Factoring outside trucking: staffing, suppliers and contractors

Factoring has a freight accent. Most of what is written about it assumes trucks, most factors advertise to carriers, and most business owners outside transport assume it is not for them.

The underlying problem has nothing to do with trucks. It is that you pay for the work when you do it and get paid for it much later, and that shape appears all over the Idaho economy.

Staffing and labour

The purest case there is. A staffing firm pays workers weekly, sometimes daily, and invoices the client on thirty or sixty day terms. Every additional placement widens the gap. Growth is funded entirely out of working capital, and payroll cannot wait.

Industrial staffing around Idaho Falls, agricultural labour in the Magic Valley, construction labour across the Treasure Valley — all of it runs this way, and factoring is close to standard practice in the sector for exactly that reason.

Manufacturing and supply

Materials and labour go into a product, the product ships, and the customer pays on their terms. The bigger and more creditworthy the customer, the longer the terms tend to be, which is the uncomfortable irony of winning a good account.

Aerospace suppliers in the Panhandle waiting on original-equipment payment cycles, food packaging suppliers in the Magic Valley, fabrication shops supplying the national laboratory contractors — the same structure every time.

Commercial contracting

More complicated than the others and frequently still workable. Construction receivables often involve progress billing, retainage held back until completion, and lien rights that interact with the factor’s position.

Some factors specialise in construction and understand all of that. General factors often will not touch it. If you are a commercial contractor, look specifically for one that works in your trade rather than assuming a decline means the product does not fit.

Professional services

Engineering, consulting, IT services, marketing — anywhere work is delivered against a commercial contract and invoiced afterwards. Less common, entirely possible, and particularly relevant to firms serving government or large-corporate clients where payment cycles are long and immovable.

What actually determines eligibility

• A commercial customer. Consumers do not work — there is no invoice on terms to sell.
• Work already delivered. Factoring funds completed work, not future work.
• A clean invoice, free of dispute, offset or unusual conditions.
• A customer who will actually pay, which the factor will check.
• No existing lien on your receivables from another lender.

When it is the wrong answer

If you can get a line of credit at a useful size, take the line. Factoring exists for businesses that cannot — because they are too new, too concentrated, growing too fast for their balance sheet, or in an industry a bank will not write.

And if the receivables are slow because your invoicing is slow, fix that first. Invoicing a fortnight after delivery and then paying to accelerate the payment is a expensive way to solve an administrative problem.