Invoice Factoring in Washington
Washington Invoice Factoring
The health of the small business environment is very important to Washington State’s economy. The 555,360 of Washington’s small businesses employ roughly 1.25 million workers, over half (53.1%) of Washington’s working population.1
But small businesses often do contract work for larger corporations, municipalities and organizations who have a vested interest, arguably a fiduciary duty to stakeholders, to delay payments as long as possible. This improves their own credit conversion cycle, making them, all else equal, more profitable or financially secure. Unfortunately, the small business owner often must wait 30/60/90 or even 180 days for payment. Some must borrow money to make ends meet.
Obtaining a traditional small business line of credit from a community bank can be difficult. The process can also drag out for weeks, especially for companies with limited operating history and profitability. So if you need capital to pay for this week’s payroll, a bank won’t be of much help. Further, taking on increased debt levels for capital needs might violate existing covenants your business may have with certain traditional banks.
Other options include merchant cash advances can hit you with extremely high loan rates. A better solution is invoice factoring, the discounted sale of invoices to a third-party buyer. This unlocks the cash that’s tied up in these accounts receivable. Factoring is a popular small business funding option for many businesses in a variety of industries.
Major Washington Industries include:
- Construction
- Food Manufacturing and Agriculture
- Professional, Scientific and Technical
Washington Construction
Like Arizona and New York, construction in Washington State is booming, with nearly 50,000 small construction firms.2 A major component of this activity is subsidized from the state and local governments through the use of grants. These are often used to build behavioral health facilities, energy efficient solar projects for higher education institutions, construction and renovation of social service centers and nonresidential youth rec facilities (like the Boys and Girls Clubs of America).3
If your construction company is a beneficiary of such grants and is involved in the construction, you need to be aware of the fiscal condition of many state municipalities.
As veteran businesses will attest, credit can dry up very quickly in an economic crisis. So be proactive about accessing funds through accounts receivable factoring which incurs no additional debt and has little reliance on the credit environment.
Washington Food Manufacturing
Washington State is also known for having fantastic food offerings. One small business, Panzanella Bread Company, is a great example. The artisan baker has been providing its delicious Italian breads to businesses in Everett (and beyond) since 1989.4 But operating as a wholesale basis only, Panzanella also knows it’s not always easy to collect on outstanding invoices according to its terms.
So the business has actually put a payment portal on its website for its business customers to pay invoices. It instructs them to enter the invoice number and have a PayPal account and they handle the rest.5
Many small businesses cannot rely on customers paying in prescribed net 30 terms. This often affects their ability to make payroll, capitalize on a strategic business opportunity or obtain a supplier discount from a high-volume order. Invoice factoring provides funding (often same day) which is a much better option than waiting 60-90 days for payment which can cause serious cash flow problems. Remember, 82% of business failures are due to poor cash management.6
Invoice Factoring Companies in Washington
Luckily, there are a number of invoice factoring companies in Washington. These alternative finance specialists purchase your company’s outstanding B2B invoices (subject to the credit worthiness of your business customers). While these firms generally only finance B2B receivables, it is possible to find some factors willing to handle B2C invoices.
While many have branch offices in different states, we typically recommend a factoring company headquartered in the same state as your small business. An invoice factoring company may have insight into credit information that is better than yours. This provides them the ability to consult which customers to extend credit sales to. Many factors are familiar the same delinquent business customers (known as account debtors) and have dealt with them in the past. We’ve found this to be the case in states such as Georgia and North Carolina.
Here are a few invoice financing companies with headquarters in Washington:
- Universal Funding Corp. (Spokane)
- Allegiant Business Finance (Seattle)
- WW Payment Systems, Inc. (Vancouver, WA)
- Access Business Finance (Bellevue)
This is not a full list of factoring companies in Washington. If your company is looking for small business funding or general information on how invoice factoring can help, just provide us some basic information. Let us know your corporate structure (sole proprietorship, S-Corp, LLC, etc.), the average size of your monthly accounts receivable and their aging schedule. We would be glad to help your small business reach its full potential.
1,2https://www.sba.gov/sites/default/files/advocacy/Washington.pdf
3http://www.commerce.wa.gov/building-infrastructure/capital-facilities/