Fund your payroll and strengthen your team

Why Manufacturing companies need a finance partner?

The manufacturing industry is a working capital intensive industry. Labor, equipment, material, facility and logistics costs can add up for each job that is being taken on. Having enough working capital is paramount to a manufacturing business being able to grow.

What many manufacturing companies find

Many companies in manufacturing find they need to spend the time and money to order the parts or materials, pay for assembly, and have it shipped to the customer just to be able to invoice for a job. Then once the invoice is submitted, it still can take from 30-60 or more days to get paid for that job. Meanwhile the next order is in and you have to use your own working capital to manufacturer the order of another client or the next project.

How invoice factoring can help

Invoice factoring typically can get you 80-90% of the invoice value in cash on the day you submit the invoice to your client. This enables the manufacturing company to have the cash in hand to pay for the costs of the next project. When the client pays the invoice, the factor takes their fee of generally 1-3% of the invoice value and the manufacturer then receives the balance. This is a great way for a manufacturer to quickly scale up and have the working capital needed for continued growth.

Letters of Credit/ PO financing for Manufacturers:

Another useful finance tool can be Letters of Credit. This is when a finance company essentially guarantees payment to an overseas manufacturer enabling them to go ahead and make the product and so the manufacturer or distributor doesn't need to have the money for production up front. Check out our article on this at Letters of credit.

How a Manufacturer gets set up with factoring

Here are the basic 4 steps:

Quickly Sign Up - Just provide your full name, email and create a password.

Apply and Submit Info - Fill out and upload some basic information about your business.

Get Back to Work - Get back to doing your job while we get everything set up for you.

Accept and Submit for Funding - Sign our contract and upload invoices for verification and funding.

If you have any questions or want to discuss how Meritus can help provide accounts receivable factoring or import financing for your business, contact us at 877-648-3709 or complete the contact form.

Many freight forwarders come across cash flow problems at some point. Normally, this results because they have to pay shippers, warehouses and other service providers in the supply chain before their customers pay them. This can create big problems for startups, growing businesses, or any business without cash reserves.

Obviously, if you can't pay your carriers,(warehouse rent and suppliers) you're not staying in business for long. Some freight forwarders try to solve this problem by paying more slowly than they get paid, but this creates more problems then it solves. Eventually, two of your most important assets, your credit standing and your business reputation, diminish if you do business this way.

Invoice Factoring: A Better Solution

Let me offer you a better solution. It's called invoice factoring and it is tailor made for businesses, such as freight forwarders. Here's how it helps you speed up your cash flow and solve your cash flow problem. It starts with your accounts receivable invoices. The factoring company reviews your invoices and the credit worthiness of your customers. They consider your credit history secondarily, if at all. Then, based on your invoices, they make a decision to fund your need. Most factors give you 80% to 90% of the face value of your invoices upfront within 24 to 48 hours. Then they take on the responsibility of collecting on your invoices. You don't have to lift a finger, you just keep focusing on what you do best, managing the supply chain.  After the factor receives full payment on the invoices, you get the remaining value of the invoices, less the factoring fee. Normally, this fee runs about 1% to 3%, and depends on the quality and value of your invoices.

A Summary of the Benefits

Now you've probably already realized the benefits in this arrangement, but here's a quick summary:

• You get the cash flow you need to pay your suppliers and vendors within 24 to 48 hours of getting set up with the factor.
• Even if you're a startup or have a compromised credit history you can still get funded based on your customers creditworthiness or time in business.
• This is not a loan, and it does not go on your books as outstanding debt. In addition, you do not have to present the intrusive financial and personal disclosures required for bank loans.
• You can reassign or eliminate your accounts receivable personnel, and save money on your operating costs because the factor collects invoice payments.
• The value of your invoices determines your funding capacity, not the bank.

I hope you see how invoice factoring is a great fit for freight forwarders. Keep in mind, you do not have to factor all your invoices, but I recommend you at least try it with a portion of your invoices and discover the benefits. If you have any questions, need more details, or exact terms contact us or sign up today!

