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Facility Maintenance Factoring: Streamlining Operations

by Peter Amundson

For facility maintenance businesses, managing cash flow effectively is critical to maintaining smooth operations and ensuring the ability to respond promptly to client needs. Facility maintenance involves a wide range of services, from routine cleaning to emergency repairs, which require a reliable flow of funds to manage staff, purchase supplies, and handle emergencies. 

Ensuring a consistent and healthy cash flow is often challenging, particularly when dealing with delayed client payments. These delays can stifle operational capabilities and limit the company’s ability to grow and respond agilely to market demands. 

Facility maintenance factoring offers a compelling solution to these cash flow challenges. It helps streamline operations and stabilize cash flow. It provides a practical alternative to traditional financing methods, helping businesses maintain a steady cash stream and focus on enhancing their service quality and customer satisfaction.

What is Facility Maintenance Factoring?

Facility maintenance factoring is a type of invoice factoring tailored specifically for businesses that provide maintenance services. It allows these companies to sell their outstanding invoices to a factoring company at a discount. 

This transaction provides the business with immediate cash, which is crucial for covering operational costs without waiting for clients to pay their invoices, which can sometimes take up to 60 days.

 

How Does Facility Maintenance Factoring Work?

Facility maintenance factoring is a straightforward and efficient process. Here’s how this financial arrangement works:

Invoice Submission

The process begins when a facility maintenance company completes its services and issues client invoices. These invoices must accurately detail the services provided and the amount due. The facility maintenance company then submits these completed service invoices to a factoring company. This submission is typically done electronically, streamlining the process and reducing the time to access funds.

Immediate Advance

Upon receipt of the invoices, the factoring company reviews them to ensure everything is in order. This review includes verifying the services rendered and assessing the creditworthiness of the invoiced clients, as the factoring company will be taking on the risk of client payment. 

Once the review is complete, the factoring company provides an advance payment to the maintenance company. This advance is about 80% to 95% of the total invoice value, depending on the agreement terms. This money is transferred directly to the maintenance company’s bank account, typically within 24 to 48 hours of invoice submission, providing the needed liquidity to continue operations without interruption.

Client Payment

The responsibility of collecting the payment shifts from the maintenance company to the factoring company. The clients are informed of the factoring arrangement. They are directed to make their payments directly to the factoring company according to the terms agreed upon in the original service contract, usually within 30 to 60 days.

Receipt of the Remainder

Once the factoring company receives the full payment from the client, it calculates and deducts a service fee, which can range from 1.5% to 2.9% per 30 days, from the remaining balance of the invoice amount. This fee covers the services provided and the risk the factoring company assumes. The remaining balance — typically 10% to 20% of the original invoice value — is then transferred to the facility maintenance company.

This final transfer completes the factoring process, providing the company with the total invoice minus the factoring fees.

 

How Do You Choose the Right Factoring Company?

Choosing the right factoring company is a critical decision for facility maintenance businesses to ensure the reliability of their provider. For this reason, it’s important to weigh a few considerations, including the following:

  • Experience and Reputation: Opt for a factoring company with a proven track record in the maintenance industry. A partner well-versed in your sector’s specific challenges and dynamics can offer financial solutions and valuable industry-specific insights. Investigate their track record, read through positive testimonials, and cross-check their credentials to ensure they’re both reputable and experienced.
  • Fee Structure: The fee structure is a crucial part of the agreement, so it should be clear to all parties involved. Make sure to understand all the fees involved, including any potential hidden costs. Knowing all the fees upfront will help you evaluate the actual cost of their services and avoid any surprises down the line.
  • Terms and Flexibility: The best factoring company for your business should offer flexible terms that cater to your unique needs. Whether it’s adjusting the advance rate or customizing the repayment schedule, your factoring partner should be able to adapt their services to suit your business’s cash flow needs and operational requirements.
  • Client Interaction: How a factoring company interacts with its clients is crucial since it can significantly influence business relationships. Choose a partner that handles client communications with the utmost professionalism and courtesy. Ensuring they maintain high customer service standards will reflect well on your business and help preserve the strength of your client relationships.

 

Optimize Facility Maintenance Operations with Smart Cash Flow Solutions

Business Factors & Finance offers tailored facility maintenance factoring solutions to help keep your business running smoothly. With over 40 years in the receivables financing industry, we’ve helped countless small and medium-sized businesses thrive with our straightforward financing solutions.

Apply today and learn how factoring can enhance your facility maintenance operations. Call us at 800-672-3844 or fill out our online form to begin.

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