Houston Factoring for Businesses to Help Improve Cash Flow
As the Energy Capital of the World, Houston is widely known as an oil and gas town, but the truth is the fourth largest city in the U.S. is filled with people and companies working in a vast array of growing industries. From small family-owned businesses to large healthcare and technology firms to manufacturing and trade companies of all sizes, Houston is bustling with diversity and opportunity for the entrepreneurs and business owners who call it home.
Regardless of the vibrant economy and all the resources at their disposal, entrepreneurs and business owners inevitably run into cash-flow problems somewhere along the way. When a business’s accounts payable starts to outrun their accounts receivable, they often look towards credit or traditional bank loans to solve their monetary woes. But a potentially better option for many Houston businesses, large and small, is one that is often overlooked: invoice factoring.
So what is invoice factoring?
To put it simply, invoice factoring is when a business sells its accounts receivable (invoices) to a third-party company at a discount. It allows the business to get paid on invoices immediately instead of waiting the usual 30 to 90 days (or more) for a client to make a payment. Thus, factoring helps ease or even eliminate business cash-flow restrictions.
How does invoice factoring work?
It’s a fairly straightforward process. A business simply hands over their unpaid invoices to the factoring company, also called a factor (such as American Commercial Capital, LLC). The factor will verify the invoices and do a credit check on the company that owes the business. If everything checks out, the factoring company will advance most of the value of the invoice (usually around 80%), giving the business immediate cash to put to good use. Then the factor sets out to collect on the invoice. Once the invoice is paid, the business will receive the remaining balance, minus a small factoring fee for the factoring company’s troubles.
Walk me through it—what’s the invoice factoring process like?
First things first, you should apply for our free quote or give us a call to talk more.
But to give you an idea of the process, you would fax us an invoice purchase request and, once approved, we will advance you 70% to 80% of the invoice amount within 24 hours. Now it’s in our hands and you don’t have to worry about it. You can stay focused on what you do best—running your business. Once we collect on the invoice, we will send you the remaining balance (the 20% to 30% not advanced up front), minus our small factoring fee. The entire process is designed to be a cash-flow sensitive solution that won’t interrupt your daily operations.
What happens if my client never pays you?
This rarely happens, but it depends on the circumstances of nonpayment.
If your client files for bankruptcy within the first 75 days after we purchase your invoice, we will fully assume the loss of the money that we advanced to you. You will owe us nothing, but you also won’t receive the remaining balance—the 20% to 30% not advanced up front. You keep the initial 70% to 80% that we advanced to you.
If, on the other hand, after 75 days, or if your client doesn’t pay due to a dispute with you, then you agree to repurchase your invoice from us. This only happens on very rare occasions.
Does my business meet the requirements for invoice factoring?
Most likely, yes.
Whether or not will buy an invoice from your business depends on the credit-worthiness of the customer or client you’re invoicing, not on your business. If they are a credit-worthy risk, chances are that we will take it on, just as long as all products, goods, and services detailed on the invoice have been completed, delivered, accepted, and approved. That is, as long as you’ve completed your end of the deal, we’ll be glad to take it from there and get you paid.
What kind of businesses use invoice factoring?
Many kinds of businesses use invoice factoring, especially growing businesses with generous profit margins that might not be approved for traditional bank loans or financing.
We specialize in serving various industries in Houston and surrounding areas in Texas. These industries include staffing agencies, machine shops, manufacturing companies, I/T computer consulting firms, accounting businesses, and healthcare companies. But we welcome all kinds of businesses, even if your business doesn’t fall under one of the specified industries.
What makes American Commercial Capital a good choice for Houston businesses?
If you look closer at some of so-called “Houston” factoring companies targeting Houston businesses, you’ll discover that many of them are actually national companies simply trying to cash in on the bustling Houston market. They might be great companies, but they’re not Houston-born and based, and they may not have the firsthand knowledge and expertise of the Houston marketplace that could be crucial in helping your business succeed. American Commercial Capital, LLC, is a Houston-based company founded in 2003 by Roy Brooks and it has remained a fully local operation. It has been helping Houston-based businesses succeed ever since.
In addition to Houston businesses, we also work with nearby businesses in San Antonio, Dallas, Austin, Fort Worth, Beaumont, Port Arthur, Corpus Christi, and other Texas cities.
How do I get started with invoice factoring?
Easy. Fill out our form for a free quote or give us a call at 713-227-3863.