Financing Your Security Guard Company With Invoice Factoring
Invoice factoring is the perfect solution for a good number of industries. Security guard firms are in an industry that lends itself well to this sort of business financing. Such firms will find that they will be able to receive cash upfront for jobs that they normally send invoices to.
Therefore, instead of waiting 30-90 days before payment, they can receive cash within 7 days after completing the job. This almost immediate access to money that they have already earned will give them more options. If they want to take on more clients, they will have the capital to do it. If they need to pay bills already outstanding, they can do this as well. In summary, invoice factoring can significantly improve any cash flow problems.
Security guard companies rarely get paid up front. Therefore, the business owner has to front the costs until they are paid by the client. This will include paying workers and any other overhead associated with the job. Depending on how that particular company bills that can be anywhere from 15 to 90 days.
During this time, the company receives absolutely no revenue, unless the invoices from other jobs are coming in. Having to wait for 30 days (or whatever the payment period actually is) can be tough financially, especially for a small company. They may have difficulties paying their security guards or whatever overhead costs they have associated with their business.
Perhaps the most obvious solution would be to attempt to get a loan. However, this may or may not be possible. Companies that have not been in business long enough may not qualify for a loan. Those with average to poor credit may not qualify either. Other companies may simply prefer not to carry a lot of debt. All of these scenarios leave the company in a bind. A good alternative might be invoice factoring.
Invoice factoring allows a security guard company to get paid upfront for those invoices by selling them to a company willing to purchase them. A factoring company buys invoices at a discounted rate that ranges from 85%-90% of the full value of the invoice. This money is paid cash and can be used right away.
After the invoice factoring firm buys the invoice, they will then collect the outstanding invoices from those that owe them. This collection service can be fantastic for companies that don’t have a collection department of their own. After all monies are collected, they are returned to the company that originally sold the invoices. The factor is paid based on an agreed upon formula.
This sort of financing can be especially helpful for companies that have bad (or average) credit and don’t qualify for a traditional loan. This is because invoice factoring is dependent upon the credit worthiness of the holder of the invoice and not those who are owed them.