The textiles industry is one of the first sectors of the economy to use factoring as part of the typical way to provide cash flow for the business. It is the very nature of the textiles industry that makes it a great match for this funding option.
In this industry business owners of the textile mills and the garment manufacturing companies have a very large outlay for raw material, labor, and equipment. However, they may be completing orders that take weeks to finish, ship and invoice for, creating a deficit in cash on hand to make payroll, buy new raw materials and to take on new contracts to continue to bring in revenue.
The Ins and Outs of Factoring
Through textiles manufacturing invoice factoring a company can sell some or all of those yet to be paid accounts receivables to a factoring service. The factor then advances the company a percentage of the total value of the invoices sold, which can be up to or in excess of 80%.
This money is available to the textile company in days. It is not a loan and does not need to be repaid, allowing the company to have immediate access to the money to buy materials and equipment, make payroll and perhaps even earn discounts from suppliers for early payment.
The factor then collects for the invoices from the textile company’s customers, managing all the back office paperwork required for the account. Upon full payment by your customer the factor deducts the fees for the service and provides the balance of the 20% reserve held back.
What it Means
When choosing textiles manufacturing invoice factoring over a business loan you have several distinct advantages. You have the very quick access to the working capital you need, without the long or short-term repayment schedule found with a loan.
Additionally, you have the freedom and the flexibility to factor the accounts receivable you want to address the cash flow shortage. Factors can provide millions of dollars in funds in just days, giving you the ability to take on new work without having to worry about how to pay for materials, buy equipment, or bring in new employees to get the job done.
Through the use of textiles manufacturing invoice factoring you also have a dedicated back office through the factor to address the full management of the accounts receivable they have assumed. This is really a win-win situation for textile companies, which is why it continues to be an ideal solution in a very dynamic industry.