Apparel Invoice Factoring

Accelerate cash flow and grow your apparel business

WHAT'S IN THIS GUIDE

1. How Does Apparel Factoring Work
3. How Does Apparel Invoice Factoring Compare With Other Kinds of Business Financing?
4. How Do You Choose an Apparel Factoring Partner?
5. What Kinds of Businesses can Benefit from Commercial Factoring?
6. How Do You Choose an Apparel Factoring Partner?
7. Is Apparel Invoice Factoring Right For Your Business?

Global retail apparel and footwear sales reached nearly 2 trillion U.S. dollars in 2019 and are expected to top 3 trillion U.S. dollars or nearly 3.8 trillion in Canadian dollars by 2030, according to Statista. To stay in the game in a competitive market, both large and small apparel companies need working capital to grow and maintain gaps in cash flow.

As in many other industries, apparel and textile companies often wait weeks or months before their invoices are paid, yet must continuously produce goods to meet market demands. This makes it challenging to maintain sufficient funds to facilitate consistent growth without incurring new debt.
Factoring for apparel companies provides a steady in-flow of cash for your business by leveraging your unpaid customer invoices.

Commercial factoring is a lifeline when slow-paying invoices stifle cash flow and working capital. It is a financing option that can also be the first step in gaining low-interest financing from CIT, Wells Fargo, and other banking institutions.

Providing top invoice factoring for small business, FundThrough automates the invoice factoring process, so you have the working capital to grow your commercial company. 

How Does Apparel Factoring Work

Consistent cash flow is critical in the apparel and textile industry to purchase materials, make payroll, and pay ongoing business expenses. Factoring for apparel companies enables you to get the cash you need to grow—fill new orders, acquire new customers, and open new markets. 

Invoice factoring works by advancing money you’ve already earned. Instead of incurring new debt via bank loans or lines of credit, passing credit checks, and jumping through hoops to get the funds your business needs, invoice factoring offers a simple, straightforward solution to grow your business. 

FundThrough buys your selected invoices and advances the full invoice amount, minus a small fee. This provides fast access to cash. You can collect on your outstanding invoices now instead of waiting 30, 60, or 90 days for customers to pay. 

What Are the Advantages of Apparel Invoice Factoring?

Besides an influx of cash, apparel invoice factoring provides many benefits:

  • Factoring makes it easier to forecast and plan long-term so you can take advantage of new opportunities that might be otherwise out-of-reach. 
  • Consistent cash flow and less debt give your business a better chance of survival. 
  • Invoice factoring typically costs less and is less risky than bank loans and doesn’t require giving away equity. It also takes the hassle of managing unpaid invoices out of your hands. Depending on the size of your customer base, that could be considerable time savings.
  • It may be possible to use the immediate cash from invoice factoring to qualify for cash discounts from your suppliers. 
  • Using a factor like FundThrough eliminates the overhead and employee stress that can come with the collection process.
  • Your credit remains strong because you can quickly pay your bills, payroll, taxes, and ongoing business expenses. 
  • Your company balance sheet doesn’t take a hit as factoring is not a loan and doesn’t appear on your balance sheet as an expense.

How Does Apparel Invoice Factoring Compare With Other Kinds of Business Financing?

In the past, factoring was largely misunderstood. Business bank loans and lines of credit were the traditional and accepted forms of financing, along with credit cards. Each of these different funding options have pros and cons to consider.

Loans

Costs for a new or growing apparel business can be significant. You may need to purchase equipment and inventory, pay employees, and keep up with rent, taxes, and marketing. You may consider taking  out a business loan. 

PROS

  • Many business loans have relatively low interest rates when compared to many other types of funding.
  • Interest can be deductible on your taxes. 
  • Depending on your requirements, you may have access to large sums of money to be used to grow your business. 
  • On-time repayments can help improve your credit rating.
  •  

CONS

  • Many small, growing businesses don’t qualify for loans. They often need cash faster than the process would allow anyway. 
  • Most lenders have strict guidelines for loans and a lengthy review process.
  • You may need to have a good credit rating. Anything else and you may not qualify and if you do you’ll likely pay a higher interest rate.
  • Rates can fluctuate depending on the market. The more you borrow, the higher interest you may have to pay as the lender takes on more risk.
  • An apparel business loan and the debt will show up on your balance sheet, which affect the valuation of your business.

Lines of Credit

A line of credit (LOC) is a lot like a credit card. You can borrow/withdraw money up to a certain maximum amount determined by your financial institution. You can cover day-to-day expenses and pay back your debt, only to borrow again when needed.

PROS

  • You can borrow when you need it.
  • When you’re short of cash, you can borrow only what you need as long as you don’t exceed your limit.
  • Making on-time payments can help improve your credit score.
  • Lines of credit can have low interest rates.
  • The payments on the line of credit vary and vary depending on your outstanding balance.

