
An In-Depth Guide to Selling a Manufacturing Business (+ Info on Navigating New Tariffs)
In-depth guide to selling your manufacturing business—from valuation and exit prep to negotiation. Plus, how new tariffs may impact your company’s valuation.
CEOs looking for financing may not consider invoice factoring as an option. But for some businesses, factoring may be a great solution to jumpstart growth.
“Invoice factoring is a cash flow management tool that can provide a business with a continuous source of operating capital from its accounts receivable, allowing a company to pay creditors promptly, meet payroll, maintain overhead expenses, pay taxes, or simply relieve the financial burden experienced during rapid growth periods,” says Rob Blum of Plus Funding Group.
More specifically, factoring entails companies “selling invoices to a factoring company at a slight discount to the face value of the invoice,” says Blum. On the day the invoice is due, the factor pays the company some percentage of the invoice — “and then when the factor collects the invoice some time later, it pays the remaining balance to the company, less the factoring fee.” These essentially “converts a company’s accounts receivable into instant working capital,” Blum explains.
Factoring doesn’t mean necessarily mean your business is struggling. Business owners may use factoring to increase working capital and facilitate growth.
Here are a few scenarios in which factoring might make sense.
Before working with a factor, Blum cautious, “look into their reputation with customers.” Some factors may be undercapitalized or over-leveraged. In addition, “make sure you understand all the fees” and “that your factor provides full transparency into your invoice collections through web portal access into their accounting system or a comparable method, and that reconciliations are done frequently, preferably daily.”