In the U.S., the trucking industry generates 255 billion in revenue each year. According to American Transportation Research Institute, there are 500,000 trucking companies, but only four percent of these trucking companies have more than 28 trucks. The other 96 percent have 28 trucks or less, and 82 percent have six trucks or fewer. So, trucking is a multibillion dollar industry comprised mostly of small, independent operators.

Why is this information important?

There are two main challenges that trucking companies come across when looking at their business's finances. The first being cash flow and obtaining a business loan from the bank to keep up with payroll, expenses, etc. The second challenge being waiting the 60 to 90 days that it can take for clients to settle their invoices. With the majority of trucking companies in the United States having under 28 trucks, this also means that their teams are relatively small as well. People are wearing multiple hats to try and get things done, tasks may get missed, and scaling is challenging without the proper cash flow backing them.

Having a lack of cash flow can quickly become what is holding you back from onboarding an A-player in your industry, keeping up with payroll, paying vendors, and frankly, growing your business beyond what it is today. Freight factoring is one way to eliminate these obstacles, especially for smaller trucking companies or independent operators.

What Is Freight Factoring?

You've likely heard of factoring in the past, and it is basically a way to create cash flow immediately instead of waiting to collect on all your invoices. The freight factoring company pays you 85 percent or more upfront and then collects the invoice payments for you. Once the payments are collected they send you the rest of the payments, less a factoring fee. The fee normally runs from one to three percent of the dollar amount factored.

Many factoring companies specialize in trucking/transportation/freight forwarding, but the details of their proposals may vary widely. The number of options and the structure of the various agreements can get confusing.

In this article we will provide an overview of what to look at when comparing factoring companies.

1. How quickly can you get funding?

You will typically receive funding after the factoring company has received your submitted invoices. Some factors provide same day funding or next-day funding, while others will only fund after verifying your customer's bills, which can take more than 2 or 3 days.

The timeframe in which you receive your funding is one of the most crucial aspects of the contract that you need to consider. If you know that you typically need funding right away, then you will need to look at factoring companies that provide same or next-day funding.

2. What kind of customer service does the company provide?

Like any industry, there are varying levels of services when you need to get in touch with a representative. With finances, many people like to have the option of speaking with a person right away. If an issue arises where they need access to their funding sooner than expected or something has gone wrong with their account, having access to a person or a nearby office can be beneficial.

Here at Meritus Capital, we have local offices in a variety or locations. We make a point of interacting with our customers in person as often as we can, and we encourage customers to travel to our offices if it isn't too far for them. For example, we have team members located in Toronto, Canada, and we have a local office in Buffalo, New York. Should our Toronto clients want to make the short trip to Buffalo to visit our office, we encourage them to do so.

The kind of interactions you want to have with your factoring company is important to consider. You do not want to end up working with a company that only offers email support if you're someone who prefers to interact over the phone or in person. Make sure you do your homework before you set up a long-term arrangement.

3. Does the factoring company provide credit protection?

There are two kinds of factors: non-recourse and recourse. Recourse factors have the option of charging you back for any unpaid invoices, but the non-recourse factors provide credit protection. This is a very common question that comes up when we are speaking with companies about factoring. They want to know what happens should a client's invoice become delinquent and ultimately, become unpaid.

Having credit protection means that you will get paid on the invoice even if the invoice goes unpaid. Since they take on more risk, non-recourse factoring normally costs more.

Especially with a smaller company, it can be difficult to have a backup plan should an invoice go unpaid. It's important to consider what kind of strategy you have in place for unpaid invoices. Will you contact the customer or pursue them for the funds that they owe? Or, will you swallow the cost yourself and move on? Having an established plan of what you will do will help you establish if you will need recourse or non-recourse factoring.

