Invoice Factoring for Machine Shops
Cash Help with Slow Paying but Good Credit Machine Shop Clients
Table of contents
- Invoice Factoring for Machine Shops
- How to Finance a Metal Working Machine Shop
- Machine Shop Financing Summary
- How does a machine shop operate?
- What is machine shop financing?
- Ways to Fund Your Shop
- Common ways to fund a machine shop:
- How does factor financing service work?
- Steps in the machine shop factoring transaction:
- Machine Shop Factoring Example
- Ready for the owner-employees of Bankers Factoring to help you grow your metal-working machine shop company with our invoice funding, including bad debt protection? Use our fast online factoring application or call the toll-free number 866-598-4295
How to Finance a Metal Working Machine Shop
Machine Shop Financing Summary
Machine company operations depend on timely cash flows, given their constant need for working capital. Costs increase quickly when machine shops cut raw metals and materials, increase staffing, purchase raw materials, and pay shop expenses. Financing receivables or unpaid invoices speeds up the payment time and provides funding for your company.
Invoice factoring or invoice financing helps overcome cash flow struggles from extending customers’ 30–90-day credit terms.
How does a machine shop operate?
A machine shop is a business that cuts, welds, and bends metals into custom products. A machine shop performs machining services carried out by individual machinists. Some common types of machine shop services include:
- Milling
- Metal Lathe
- Drill Press Work
- Grinding
- Welding
- Robotics
Machine shops are key vendors for the automotive, oil & gas, aerospace, agriculture, mining, healthcare, and manufacturing industries. Bankers Factoring funds machine shops in all these industries. The invoices from machining companies are typically for customized work for other businesses. Most businesses extend NET30-60 credit terms, which means the customer does not have to pay until 30-60 days after rendered services.
Need to turn your unpaid invoices into ready working capital? Complete an online funding application today to begin the financing process for your shop and reduce cash flow struggles.
What is machine shop financing?
Business financing is securing working capital for operations, production, and manufacturing. Welders and other machinists lacking cash supply, balance sheet strength, or creditworthiness have finance options after a bank loan denial. A typical solution for machining facilities is to factor invoices or sell unpaid receivables for fast cash flow.
Ways to Fund Your Shop
Funding your company can be hard if your credit hurts your business financing. Supporting your machine shop is easy when you have the right partner. Improve your cash flow without going to an ordinary lender or bank. Your shop can sell unpaid invoices to finance your company. Factoring companies provide invoice factoring services to help your machine centers have ready to use working capital when they need it.
Keep reading Why Sell Your Accounts Receivable.
Common ways to fund a machine shop:
- Selling unpaid invoices
- Business loan or Small Business Administration (SBA) Loan
- A commercial line of credit
- Offer early payment cut rate
- Build up working capital and other sources of liquidity
Keep reading How to Offer Credit Terms with A/R Financing.
How does factor financing service work?
Machine shop financing with a factoring company is a straightforward process that only takes 3 to 5 days for funds to hit your checking account. The application process consists of your company’s general business information, personal identification, and financial records. Having unpaid invoices from your customers is the central piece for funding. Without outstanding receivables, there is no factor financing.
Steps in the machine shop factoring transaction:
- You deliver machine production and then invoice for your customers.
- Complete our fast 7 minute online funding application.
- Bankers Factoring check your invoices and submits the initial cash advance within 3 to 5 days of your application. Same-day funding thereafter.
- You receive cash advance funding up to 85% of your receivable value
- We pay the remaining A/R balance once your customer pays the invoices, less the factoring fee.
Compared to traditional bank lending, factoring takes only a fraction of the time. Within five days, your business receives funding based on the credit history of your customers. Machine shop factoring offers cash flow solutions by adding new business debt.
For more information, read What is Invoice Factoring? How does it Work?
Machine Shop Factoring Example
Suppose you own a CNC Lathe center with a growing number of large corporate customers. These customers manufacture large equipment, and your machine shop cuts custom made pieces of raw material. Given the boom in business, you need to increase staffing levels, lease more space, and buy more equipment. The time has come for you to finance your business through your unpaid receivables.
You sell $200,000 worth of receivables to Bankers Factoring with the following terms:
| Factoring Line (Invoices Sold) | $200,000 |
| 85% Cash Advance | $170,000 |
| Factoring Rate (Discount fee) | 1.5% per 30-days |
| Total Funds Received after fees | $197,000 |
The CNC company is advanced 85% of the $200,000 in open invoices in this example. Assuming the customers paid within the 30-day terms, the factoring rate was $3,000, and $197,000 was funded in two tranches to the machine shop.
Please read invoice financing for small business.
No matter what industry your machine shop serves, Bankers Factoring stands ready to turn 30–90-day old invoices into same-day working capital. We also include bad debt protection, which is critical in many volatile sectors.