CONS

  • As with loans, oftentimes banks won’t give small, growing apparel businesses a line of credit. They often need cash faster than the process would allow anyway.
  • There will be limits on the maximum amount you can borrow, which might not always be enough.
  • Although you pay-as-you-go, if you miss payments, are late, or move outside the terms of your agreement, you might face high fees.
  • It’s easy to misuse a line of credit (just like it’s easy to misuse a credit card).
  • If your business fails, you are responsible for any payments and debt incurred from using your line of credit.
  • You need to have been in business at least two years, and will need to provide bank account information, financial statements, tax returns, and more to qualify.
  • A line of credit is like a loan that needs to be repaid with interest.

Business Credit Cards

Like all forms of funding, business credit cards must be used wisely or things can go sideways very quickly. 

PROS

  • It’s easier to qualify for a business credit card than for a line of credit or business loan.
  • You have quick access to the cash you need when you need it.
  • Many business credit cards have reward programs or incentives, like cash back or airline miles. 
  • An apparel business credit card can help build credit, which is helpful if you ever need to apply for a bank loan.

CONS

  • It’s easier to qualify for a business credit card than for a line of credit or business loan.
  • You have quick access to the cash you need when you need it.
  • Many business credit cards have reward programs or incentives, like cash back or airline miles. 
  • An apparel business credit card can help build credit, which is helpful if you ever need to apply for a bank loan.

Receivables Factoring

Invoice factoring for apparel companies is not a loan. The application process is quick, there is no repayment obligation, no high interest rates, and no debt to record on your company’s balance sheet. Plus, many more companies will qualify. 

PROS

  • You have access to fast cash when you need it based on the value of your invoice(s).
  • Cash advances can greatly improve shortfalls in cash flow due to slow-paying clients.
  • Does not require your apparel business to have a long credit history, which is best for start-ups and fast-growing firms.
  • Factoring relies on the creditworthiness of your customers, not yours.
  • Invoice factoring is easier to obtain than most other forms of funding.
  • Funding can increase with the value of your invoices.
  • If your business is seasonal, factoring can infuse cash into your business to get you through the downtimes. 
  • Your accounts receivables are used as collateral, unlike many loans or lines of credit.
  • You give up no equity or control in your business in exchange for funding with factoring. 
  • No  matter the size of your apparel business, you can use factoring.

CONS

  • Invoices need to be verified (customer contact sometimes required)
  • Can be complicated to account for in bookkeeping.

How Do You Choose an Apparel Factoring Partner?

Choosing an apparel factoring partner is a lot like choosing any lender. It pays to do your homework. There are also several questions to ask prior to starting the application process:

Does the factoring company work with apparel companies?

Most factoring companies work with most industries, but not all. Some factors specialize in only a few industries. 

FundThrough works with apparel companies.

What advance rates does the factoring company offer?

Advance rates can range from 60% to 100%, depending on the factoring company and sometimes the industry. 

FundThrough advances 100% off the invoice amount, less a fee.

What factoring fees does the factoring company charge?

A factoring company should be able to provide what factoring fees it charges upfront. But some companies may make it difficult to determine the total costs of using their service. FundThrough offers transparent pricing so you know prior to signing an agreement. 

FundThrough Pricing – 100% advance rates minus a flat fee. One up front price.

Does the factoring company have minimums?

A minimum is the amount you must factor every period (month, each quarter or every year). Some factoring companies offer plans that require minimums, while others do not. 

FundThrough doesn’t require minimums. Only fund when you need to.

Cash flow is the number one problem for most start-ups and small businesses, especially if they’re growing. This is also true for apparel companies. Invoice factoring companies typically consider several situations before offering you an advance.

  • Nature of business: you must be a registered business selling goods or services to other businesses.
  • Service completion: invoice factoring is only available for goods or services that your clients have marked as complete or delivered.
  • Encumbrance-free invoice: since invoices are the only collateral in a factoring arrangement, encumbrances such as tax liens can make it difficult to qualify for factoring. (But not impossible. FundThrough works with businesses on IRS and CRA tax payment plans all the time. We can even help you with getting an arrangement set up.)

Factoring invoices is a sound financial strategy if you—

  • Spend time tracking down slow-paying customers and waiting 30, 60 or 90 days to be paid, which puts a tremendous burden on your business.
  • If you’ve delivered a product or provided a service to another business.
  • If you have slow times, downtimes, or your business is cyclical.
  • You experience times of cash flow crunch
  • You need access to working capital to grow as an apparel company.
  • You can’t qualify for a loan.
  • Your customers or clients are creditworthy

 

FundThrough takes the legwork out of accounts receivables financing. It’s fully automated platform is easy to navigate, it’s fee structure is transparent and a customer service rep is there when you have questions. Find out what FundThrough’s clients have to say, and start factoring your invoices today. 

Simple. Intuitive. Apparel Invoice Factoring.

Built For Your Business.

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