4. How much is advanced and how much is held in reserve?

Factoring companies normally provide 85 percent or more when you submit an invoice. They will hold on to the remaining amount until the invoice is paid by the client. Once the invoice is settled in full, they will release the remaining funds, minus their factoring fee. The fee tends to be somewhere between one and three percent.

5. What are the rates and fees?

Factoring fees can come in many different shapes and sizes. The main thing you need to make sure of is that you understand what fees are going to be incurred by doing business with a factoring company. Make sure to ask the right questions! Here are some ways in which fees can be charged:

1. A percentage of the invoice value
2. They can depend on how long the invoice remains unpaid
3. There can be wire and ACH fees
4. Administrative fees
5. Interest
6. And much more.

Make sure you read the contract and understand all of the fees in which you are going to be charged so that you can make a smart decision about which structure is the best and most cost effective for you. The best way to compare proposals is to figure out the total cost of the fees as a percentage of the dollar amount of the factored invoices.

Flat Fees Versus Tiered Rates

The two most common fees charged are flat fees and tiered rate fees. Here is a quick explanation on how they typically work.

Flat Fees

Flat fees are really just how they sound. They are when a factoring company charges a one-time flat discount fee for the factoring of the invoice regardless of how long or how quickly the invoice is paid. This can be great, as it provides an upfront knowledge of exactly what your finance costs are going to be, but it can also prove expensive if your customers generally pay quickly.

If a factoring company charges a three-percent flat rate and your clients pay in 60-90 days, well then you are getting quite a good deal. But, if three-percent is charged and most of your clients pay in 7-30 days, well three-percent is a lot for such a short time.

Look over your customer list or aging and think about how long on average it takes for your customers to pay and that will help you in determining whether a flat rate really is a good deal for you or not.

Trucking companies keep our economy moving by transporting goods all over the country. Today, I want to show you how transportation companies can use factoring to solidify and build their businesses. So whether you are a brand new trucking company with one or two trucks or a company that has been around forever with a huge fleet, let me show you how factoring can benefit you.

What is factoring?

No matter if you call it freight bill factoring, freight factoring, truck factoring or transportation factoring, factoring basically works the same way. Simply put, accounts receivable or invoice factoring is the sale of your uncollected invoices for a discounted rate. It is not a loan. The factor buys your invoices at a discount and pays you a percentage of the face value upfront. The factoring company then takes on the burden of collecting the unpaid invoices. Once the invoices are fully collected, the factoring company pays you the rest of the contracted amount.

How Does This Benefit A Trucking Company?

Let me explain how this works with a little story. Big Load Trucking Company transports many loads across the country. They drop off the goods and wait 30 to 90 days to collect payment on the invoices. In the meantime, they run many more loads and have to put gas in their trucks, keep them serviced and pay their employees. As they are waiting to get paid, they are laying out a lot of money for operating costs. In simple terms, factoring gives you cash flow immediately to operate your business. It eliminates the 30 to 90 day waiting period. Many times you can get your payments within 24 to 48 hours of contacting the factoring company.

How Much Does Factoring Cost?

Now I can't speak for every factoring company, but I can tell you what Meritus charges. Normally we pay you 97% to 99% of the face value of your invoices. We give you 80% to 90% upfront and the remainder when the invoices are collected. Plus, you don’t have to collect the invoices yourself. We do all that for you. All you have to do is keep moving loads and getting paid.

This cash flow enables you to expand your fleet, hire more drivers, eliminate unnecessary accounts receivable positions, maintain your rigs, etc.

Is It Worth It?

Our clients think so and here's why. They find that consistent cash flow reduces stress and allows them to focus on the most profitable task of moving more goods.  As you know, transporting more loads means generating more revenue for your trucking company.

How Can I Get Started?‚Äç

Sign up or contact us today to speak with a knowledgable representative that can help you!

Energize means to activate or to give more life, which is exactly what cash flow does for a business. Adequate cash flow brings a business to life. Cash flow makes it grow. As the old saying goes, If you are not busy growing, you are busy dying”. There is nothing worse than watching a great idea a great business with a great idea, a product, or a service die because it lacks one thing. That one thing is cash flow, the lifeblood of a business.

That is why today I'd like to talk about how accounts receivable factoring can energize your business. This is particularly for those of you who have been stagnating while waiting for your invoices to be paid. You've been waiting for 30, 60, or 90 days just hoping for the cash to come in so you can do what you need to do to operate and grow your business whether that be start a new sales campaign, launch a new product or replenish your inventory.

You've been stressed out, robbing Peter to pay Paul (as the saying goes), all because you do not have the liquid cash to operate your company like you need to.

The Basics of Factoring

Let's start with the basics. Do you have invoices from reliable customers who have proven they will eventually pay you? If so, the next step is really fairly simple. Get in touch with a factoring company. Find out what they will pay you for the invoices. These percentages can vary widely. We normally pay 97% to 99% of face value. So if you have a $100,000 in invoices, you can receive $97,000 to $99,000 based on the details of your situation. Factoring companies will probably have you forward your accounts receivable aging report and examine three things.

• How many accounts receivable do you have?
• How long have the receivables been outstanding?
• What are the credit ratings and credit histories of the customers?
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That was not meant to be self-promotional, but just an explanation of how factoring works. How it produces cash you can use for your business. How you can take a stack of unpaid invoices and turn them into cash on hand to invest in your business.

There are basically three ways to infuse your business with cash. You can get a loan, generate revenue through sales, or take on investors.

What Does It Cost You to Obtain the Cash You Need?

What is the cost of going to the bank and applying for a loan? First, you have to be able to get a loan, and that is not easy in the current environment. Even if you can, it may cost you some collateral that the bank wants to secure the loan with, or it may cost you a higher credit score because you are utilizing more of your available credit. It may only cost you the time and the hassle of filling out the application and revealing every detail of your company. Even if you get approved, it will cost you extra time before you actually have the money in hand to operate your business. Not to mention the cost of the credit each month in the form of an interest payment. So as you see, getting a loan has a cost.

‍The Cost of Taking on Investors‍

What does it cost you to take on investors? As every entrepreneur knows, it costs you a slice of your business. That costs you control of your company, or in other words, the ability to make your own decisions and run your business the way you think is best. It also costs you a piece of your profits, or future earnings. Either way, taking on investors costs you something.‍

The Cost of Generating Revenue Through Sales‍

Now this one is a little more fun to talk about because it is about investing in your business to make it grow, i.e. cash flow. The cost of generating revenue through sales is the cost of the cash you reinvest into operating your business better, hiring great employees, expanding your sales and marketing efforts, and producing improved products and services.

The question is: Is the business growth that could come from factoring your accounts receivable worth 1% to 3% of your invoices? I want you to seriously sit down and ask yourself that question. Is the ROI worth the investment of time to explore growing your business with your assets, not someone else's?

The economy is gradually improving, but many businesses are still feeling the effects of a financial crisis hangover, and wondering if the growth will continue. While some banks are loosening their purse strings, there are still many businesses that can't get the money they need. Even those that can access loans are not getting enough capital to maximize their profits. If you're one of those who needs money to grow and can‚ access the capital you need, here's how factoring can get you over the hump.

Entrepreneurs

For years, many entrepreneurs used home equity lines of credit to fund their business growth. After the housing crisis, however, banks were more reluctant to provide these home equity loans. Also, your home may have lost value and you no longer have equity to offer as collateral on a loan. Some entrepreneurs solved this problem by turning to factoring as replacement financing. If you are in this predicament, factoring can work for you as well.

Even with the economy stabilizing, most banks still have stricter credit requirements, particularly for entrepreneurs in the early stages of growth.  Business loans are not really an option for many entrepreneurs since banks look at traditional metrics, such as cash flow and debt ratios. When you are starting out those are not always the best indicators of financial health. Factoring companies can offer entrepreneurs financing because they analyze other metrics and use your company's accounts receivables as collateral. Factors provide an upfront advance of 70 to 90 percent of receivables. After collecting your payments for you, the factor transfers 97 to 99 percent of the collected amount back to you. Although there are different types of factoring arrangements, some factors even provide credit protection for your growing company by taking the hit if the invoiced company does not pay or goes out of business.

