A report in Home Furnishings Business indicates that furniture manufacturers are the latest business segment gain access to industry specific receivables factoring opportunities. The publication announced that Eagle Capital has designed an invoice factoring program that will allow furniture manufacturers to receive advanced payment on invoices issued for processed orders. Typically these invoices would not be paid for at least 30 days and possibly more.
Eagle Capital has its roots in the transportation industry where factoring invoices is commonplace. Truckers need positive cash flow in order to cover daily expenses of keeping trucks on the road to compensate for outstanding invoices which tie up the much needed cash. Now the home furnishings industry will benefit from the same program as Eagle Capital advances cash to the manufacturer while awaiting payment from customers. Eagle Capital actually collects the payments and even provides credit checks on prospective customers for their clients to see if they are a worthwhile credit risk.
Typically, receivables factoring requires the factoring agent to advance anywhere from 70-90% of the face value of invoices presented by the manufacturer right up front. When the balance of the invoice is collected by the factoring agent, the client then receives the balance less a fee for services typically running in the range of 1-5% of the total invoice value. In many cases, the infusion of cash allows the manufacturer to meet immediate expenses such as payroll and in some cases may even provide the capital for expansion projects.
One motivation cited by Eagle Capital for offering the factoring service to the home furnishings industry was to level the playing field with foreign manufacturers who already have the benefit of cheap labor.
You can read the entire article about home furnishings receivables factoring here.
We hear a lot these days about companies that are too big to fail. Appears that CIT is not too big to fail but is too big to go into bankruptcy without causing a lot of chaos for its factoring clients. (Image courtesy of European Pressphoto Agency)
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