Invoice Factoring in Pennsylvania
Pennsylvania Invoice Factoring
The Keystone State is a sports crazy state, steeped in patriotism and working class values. But the state also has a strong entrepreneurial mindset-its home to nearly 1 million small businesses that employ nearly half of the state’s private work force.1
But small businesses may endure long wait times for repayment of credit sales with customers (known as account debtors). Instead of waiting 60 or 90 days for payment or paying crazy rates to a merchant cash advance company, consider invoice factoring. Factoring is the discounted sale of outstanding invoices to a third-party buyer, for up-front cash.
There are two main types of invoice factoring; recourse and non recourse factoring. Under recourse factoring, the factoring company does not take on the credit risk of your customer defaulting on the invoiced amount. You’re still ‘on the hook’ to the factor for the amount advanced.
With non-recourse factoring, the credit risk of your customer is transferred to the factor. This can be used as a shrewd risk management tool for your business if you have an extremely large, single invoice or a high concentration of invoices with just a few customers.
Keep in mind, under most non recourse agreements, it is the credit risk that is transferred (meaning the account debtor is financially unable to pay). It does not cover non-payment for other reasons such as defective products, unsatisfied service or a separate business dispute. Be sure and read your factoring agreement carefully beforehand.
It does cost more to factor receivables on a non-recourse basis but if you have a very large outstanding invoice to compensate the factor for the additional risk they’re taking on.
Common Invoice Factoring Industries in Pennsylvania:
- Oil & Gas (Shale)
- Leisure and Entertainment
- Mining
Many people don’t realize that Titusville, Pennsylvania (established in 1859) is really the birthplace of the modern oil industry, not Texas or Oklahoma.2 Today, the Marcellus Shale shows enormous potential to keep our country energy independent.
Not surprisingly, there are lots of oilfield service companies in Pennsylvania. For example, transport or trucking factoring companies provide water for the fracking industry.
Many provide services for major energy players including, Gulfport, Continental Resources, Anadarko Pete and MLP veteran Kinder Morgan. While well-known names can be lucrative accounts, many small businesses have had to extend credit sales to land the accounts. Sometimes, this can delay payment.
It helps to factor invoices with a company that has experience dealing with such companies. Also, your business might consider utilizing a non-recourse factoring arrangement if you’ve billed a large amount to a single customer in such a volatile industry. Energy companies operate in a boom or bust environment that ebbs and flows with the commodity prices.
With so many sporting events in Pennsylvania (in addition to the Steelers, Pirates, 76ers, Nittany Lions football and Penguins) there’s a strong demand for staffing companies to help with operations. Temporary workers such as security guards, janitors or food distributors are often in high demand.
But these businesses often must wait for repayment up to 60-90 days. This thwarts your ability to pay these employees in the meantime since staffers typically don’t receive payment until the work has been completed. This is a problem for existing workers who are waiting for their weekly paychecks. As such, many staffing companies partner with Pennsylvania factoring companies.
Invoice Factoring Companies in Pennsylvania
If your business is located in or around the Pennsylvania area, you have plenty of small business funding options. To meet the cash flow needs of these businesses, several factoring companies, known as ‘factors’, provide alternative funding for businesses that have been turned down by mainstream financiers. Below are a few invoice factoring companies with operations in Pennsylvania:
- 48 Factoring (Philadelphia)
- Northwest Savings Bank (Warren)
- Riviera Finance (Pittsburgh and Harrisburg)
This is just a small sample of invoice factoring companies in Pennsylvania. When choosing a factoring company to partner with, there are some questions you should ask first. Namely, how long have they been factoring receivables, whether they provide a dedicated representative, are there monthly minimums, the different types of financing provided and whether they offer non-recourse factoring. If possible, read any factoring company reviews on them.
Some Pennsylvania factoring companies have some minimum qualifications a small business is expected to meet before partnering with. First, the business must have been in business for one full year. This is surely less than a traditional bank will require.
Second, there must be a minimum of $120,000 in sales over the prior twelve months (TTM). Average monthly accounts receivable is a pretty standard variable when applying for accounts receivable factoring.
If your small business has been turned down for by a local bank for a loan or small business line of credit, consider small business factoring for immediate funding.