Unbankable Businesses

During the recent financial crisis, your business may have struggled. Due to these difficulties, your relationship with your bank was damaged. Now, you need time to shore up your financials and gain back your credit standing. Even though your business is doing better now, you still need financing to bridge the gap between now and the one to three years it takes to re-establish credit. Factoring is a financing method you can use until you qualify for traditional bank loans again. Some factoring companies may require a minimum commitment period or a guaranteed monthly fee, but others do not. Make sure you understand the commitment you are making upfront.

Fast-Growing Companies That Want to Increase Profits

Even though the lending environment is tougher than it used to be, some of you can still get financing from a traditional bank. So why use factoring when it is typically more expensive than a bank loan? You may be in a situation where more capital could help you generate more sales and profits. If your growing company can only get enough money from the bank to do $5 million in sales that generate $500,000 in profits, you’re leaving money on the table. What if you could borrow enough cash to bring in $20 million in sales and $2 million in profits? Even though you spend an additional $300,000 in financing costs, you would still realize an extra profit of $1.2 million dollars. ($1.5 million profit from the additional sales, less a 2% factoring fee.)

You can benefit from accounts receivable factoring if you are in any of these situations. For more details, contact us and we can advise you on how to best set up your factoring finance.

No Access To Capital?

Working capital requirements can very quickly become a growth inhibitor to a new business. Startups lack credit history and so typically business owners find that they have limited options to get financing. They often turn to family and friends, pitch their business to investors, or simply bootstrap the business and grow at a much slower rate than what may be possible with financial backing.

Invoice Factoring- A good option for my startup?

There is another way. B2B startup businesses that are soon to begin billing customers or are generating invoices can partner up with a factoring company and utilize them to finance their growing startup. The factoring company can help by:

• Providing credit insights for new customers
• Bringing working capital to the table
• Giving you access to increasing funds as you grow
• Taking no equity to do so
  

Unlike a bank, a factoring company looks to the credit quality of a business's customers allowing even a brand new business with good customers to gain this type of financing.

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How does factoring work for startups?

A factoring company funds based on outstanding invoices/ accounts receivable. So once a business has an agreement with a factoring company, the business will submit copies of their outstanding invoices to the factoring company. The factoring company will then verify the work is done and will advance between 80-90% of the invoice value in most cases. This enables the startup business to have access to cash or working capital for their business within hours of creating their first ever invoice.

This enables a startup to:

• Make payroll
• Buy more inventory
• Re-invest in the business in whatever way makes the most sense.
  

Once the invoice is paid by the startup's customer, the factoring company would receive a small fee for providing the service (generally around 1.5% of the invoice value depending on how long the client takes to pay) and the startup would receive the rest at that time.

As businesses are constantly generating invoices for work completed, this can act as a type of line of credit for new businesses that will continue to grow as they grow.

Setting up Factoring for a startup

At Meritus Capital, we find getting a startup set up with us can be the best, easiest and quickest time to do so as there is no entity history, previous bank loans, filings, suits or the like to complicate the process. Here are a few key points about the process.

• We have a quick and easy online application that can be filled out and where select documents can be uploaded.
• Once we agree to the basic terms, we will provide you with a contract to sign.
• We can go from start to funding sometimes in as little as a few days to a week!
  

If you have any more questions, please do reach out to anyone on our team or fill out our application today to get started!

Like many others in the industry, A.B. Staffing was looking to expand their operations after another challenging year in the staffing sector. Confronted with the need for capital to expand, A.B. Staffing faced a common hurdle securing funds quickly without the complex, equity-diluting process that’s typical of raising capital. Their goal was clear – to find a way to scale efficiently without relinquishing ownership.

