Invoice Factoring in Texas
Texas Invoice Factoring
Access to traditional capital for small or medium-sized businesses in Texas without a long operating history or financial statements is difficult. Banks will often turn down startups (often very high growth companies) which lack bottom line profitability. And this is the case during strong economic ties (forget about in a recession).
Small businesses are often forced to take on new business partners or sell equity to raise capital which often turns out to be a bad idea down the road. There is another option known as invoice factoring (in case you’re wondering, what is factoring?, it’s a pretty simple concept, with a long history). Factoring is the discounted selling of accounts receivables to a third-party buyer. Thus, factoring invoices means they are actually sold to a third party before they are ever collected.
Many businesses have most of cash tied up in accounts receivable and inventory. Consequently, they often don’t qualify for traditional small business funding. Luckily, there are a number of factoring companies, known as ‘factors”, who will buy your outstanding invoices at a discount to face value. These advanced funds can be used to pay down debt, make payroll or capitalize on a new business opportunity that would otherwise have passed while waiting for payment.
Major Industries in Texas
Important Texas industries include the energy sector (specifically, oil and gas enterprises, transportation and manufacturing).1 Often, these industries result in payment delays for suppliers and subcontractors which can hamper a small business’ growth and profitability. Factoring is an increasingly popular financing option for these small businesses in the state of Texas. Popular industries include:
- Energy (Primarily oil & gas)
- Transportation & Logistics
Texas Energy Industry
Texas is inextricably linked to the boom and bust cycle of the oil. Every wildcatter out there wants to be the next J.R. from Dallas. With the possible exception of California, few states exemplify the entrepreneurial spirit of Texas. With areas such as the Permian Basin, Texas is dotted with opportunity.
The multi-national energy giant Exxon is headquartered in Texas. It is also one of its largest employers. If yours are one of the thousands of small and medium sized companies that are Exxon suppliers or contractors, you also know they can sometimes take their time paying accounts receivable.
It’s not exactly their fault. Many large, publicly traded corporations typically delay payments to their suppliers as long as possible, since it makes them more profitable. After all, they have numerous stakeholders to consider including workers, stockholders and charitable beneficiaries.
A longtime member of the Dow Jones Industrial Average, Exxon shares (symbol XOM) are widely held in the retirement accounts and public pension funds of millions of Americans. But the drop in the price of crude oil threatens Exxon’s profitability and the state’s fortunes at large. Whether a Republican administration will have any positive effect on the company remains to be seen but the fact that former Exxon-CEO Rex Tillerson is our new Secretary of State certainly can’t hurt.
For a variety of reasons, tax exemption being one, many Fortune 500 companies choose to operate in Texas. In fact, 54 Fortune 500 companies were headquartered in Texas, second only to New York.2
Invoice Factoring Companies in Texas
The major players Texas industries have customers that are notoriously slow payers. Luckily, there are plenty of invoice factoring companies in Texas. Many are located in and around major cities like Dallas and Houston, but there are factors located throughout Texas.
Larger factoring companies often have branches in a number of different states, but it’s a good idea to utilize a factoring company headquartered in the same state as your business. This provides a degree of local expertise that is beneficial to any small business.
The factor may know a number of the account debtors and may already have a working relationship with them. For example, the factor’s credit and collection departments may be better than your own. There are a number of accounts receivable factoring companies headquartered in Texas:
- Advantage Business Capital (Houston)
- Diversified Lenders (Lubbock)
- Factor Funding Co. (Houston)
- Farwest Capital (Austin)
- Goodman Factors, a division of Independent Bank (Dallas)
- King Trade Capital (Dallas)
- Tarbox Factoring (Lubbock)
- Triumph Business Capital (Coppell)
- Vertex Financial (Dallas)
Invoice factoring provides a stable cash flow to make payroll, capitalize on strategic opportunities or meet existing liabilities. Accounts receivable factoring does not incur any new debt because you are actually selling assets (accounts receivable). The application process is generally pretty simple. You will need to provide some basic documents such as a duplicate of the Articles of Incorporation for your business, as well as copies of invoices and their aging schedule.
If your small business is interested in receiving more information from an invoice financing company near you, tell us a little about your business (location, industry, size of your average monthly invoices, etc.) and we can match you with the right factor from our network of invoice factoring companies in Texas. Don’t get locked into a long and expensive contract-get the right partner from the start. It will save your business considerable money, resources and headaches in the long run.