Lesson 2: Common Reasons Businesses Choose Invoice Factoring

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For Some Industries, Factoring Receivables is the Standard

Whether or not you have heard of invoice factoring depends largely on your industry. Some industries such as transportation and freight, manufacturing, oil and gas, textiles and construction have a long history with invoice factoring. Others such as payroll factoring, staffing factoring and medical factoring have jumped into the practice in large numbers in recent years due to the dramatic growth experienced in these industries.

Manufacturing factoring, especially for clothing and textiles, is at the core of where the practice of invoice factoring began. The nature of the business, with its long cycles between the productions of sellable product to getting it on store shelves, makes invoice factoring the ideal fit.  Moreover, international players tend to use invoice factoring more and if your factories are overseas as many are today, you will better speak the language of the industry if you are familiar with manufacturing factoring.

Freight Bill Factoring Is the Norm

Similarly freight bill factoring is very common for those in the trucking and transportation business. With slim margins all around and so many different hands involved in a single delivery or haul, freight bill factoring is a way to ensure that trucking companies can collect payment so they have enough money to move their next order. Because shippers demand immediate payment but truckers often don’t receive payment until much later on, a type of cash flow gap is almost build into the business model. For these reasons, transportation factoring is used extensively across the industry so much so that many trucking factoring companies exist just for the sector.

Facing Rapid Industry Growth, Staffing Factoring Is on the Rise

New to the practice of invoice factoring yet taking it by storm are the burgeoning staffing and payroll factoring sector. With unemployment remaining high, more companies are turning to staffing agencies to fill open positions with temporary personnel. Many of these agencies are growing so rapidly, they lack the cash on hand to cover payroll, a bane to any serious staffing company. As such, many of these agencies are partnering with receivables factoring to get cash quickly to make sure their payroll is covered. This is particularly true with medical staffing factoring, where the highly trained, in-demand staff earns high wages.

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