Invoice Factoring Lets You Safely Offer Net 30-90 Day Selling Terms
How to Smartly Extend Trade Credit to Your Customers
Startup business owners face the risk and question of extending credit terms to their customers or sticking with prepay accounts. Entrepreneurs juggle their growth plans and cash flow to ensure all bills are paid on time. The financial stress for small businesses is immense when trying to grow and cover payroll.
Startups can provide credit terms by implementing Bankers Factoring Non-Recourse Invoice Factoring solutions. Providing customers with credit terms enables them to purchase goods and services now and pay them 30, 60, or 90-days later. Our customized Non-recourse Invoice Factoring programs allow our clients to eliminate 60-days or longer to receive payment.
What are extended credit payment terms?
Credit terms or payment terms are contractual agreements between suppliers and customers that determine when clients pay their invoices and critical conditions. Offering extended payment terms for up to 90-days enables startups and small businesses to acquire large commercial customers.
For example, your business has the opportunity to sell products or services to major companies, also called commercial customers, such as ATT, Verizon Wireless, Home Depot, Walmart, Dollar General, or Bass Pro Shops. They require at least 60-day payment terms.
By partnering with Bankers Factoring, we provide cash flow management solutions by selling your open invoices. We provide immediate cash funding and eliminate the 60 or 90-day wait for payment in these commercial agreements by selling your open invoices to Bankers Factoring.
Standard Payment Terms
- Net 15: payment due 15 days after the invoice date
- Net 30: payment due 30 days after the invoice date
- Net 60: payment due 45 days after the invoice date
- Net 90: payment due 90 days after the invoice date
- X/YZ Net AB: if paid within “X” days, receive a “YZ” discount, and “AB” is the actual payment due date
Payment terms range from 15 to 90 days or longer, depending on the industry and the customer (Account Debtor). It is essential to know that some customers have internal policies that trigger the payment when they receive the product. Such internal policies can extend your payment terms an additional two weeks. Thus, invoice factoring is a great financing tool to offset such extended payment terms and days sales outstanding (DSO).
Visit our previous article, “Offer Credit Terms Through Invoice Factoring,” to learn more.
How does invoice factoring offer extended payment terms?
Invoice factoring is a business financing transaction where clients sell their accounts receivable (A/R) or invoices to Bankers Factoring. We provide immediate cash funding up to 92% of the open invoice value. Invoice factoring enables startups and small businesses the financing lines to receive quick working capital. Factoring eliminates DSO and the wait for payment from your customers.
For example, if your business invoices Walmart $100,000 for merchandise, you can sell the invoice to Bankers Factoring. After your application is approved, we deposit up to $92,000 in your bank account to cover payroll, purchase more inventory, acquire new customers, and grow your business.
Visit our Frequently Asked Questions, to learn more about invoice factoring financing.
Benefits of Extending Credit to Customers
- Acquire New Customers: invoice factoring allows businesses to increase staffing levels, buy more inventory, and take on new sales opportunities with consistent cash flow.
- Differentiate from Your Competition: not all startups or small businesses understand how invoice factoring works. You can gain a competitive advantage by implementing extended credit terms in the marketplace.
- Demonstrates Financial Strength: if your business can offer extended payment terms, it shows the market you have the financial backing to take on large sales.
- Non-Recourse Factoring Offers Bad Debt Protection: Bankers Factoring benefits non-recourse factoring, including bad debt protection or credit insurance. In short, if your customer, also called the account debtor, declares bankruptcy or short pays the invoice, we take on the credit risk. Your business is not responsible for the protracted pay from your customer with Bankers Factoring.
Visit our previous article, “How Invoice Factoring Impacts Customer Relations,” to learn more about the benefits for your customers.
How to Extend Credit Terms to Customers?
A great benefit to offering extended credit terms from invoice factoring is that approval depends on your customer’s creditworthiness. For startups lacking financial strength with traditional lenders and business owners with poor credit, invoice factoring eliminates the constraints from distressed financial situations.
To qualify for invoice factoring solutions, we require 8 Main Criteria for approval. Most importantly, we assess your customer’s credit, the account debtor. Bankers Factoring provides an outsourced credit department to eliminate the burden of qualifying your customers.
We recommend the following 3-step process to acquire customers with extended payment terms:
- Develop a vetting process for new customer acquisition regarding creditworthiness
- Communicate your credit terms policy before entering into new contracts or agreements
- Reserve the autonomy to provide flexible terms depending on the customer and scope of work. Some customers may be worthy of 90-day terms, while others may only qualify for 15-day payment terms.
Visit our previous article, “Understanding the Due Diligence Process in Invoice Factoring,” to learn more about qualification and approval.
Invoice Factoring: Provide Credit Terms with Cash Flow Management
Invoice factoring, also called factoring, helps businesses avoid cash flow shortages. Small companies and startups face the difficulty of paying employees and bills on time. With factoring, our clients can provide extended credit terms, which they, in turn, can sell to Bankers Factoring.
Small businesses can offer 90-day terms, sell the invoices to Bankers Factoring, and receive up to 92% of the open receivable value within days. Invoice factoring is a cash flow management solution enabling business owners to forecast their cash flow.
Extended credit terms can seem frightening for entrepreneurs, but it strengthens your capabilities to leverage growth opportunities. We provide an outsourced credit and A/R department, allowing management to focus on business development.