Cell Tower Factoring
Are you being handicapped due to your account receivables being 30 to 60 days out?After interviewing a business owner of a telecommunication tower company, I found out that there’s a huge need for some bridge financing in this industry. Doe your company have receivables on the books that are anywhere from 30 to 60 days out? From what I gathered after this conversation with this business owner, it is very unlikely to be paid on jobs within 45 days or less. Would it help if your company had the majority of those funds tomorrow? This is where factoring comes into play.
What is factoring?Factoring is a tool allowing the potential of future accounts receivables to be used today to make payroll and pay regular day-to-day expenses. This tool allows the business to sell their accounts receivables at a discount to a factoring company in exchange for immediate funds. In return the factoring company waits for those receivables to be paid by your customer which could take anywhere from 30 to 60 days. Factoring can improve the growth of a company by utilizing the cash flow to expand.
How does factoring work?Lets use the example and pretend ACME Tower Erectors just received a job order from one of the major telecom companies and we’ll pretend their name is XYZ Telecom. ACME agrees to the contract and completes the work and invoices XYZ Telecom. It’s very common for these companies to pay their invoices anywhere from 30 to 60 days. This can definitely put a kink in ACME’s cash flow. ACME needs the ability to pay their employees, and their everyday expenses. At this point ACME has a few options, they can wait for 30 to 60 days to get paid, or they can call a factoring company and sell their receivables. The factoring doesn’t care about ACME’s assets or the credit scores of the owners. The factoring company will see the credit worthiness of XYZ, and if they are a reputable company the factoring company will advance up to 90% of the invoice and buy the invoice at a discount. Funds can be dispersed to ACME in as little as 24 hours, which will help with their cash flow and can expedite their growth. The factoring company is now taking on the liability and waiting 30 to 60 days for those receivables. Once those receivables are paid to the factoring company, they take their small fee and the remaining amount is paid to ACME.
Can this help your company?This is not just limited to telecom companies; here are just a few other industries: