1 What Is Janitorial Factoring?
2 Benefits Of Invoice Factoring For Janitorial Service Companies
3 How Does Janitorial Factoring Work?
4 Uses For Your Factoring Cash Advance
5 Janitorial And Housekeeping Businesses We Fund And Finance
6 Factoring Your Janitorial Service Invoices vs Other Funding Options
7 Typical Factoring Rates And Fees
8 Requirements To Apply For Janitorial Services Factoring
9 Frequently Asked Questions About Our Factoring Services
Last Updated on October 24, 2022
It can be tough to juggle back-office operations like invoice management and payroll alongside cleaning operations and janitorial services. It does not help that some customers prefer to pay with invoices, leading to a frustrating cycle of negative cash flow and mounting debt if they delay payment.
To keep growing your janitorial company and stay competitive in the industry, you need cash to consistently make payments, train personnel, and meet payroll – this is where janitorial factoring comes in.
In this article, we discuss how invoice factoring for janitorial companies works, its benefits, and how it compares to other financing alternatives. Read on to learn how altLINE, one of the top-rated factoring companies in the country, can improve your cash flow and grow your business!
What Is Janitorial Factoring?
Janitorial factoring is when your company sells invoices to a third party like altLINE in exchange for a cash advance. Janitorial company customers often pay with invoices, so you may experience cash flow issues when payments are delayed. Janitorial factoring is used to access working capital whenever it’s needed, reducing your reliance on customer payment timelines.
Benefits Of Invoice Factoring For Janitorial Service Companies
Janitorial service factoring unlocks extra funding when customer invoices take a long time to clear. Check out how invoice factoring helps you access cash when you need it:
Get Your Accounts Receivable Invoices Paid In Days, Not Months
The best commercial cleaning factoring companies fund your invoices within 1 or 2 days. This means you can get up to 80-90% of your money almost immediately instead of in 30, 60, or even 90 days.
Access Capital To Grow Your Business While Maintaining Equity
Businesses often must sacrifice assets and equity to fund growth opportunities, but invoice factoring can set them up for long-term success. Invoice factoring cash advances give you the money needed to pursue opportunities without compromising your assets or equity.
Get Cash When You Need It Most
Overdue invoices and late customer payments can create extra stress because they disturb your cash flow. Invoice factoring cash advances offsets late payments to increase cash flow, ensuring your business stays financially healthy.
How Does Janitorial Factoring Work?
Janitorial factoring through altLINE works to fund your business through cash advances. We also soften the financial blow of late customer payments by improving your cash flow. Instead of waiting on customers to pay their invoices, a janitorial factoring company can give you cash whenever needed.
Here is a short guide to applying for our janitorial services factoring:
Submit Your Unpaid Invoices
We accept all kinds of unpaid customer invoices, though we favor creditworthy customers and mid-size or large businesses. Additionally, we do not factor invoices for customers with a bad credit profile or history of delinquency.
If your invoice turnover time is between 30 and 90 days, your receivables are well-positioned for factoring.
altLINE Advances Up To 80-90% Of The Invoice Face Value
You can generally expect a factoring advance rate of 80-90% of your invoice’s value and receive the cash advance between 24 and 48 hours after submission to altLINE. However, the exact timing may differ depending on the customer’s receipts and job completion time.
altLINE Helps Collect Payment For Your Outstanding Invoices
altLINE helps gather customer payments by providing a lockbox for the money and reporting collection progress through an online customer portal. If issues arise, we can make calls and resolve disputes professionally to maintain good business relationships.
altLINE Pays Out The Remaining Unpaid Invoice
After payment collection, altLINE will deduct its fee (typically 1-5% of your invoice) and transfer the remaining invoice value to your account.
Uses For Your Factoring Cash Advance
Receiving cash advances from janitorial factoring means you do not have to wait on customer payments to fund your business. Instead, you can avoid long payment cycles and unlock growth capital sooner to accelerate business development.
Here are some ways you can use invoice factoring cash advances:
As a janitorial service provider, your cleaning team is the lifeblood of your business. Late employee payments caused by slow customer payments may negatively impact productivity and staff satisfaction. Cash advances from invoice factoring help you make payroll on time, keeping employees happy and productive.
Take On New Customers
You should not be forced to wait for customer payments to take new clients and grow your business. Invoice factoring cash advances provide the money you need to fund growth you cannot attain without sacrificing equity or assets.
Pay Operating Expenses
Janitorial services need to pay for transportation, trash removal, and other expenses. Factoring cash advances give you the money to pay those obligations without taking a loan or sacrificing equity.
