Temporary and IT placement firms, security companies, janitorial service providers, and translators are a few examples of service industry firms that are relying more on accounts receivable (A/R) financing. CFG has been providing A/R financing to a translation services provider in Canada since 2010.
The owner of the translation company says that most of its large customers pay invoices in 60 to 90 days, but they must pay their contractors (translators) in 30 to 60 days. “And now we’re bidding on some large government contracts that we can only bill quarterly, and then they take 45 days to pay. So this is a potential 135-day payment cycle.”
The owner approached CFG to discuss A/R financing after its bank credit line was shrunk. “We were having to turn down large contracts because our cash flow wouldn’t allow us to take on the business,” says the owner. “Accounts receivable financing was our last option.”
Each week, the company sends a report to CFG for validation that includes all of its invoices for the week. It then receives funding for 85 percent of the value of qualifying invoices the next business day, and the reserve amount (the balance less fee) after the receivables have been collected. “It’s a straightforward process that has worked very well for our business,” says the owner.