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Choosing an alternative path, they partnered with Meritus Capital for financial support. This partnership offered a much-needed advantage with immediate access to the capital they required, sidestepping the pitfalls of equity dilution.

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With the resources to move forward, A.B. Staffing leveraged this opportunity to broaden their operations and tackle new opportunities, all without sacrificing ownership control of their business.

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Meritus Capital's tailored financial solutions empowered the staffing company, providing hassle-free, flexible, and immediate access to funding. Today, A.B. Staffing has expanded beyond their initial goals and continues to be a major leader in the staffing industry.

Having experienced a nearly $36MM dollar increase in annual sales, this staffing logistics company was hit hard with growing pains. Sales increases are exciting – but when combined with a shortage of resources, they can create serious operational hurdles. To make matters worse, this company’s previous factor was no longer willing to work with them due to their rapid growth pace.

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This company needed a solution that would give them:

• A high advance rate of over 93%
• A low factoring fee
• Staffing industry expertise to support their scaling efforts

Meritus Capital saw this company’s setback as an opportunity. After taking them on as a new client, the Meritus team delivered quickly on all fronts:

• A rate that met their growth needs
• 25% savings on their factoring rate
• A partnership driven by an industry-specific growth strategy

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The result?

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The client was well-positioned to jump on the exciting opportunities coming their way. Most importantly, they gained a financial partner who set them up for long-term profitability, and plenty of room to keep growing.

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Staffing is a highly competitive industry that thrives on service excellence – and working with a likeminded factor makes all the difference. Meritus is here to support your business with the tools and flexibility to face rapid growth with confidence.

Meritus Capital had a well-established direct hire client who was hungry for an expansion into the temporary staffing market. It was the right move for their business, but it came with time and cash flow challenges.

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Payday doesn’t ‘wait.’

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Our client was responsible for covering their temporary workers’ payroll expenses. This means they couldn’t risk waiting on employers to pay their invoices, and that extra cash flow was needed to keep the business running as smoothly as possible.

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Our client also needed to seize growth opportunities coming from a new market. With growth opportunities, comes greater overhead. Think: extra costs for recruitment advertising, interviewing, background checks, and all the administrative work in between.

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Eager to help, the Meritus Team got to work on a new payroll funding line for our client.

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The result?

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A financing plan that fueled the company’s expansion by 13 times in their new temporary staffing division.

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With the right financing partner, you can tap into new markets with confidence. In this case, Meritus Capital was instrumental in broadening our client’s range of staffing needs and revenue streams.  

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The staffing industry stands as one of the most competitive. Whether you’re starting from scratch or expanding your offerings to gain an edge, Meritus Capital is here to support you in navigating challenges, capitalizing on market trends, and driving sustainable growth so your business can make its mark.

This successful staffing company generating $30MM annually was facing a significant challenge: high financing fees from their previous funder were severely limiting their growth potential.

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When fees are excessively high, they can create substantial obstacles for businesses. These fees drain valuable capital that could otherwise be reinvested into essential areas like expansion, hiring, or new projects. As a result, companies often find themselves:

• Trapped in a cycle of debt, constantly playing catch-up, and shrinking profit margins.
  

• Unable to seize new opportunities or improve operational flow, creating roadblocks to growth.

Here’s how Meritus turned things around for them:

• Introduced a competitive and cost-effective financing solution: We customized our approach to meet the staffing company’s specific needs, easing their financial strain.
• Saved over $100,000 in financing costs within 12 months: A significant reduction in fees freed up hard-earned capital that had previously been tied up.
• Empowered the company to reinvest in growth initiatives: With the financial relief, they could focus on expanding operations and pursuing new opportunities.

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By customizing our solution, we alleviated the burden of high fees, giving the company the financial space to concentrate on what really matters: growth and longevity.

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Every day, our team is excited to help businesses overcome challenges and achieve new milestones. By understanding each client's unique needs and addressing the core issues, we’re proud to have helped hundreds of businesses reach their fullest potential.