Janitorial And Housekeeping Businesses We Fund And Finance
As one of the best invoice factoring companies, altLINE funds various businesses in the janitorial and housekeeping sector. Here are some businesses that can benefit from invoice factoring:
- Residential cleaning services
- Commercial cleaning services
- Sanitization and disinfection services
- Pressure washing services
- Laundry services
- Furniture cleaning services
Factoring Your Janitorial Service Invoices vs Other Funding Options
You have a few other options to improve business cash flow, in addition to janitorial and commercial cleaning services factoring. Here, we compare three business funding alternatives to invoice factoring:
Janitorial Factoring vs Bank Line Of Credit
A bank line of credit is one of the most common small business financing solutions. However, as a janitorial service company, you may have a harder time qualifying for a line of credit.
Banks typically look at your fixed assets to approve your line of credit application. Janitorial businesses generally do not have many fixed assets, so you may get lower credit limits or not qualify for a line of credit at all.
Janitorial invoice factoring is usually better for your business because the factors look at your customers instead of your fixed assets. If you work with an established customer base, factoring companies will give you enough working capital when banks cannot.
Janitorial Factoring vs ACH/MCA Loans
ACH (automated clearing house) and MCA (merchant cash advance) loans provide businesses with funding in one or two business days. They are also very easy to qualify because lenders only review your bank statement for approval.
However, ACH and MCA loans feature high interest and lender fees that can reach up to 60% of your initial loan. If you do not manage these loans well, your company may fall into a debt spiral that can put you out of business.
Janitorial factoring is safer because your customers will eventually pay their invoices, thus repaying the cash advance. Because you are highly likely to get paid, you can focus on developing your business instead of stressing over debt repayments.
Janitorial Factoring vs Quick Pay Discounts
You can improve cash flow when necessary by offering discounted rates to customers who pay before their invoices are due. Offering discounted rates may be viable to encourage early payment, but it depends on the customer’s priorities.
If your customer prefers having more cash on hand over your discounts, they will pass on your offer and take longer to pay, leaving you without cash to develop your business. Therefore, quick pay discounts should only be used when you do not have an urgent cash need.
Janitorial factoring is usually more reliable because as long as your invoice is approved, the financing company will issue a cash advance.
Typical Factoring Rates And Fees
altLINE determines factoring fees depending on how much you plan to factor and how long customers take to pay. Factoring more amounts and getting your invoices paid faster generally result in lower factoring rates. Factoring companies may also consider other criteria like how long you have been in business, customer base diversity, and overall customer credit quality.
We charge two types of factoring fees:
- Initial fee: This fee covers our processing expenses for a set initial duration (typically the first 30 days) and costs up to 3.50% of your invoice’s value.
- Incremental fees: These fees compensate us for our time lending the money beyond the initial fee duration and cost up to 1.50% of your invoice value per charge. Note that the longer your invoice is outstanding, the more these fees will cost.
Requirements To Apply For Janitorial Services Factoring
Before getting a cash advance from janitorial services factoring, you must provide some information to qualify. Here are the required documents:
List Of Existing And Potential Customers
altLINE requires a list of your existing and potential customers as part of your factoring application to review their credit quality and factoring eligibility.
To be eligible for invoice factoring, you must complete a form. Enclose these documents with your application:
- Business ownership identification
- Personal identification
- Employer Identification Number
- Customer contracts
- Articles of incorporation and other relevant corporate documents
Accounts Receivable Aging Schedule
An accounts receivable aging schedule records all your invoices based on when they’re due. We use this document to examine your customers’ payment behaviors and determine their factoring eligibility. We will factor invoices 30 to 90 days outstanding but invoices for customers that state an inability to pay may not be eligible for factoring.
Frequently Asked Questions About Our Factoring Services
Here are some typical questions about factoring for janitorial and commercial cleaning companies answered:
Do you need to run a credit check before getting started?
altLINE runs a credit and background check on all janitorial company owners. However, there are no minimum credit thresholds for approval. Background checks are reviewed for financial-related crimes or felonies. In the event a borrower has a spotty background, approval with altLINE may be in question, but in the event the borrower is disqualified, altLINE will often work with the borrower to identify a janitorial factor that is willing to help.
Do you require UCC filings when factoring janitorial invoices?
Upon executing a term sheet, altLINE will file a UCC on the client’s business. This UCC filing allows altLINE to properly secure the collateral (i.e. the invoices) it plans to advance against when the factoring facility is in place. UCC filings are an integral part of any form of lending.
Is janitorial factoring a debt or loan?
Janitorial factoring is neither debt nor a loan. Invoice factoring is the sale of your invoices to a third party. The money advanced against these invoices will be repaid by your customers. However,
altLINE is a recourse factor, so you may need to pay the cash advance back if your customer fails to pay their invoice.
Do you offer non-recourse janitorial factoring?
altLINE only offers recourse janitorial factoring. While you must repay the cash advance if your customer fails to pay, recourse factoring structures often allow for factors to extend lower rates and larger credit limits on your customers.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.