A constant concern is how to finance the mobilization of a contract before the first invoice. Invoice factoring is the purchase of invoices for completed transactions, but funds are often needed prior to an invoice being issued. Typically contracts regulate how many and how often invoices can be issued and the usual process is allowing invoices for every 30 days of work. Many times there are expenses such as payroll or costs to suppliers that must be paid before the first invoice is available. Once the first invoice is factored the contract can become self financing. However, getting to the first invoice can be a challenge. Below we have listed some alternatives to a traditional bank loan that may help in this situation.
Supplier Early Payment
One of the frequent issues with contracts is that your supplier needs to be paid before you invoice your customer. In many cases when the supplier is in the United States and the products needed are off the shelf we can pay the supplier before shipment. If the product is not off the shelf or if the supplier is over seas then Purchase Order Financing may be an option.
Micro loans are sometimes available to provide initial funds for a project then once invoices are issued the invoices can be factored. This will require a relationship between the lender and the factor, in some cases the factor will pay the micro loan payment out of the factoring proceeds.
Cash Flow Loans
Cash flow loans are based on the average bank account balance of your company. Many companies can get a cash flow loan to help pay startup costs and then factor invoices once they are issued. From this point on the can be financed through invoice factoring
Using Other Projects to Fund the Startup
If you have other ongoing projects then one of the simplest ways to fund a new project startup is to invoice factor the invoices of another project. By releasing the funds in the other project earlier through invoice factoring you can access funds to jump start the new project.
These are just a few of the options available. The benefit with most of these is that they can be combined with factoring as an ongoing process. Feel free to contact us here and we’d be delighted to talk more about what options would work best for you.