Paragon Financial Group is funding during the COVID-19 crisis.

How Payroll Financing Works for Commercial Cleaners

We all know that the banks do not just grant a friendly credit environment to the commercial cleaning industry. If they provide any money, then it usually isn’t enough. This often leads to an inability to grow your company due to a lack of funds. Well, there’s financing out there that is significantly rising in popularity in the janitorial industry. We call this Factoring. This type of funding focuses on your customer’s ability to pay, not yours.

How to Get Working Capital using Your Invoices

Factoring is the sale of your accounts receivable (invoices) to a funding source at a discount off the face value in exchange for immediate cash. We call this funding source Factor.

The process normally works like this: Your cleaning company provide services and issue an invoice to your customers. Without factoring, you need to wait 30-60 days for payment. With factoring, the factor directly purchases the invoice and advances an initial payment of approximately 90% of the invoiced amount. In most cases, you’ll have the funds in your account within the next 24 hours. When your customer pays the invoice (the factor will receive the payment directly), you’ll receive the remaining balance less the factor’s fee.

Factoring is a well-established type of business financing that produces immediate cash payments to a company; at the time of shipment, delivery, and invoicing a customer. In its basic form, American businesses have been using factoring business since Colonial times. Its origins go back even further, literally thousands of years to the early days of commerce.

What does Factoring Look like in America?

American consumers take part in a common form of factoring every time they use a credit card. There are 1.4 billion credit cards in circulation, 2.6 each for every American cardholder. In 1970 the average balance on individual cards was $649, increasing in 1986 to $1,472, and today it is an astounding $16,061! Millions of times a day, every business that provides customers with charge privileges using credit cards is the direct beneficiary of factoring. American retail industry depends on the factoring system, and without it, the national economy would be seriously handicapped.

In this familiar transaction, the issuing bank or card company is the factor-using the Visa, MasterCard, or other system-advancing the seller of merchandise or service cash immediately after your purchase, long before you pay. Because the seller gets cash upfront without having to wait for your payment. His money is not tied up in receivables. For the double privilege of making credit available to customers and getting immediate payment, the business is willing to pay a discount to the issuing bank or credit card company-typically two to four percent of the purchase price. Thus, for every $100 of merchandise you buy with a credit card, the seller gets $96 or $98 in immediate cash.

How is Payroll Funding Beneficial to Your Business?

Factoring accomplishes the same for commercial or business-to-business transactions. When you extend credit to a customer, you are essentially becoming that customer’s part-time banker. For the period credit is extended to Customer Smith (30 or 60 days) you become his lender, and he, your borrower. For the period of time credit is extended, you lose the value of that tied-up money because you can only anticipate payment. If Mr.Smith had paid cash, you could have invested that money immediately, then earning interest on it rather than having to wait. When Smith pays late, your cost increases still further.

Since there is no “free lunch” in business, someone has to pay the expenses of your extension of credit. Either you pay by lesser profits, or your other customers will have no other choice but to pay higher prices. In a marginal company, excessive credit extension and late customer receivables can spell disaster.

Best Factoring Company Get the Cash you need Today

Want to Turn Commercial Cleaning Invoices into Cash now?

Apply Now

Money When Your Business Needs It Most!™

  • Get Cash Today

    Best Factoring CompanyGet the Cash You Need Today

    Just fill out this quick & easy form!

  • This field is for validation purposes and should be left unchanged.
Get Cash Today
  • Quick Contact Form
  • This field is for validation purposes and should be left unchanged.

Back to Top

Best Factoring Company

Get Started Immediately