If your company works in aviation and aerospace, you know first-hand how much the industry has grown in recent years.
Expanding foreign markets like India, China and Brazil have fueled more demand for commercial air travel and represent tremendous growth opportunities for aviation companies in the United States. Manufacturers Boeing, Airbus, Bombardier and Embraer have predicted the world’s aircraft fleet will more than double—to more than 40,000 planes—in 20 years. This is great news for companies that supply, perform maintenance and do overhauls for commercial as well as private aircrafts.
Growth is good, but having enough cash on hand to serve aviation customers can sometimes be a steep challenge. Factoring your company’s receivables could be the best way to quickly elevate your company’s cash flow. There are several other benefits that factoring companies--also sometimes called “factors”--provide their clients.
Here are five key advantages that factoring offers today:
Factoring allows your company to receive payment on its receivables almost immediately instead of waiting 30 to 60 days on a customer payment. A factoring company buys your invoices and advances cash on those invoices in less than a day. The factor then collects payment from your customers and sends your company the remaining balances of the invoice values.
Same-day funding of your aviation company’s receivables allows you to quickly build up cash flow to pay employees, meet customer demands and continue to expand your business.
Unlike a traditional line of credit, there is no limit to the amount of funding you can receive through factoring. As your receivables grow, the cash you receive from factoring matches that growth. For example, if your aviation company’s monthly volume of invoices increases from $50,000 to $150,000 in a year’s time, the same-day funding from factoring will scale up to meet that growth.
Some factoring companies have stronger financial resources than others. When selecting a factor, be sure to ask the company’s representatives about their capital structure and customer base. Factors that have been in business for many years and are familiar with the aviation industry are the best bets to finance your company as it grows.
Easy Account Set-Up
Securing a bank loan or another form of traditional funding can take several weeks and involve a lot of documentation and paperwork. With most factors, your company can set up an account and start receiving same-day funding of receivables in less than a week.
The approval process for factoring is straightforward and less demanding. Even if your company is a start-up or has a less-than-stellar credit score, you can qualify for financing. A factoring provider will be mostly concerned about your customers’ credit and payment histories, not your own.
When selecting a factoring company, it is important to find one that uses up-to-date online account software. Some factors still require original invoices and other documents to be mailed in before they will buy them. This creates additional time and hassle.
Finding a factoring company that has a system in place to receive and approve scanned or digital invoices is crucial. Many factors today also use online software that allows you to review your funding transactions in real-time, from any location. This gives you a clear picture of your company’s available cash flow at any given moment.
In addition to boosting cash flow, factoring can take a lot of work off of your company’s plate. Many factoring companies provide a range of back-office services, including customer collections and free credit analysis. The best factors provide a level of service that streamlines the collections process for your aviation company and your customers. The factor should understand that collecting payment in a prompt, professional manner is in everyone’s best interest.
The back-office services that factoring provides can make a real difference to your company’s bottom line. You no longer have to spend time and resources on collections, allowing you to focus more effort on finding new customers for your aviation company.
Sources: PricewaterhouseCoopers, Makino Inc.
For more than 20 years, RTS Financial has provided factoring solutions to companies in a wide range of industries. To learn more about factoring and the impact it can have on your business, call us today at (877) 929-4029.