue, such as invoice factoring, are crucial to understand to keep your business on track and growing.  

Factoring for food and beverage explained 

Invoice factoring for your food and beverage company allows you to have consistent working capital. All while waiting for invoices to be paid. To summarize what invoice factoring is: You invoice your customer, and you  then sell those invoices to a factoring company. Factors typically advance between 70-90% of the total invoice value, giving you access to your working capital within days. You remain in control of your business and customers; the difference is that your customer simply makes payments to the factoring company instead.  

Food and beverage companies work with factoring companies to cover expenses and get capital.

Get working capital faster to cover expenses.

Why factoring is a good option for food and beverage companies 

Food and beverage companies can struggle to maintain a solid cash flow. You try to meet demands, cover operating costs, payroll deadlines and more. Fortunately, factoring can be beneficial for resolving this issue. Not only can factoring your invoices allow you to comfortably stay on track, but it can also help grow your business. Having your capital readily available for you on demand in exchange for selling an invoice, can allow you to invest more in your food and beverage business. You can use that working capital to market and advertise your business or invest in additional inventory. Furthermore, it can be used for purchasing more technology, better equipment, higher quality products and more. All these examples can take your company to the next level without having to wait for invoice payments.  

 

What type of company should factor their invoices? 

 Essentially, any type of food and beverage company should consider looking into invoice factoring. Whether you are working with seafood, meat, dairy, fruits, and vegetables, etc., it can benefit your business in different ways. Having that cash in your hand gives you the opportunity to focus on working on your business and bringing more food to the market. Nevertheless, make sure to do all the research necessary. This will help you determine whether invoice factoring is right for your business. Furthermore, what to be aware of when choosing a factor.  

A huge issue many companies face is not receiving payments on invoices in a timely manner. This is a threat to your business and your working capital, as late payments can negatively affect your cash flow. Fortunately, there are a couple ways to try to prevent late payments. 

Accept multiple forms of payment.   

Giving your customers flexibility when accepting payments may get you paid quicker. Offering multiple forms such as credit card, cash, bank transfers, and mobile pay gives your customers options. In return, it should make the entire process faster and easier for them, allowing payments to smoothly come in.  

Companies tend to not get their invoices paid on time because they do not offer flexible payment methods.

Offer flexible payment methods to customers for faster compensation. 

Automate invoicing.

If you send out your invoices on a specific date every month, it may be more beneficial for you to send out invoices as soon as possible. Try to send out invoices according to the terms agreed upon in the contract, or as soon as the task has been completed. If you find that to be burdensome, consider automating your invoices. To automate your invoices, businesses use a software to create an invoice template that can be used multiple times. With this software, once a new invoice is sent over, the information will be entered in the template and scheduled to be delivered. By automating your invoices, you save time by not having to prepare every invoice manually. Release these automated invoices as soon as possible, then follow up with your customers to ensure for a smooth transaction process to promote business growth. 

 

Incentivize early payments  for getting invoices paid.

The faster your clients get their invoices paid, the better. Without any benefit or reward for early payments, they may not feel inclined to pay earlier. Even a small 1-3% discount on the invoice total for payments made 10-15 days before it is due allow invoices to be fulfilled faster. This incentive can be offered to give thanks to your customers who make paying a priority and it can also help you build stronger relationships with clients.  

 

Overall, dealing with invoices can be a bit inconvenient and troublesome. Try to implement these techniques to make the process easier. You may also want to consider selling your invoices to a factoring company for a small fee, and they will deal with your customers’ invoices directly. If you are in need of working capital fast, this option can be beneficial for you. You may receive a large percentage of the invoice total within days. Instead of waiting for the invoice to be paid. You will also have the added benefit of having the factoring company become your back office. By monitoring your accounts receivable to assist you in ensuring timely payment.

Invoice factoring makes it possible for your business to receive money that is owed to you now, rather than having to wait for invoices to be paid. A factoring company enables this by purchasing your business’s unpaid invoices at a discounted rate and receiving those payments from your clients directly. As a result, it is important for you to understand what to look for when choosing a factoring company for your business. Here are some questions and options you may want to consider.    

What is the application process for invoice factoring?  

The application process for invoice factoring is typically fast and simple. Contrary to the tedious process of applying for a traditional bank loan. A factoring company performs most of the application process. You just need to submit certain documentation along with the application for funding.  

Factoring companies will also review the invoices you are seeking to factor, your business bank account, an accounts receivable aging report, prior collections history, as well as some other documents for personal identification purposes. This part of the process is referred to as underwriting. 

A factoring company will review your application. Once reviewed, you may be approved for funding, This will likely be within twenty-four hours or less. Next, once the transaction is approved the contractual documentation must be signed. Funding should be available to your company within days. Make sure to choose a factoring company offering a quick application process. If you need working capital fast, this is beneficial. 

When choosing a factoring company, see what companies offer quick and flexible applications.

The invoice factoring application process should be fast and flexible.

Choosing a factoring company with fair factoring rates.  

Factoring rates are highly dependent on the firm you choose. Therefore, you should evaluate how much you wish to pay, and how often. Depending on the company, they may either calculate costs on a daily, weekly, or monthly basis or charge you a one-time flat fee. Factoring fees tend to fall between 1% and 5% of the total invoice amount. However, some companies will offer you different rates for different customers. You may negotiate terms with a factoring company and can compare options to ensure you are receiving the best terms possible. Questions for the factoring company to consider should involve the fee structure, current rates, advance amounts, and whether there will be any personal guarantees involved. Asking the right questions will allow you to be more prepared when speaking to or researching a factoring company.  

Evaluate how the factoring company will communicate with your customers.   

Since the factoring company is taking ownership of your invoices, they will need to communicate with your customers directly. Forming professional relationships with your customers allows for a smoother collections process and establishes a mutual relationship between the factoring company and the customer. Therefore, it is important to research how businesses handle their customers. Be sure to read feedback from real customers to find out about their policies and how they communicate. At CapFlow Funding, customers are informed in three different ways about making payment on factored invoices– through a notice of assignment, direct verification usually via email, and by information regarding the factoring company that is provided right on the invoice.  

When choosing a factoring company, you should see how they would interact with your consumers.

Ensure you have clear communication between you, the factoring company, and your customers.

Research the factoring company’s track record.   

Take the time to conduct research on the factoring company’s policies and procedures and find a factoring company whose ideals and basic principles line up with yours. You should also read reviews and feedback from previous or current clients of the factoring company you are looking to do business with. Do not settle for a company that will not meet your expectations.  

Invoice factoring, also known as accounts receivable funding, is an effective way to provide your business with working capital rather than having to wait to collect revenue on invoices. It can relieve the worries of not having a consistent cash flow to keep up with any existing expenses. However, there are many myths and misconceptions regarding invoice factoring. It is important for you to have a clear and concise understanding of what to expect. These are some of the most common misconceptions.  

Factoring Doesn’t Lock You into a Long-Term Contract 

Some factoring companies do require long-term contracts. This may vary between 90 days to 12-24 months. However, a long-term contract is not as intimidating as it may seem. These companies often offer lower factoring rates when committing to a longer contract. Some may be more flexible in terms of the duration of the contract. Understanding the benefits of what contract duration works best for your business is essential. To avoid any early cancellation fees or fine print misunderstandings, make sure to review your contracts thoroughly and ask questions. Other funding companies do not require long-term contracts, and they work with you to choose a time frame that works best for your business. 

Understand the terms of your contracts with the funding company.

A Good Factoring Company Will Not Demand Large Upfront Fees 

It is not uncommon for factoring companies to charge an upfront fee when working with new clients. However, it is normally just a small fee for the application. It is important that these companies are transparent with you about any upfront terms and fees.  The application process itself takes only a few days to be approved and is a forthright, affordable process. 

Invoice Factoring Collections on Your Invoices Will Not Affect Your Customer Relationship 

Your customers may not be aware of what invoice factoring is, and those who do – typically understand the benefits of invoice factoring. This has become more common within industries and is only growing exponentially. It is in these companies’ best interest to maintain a good relationship between themselves and your customers. If not, it would be detrimental to them as well. Essentially, the only difference that your customers are facing is making their checks payable to the factoring company rather than yours. These accounts receivable management companies aim to make these payment processes efficient while not harassing the customers, which should not discourage them.