How Food Producers Are Funding Growth Without Banks
Our factoring program can be a vital source of financing for food producers which have high-quality accounts receivable outstanding such as those that sell to major grocery chains or distributors.
By factoring, companies get quick access to the funds needed to continue to meet daily working capital needs, build inventory or expand operations.
Factoring Proposal Issued: $1.5 Million | Manufacturer: The owner’s problematic personal credit profile resulted in declines from other factoring companies. Versant focuses on the AR alone!
In the world of small business operations, managing cash flow can often be one of the biggest challenges. Business owners frequently find themselves in situations where they need immediate working capital to cover expenses, purchase inventory, pay employees, or invest in growth—long before customers pay their invoices. In such scenarios, accounts receivable factoring emerges as a powerful financial tool that can act as bridge financing, helping businesses stay afloat and even thrive.
This article explores the concept of accounts receivable factoring, how it works, the benefits and risks, and why it can serve as an effective bridge financing solution for small businesses.
Understanding Accounts Receivable Factoring
Accounts receivable factoring, often simply referred to as “factoring,” is a financial transaction in which a business sells its accounts receivable (unpaid customer invoices) to a third party, known as a factor, at a discount. In return, the business receives immediate cash—typically 70% to 90% of the invoice value—while the factor takes on the responsibility of collecting payment from the customers.
How It Works
The factoring process generally follows these steps:
Invoice Generation: A business provides goods or services to its customers and issues invoices, usually with payment terms of 30, 60, or 90 days.
Sale to Factor: Instead of waiting for the invoice to be paid, the business sells the receivable to a factoring company.
Advance Payment: The factoring company pays a portion of the invoice value upfront—known as the advance rate.
Collection: The factor then collects the payment directly from the customer.
Remainder Payment: Once the customer pays the invoice in full, the factor remits the remaining balance to the business, minus a factoring fee (typically 1% to 5%).
Bridge Financing Defined
Bridge financing refers to a short-term funding solution used to cover immediate cash flow needs until a business secures more permanent financing or receives expected income. It’s often used to “bridge the gap” between a financial need and a future event, such as:
Collecting on outstanding invoices
Receiving a bank loan
Closing a round of equity investment
Selling an asset or property
Bridge financing is crucial in time-sensitive situations and often carries higher costs or stricter terms due to the short-term risk for lenders.
Why Small Businesses Need Bridge Financing
Small businesses often experience erratic cash flows. Even profitable enterprises can run into short-term liquidity crunches. Here are some common scenarios where bridge financing is necessary:
Seasonal businesses ramping up for a busy season but needing cash to buy inventory.
Service providers waiting 30–90 days for customer payments while needing to pay employees weekly.
Manufacturers needing funds to cover production costs before receiving payment for completed goods.
Startups between investment rounds but needing funds to sustain operations.
For many small businesses, traditional loans or lines of credit may not be available, especially if they have limited credit history or lack collateral. This is where accounts receivable factoring can fill the void.
How Accounts Receivable Factoring Serves as Bridge Financing
Accounts receivable factoring fits the definition of bridge financing because it offers immediate liquidity based on income that is expected in the near future. Here’s how factoring acts as a bridge:
1. Accelerating Cash Flow
When a business issues an invoice with net 30, 60, or 90-day terms, the funds are essentially locked up for that duration. Factoring unlocks that value immediately, allowing the business to maintain operations or capitalize on opportunities without waiting.
2. Providing Short-Term Relief
Factoring provides funding until longer-term solutions are realized. For example, a business awaiting a loan approval can use factoring to maintain cash flow in the interim. Once the loan is secured, the business can rely less on factoring.
3. No New Debt Incurred
Bridge loans often come with interest and increase the business’s debt burden. Factoring, on the other hand, is not a loan—it’s a sale of assets. This makes it a particularly attractive option for businesses that want to preserve their balance sheets.
4. Flexibility and Scalability
Unlike bank loans with rigid terms, factoring is inherently flexible. The more invoices a business generates, the more capital it can access. This makes it an ideal bridge for growing businesses scaling their operations.
Advantages of Using Factoring as Bridge Financing
1. Quick Access to Cash
Factoring companies can often approve applications and release funds within a few days. This speed is critical in time-sensitive scenarios where traditional financing may take weeks or months.
2. Improved Cash Flow Management
By converting receivables into immediate cash, businesses can better plan and manage their operational expenses without delays.
3. No Credit Score Requirements
Factoring is based on the creditworthiness of a business’s customers—not the business itself. This makes it viable for new or struggling businesses with strong accounts receivable.
4. Support for Growth Opportunities
If a business receives a large new order but lacks the funds to fulfill it, factoring can provide the necessary capital. This allows businesses to say “yes” to growth rather than turning down opportunities due to cash constraints.
5. Outsourced Collections
Some factoring arrangements include credit checks and collections, saving the business time and resources in chasing down payments.
Disadvantages and Considerations
While factoring offers many benefits, it’s not without downsides. Business owners should consider the following:
1. Cost
Factoring fees can range from 1% to 5% or more per month. Over time, this can be more expensive than traditional financing.
2. Customer Perception
Some customers may view factoring negatively, especially if they are contacted by the factoring company. This can affect customer relationships if not handled properly.
3. Qualification Requirements
Not all invoices are eligible. Factoring companies typically only accept invoices from creditworthy customers, which may limit the amount of capital available.
4. Loss of Control
With non-recourse factoring, the factor assumes the risk of non-payment. However, with recourse factoring, the business must repay the advance if the customer fails to pay—introducing additional risk.
Types of Factoring Arrangements
Understanding the different types of factoring is important when considering it as bridge financing.
1. Recourse vs. Non-Recourse
Recourse Factoring: The business is liable if the customer doesn’t pay the invoice. This is cheaper but riskier.
Non-Recourse Factoring: The factor assumes the risk of non-payment, but charges higher fees.
2. Spot Factoring vs. Full-Service Factoring
Spot Factoring: The business factors a single invoice or a few invoices on a one-time basis.
Full-Service Factoring: The business enters into a long-term relationship with the factor, often factoring all receivables.
3. Disclosed vs. Undisclosed Factoring
Disclosed: The customer is informed that the invoice has been sold to a factor.
Undisclosed: The customer pays the business, which then remits payment to the factor (also known as invoice discounting).
Use Cases: Real-World Examples of Bridge Financing with Factoring
Example 1: A Seasonal Retailer
A toy store generates most of its revenue during the holiday season. In the fall, the business needs to order large quantities of inventory. Since customer invoices from previous sales are still unpaid, the retailer sells them to a factoring company and receives immediate funds to stock up. By December, customer payments are in, and the business is flush with cash again—making factoring a perfect seasonal bridge.
Example 2: A Construction Company
A small construction firm wins a contract to build a commercial property but needs to pay subcontractors and buy materials upfront. Bank financing is unavailable due to limited credit history. The company factors its receivables from a previous job, receives 85% of the invoice value in cash, and uses it to fund the new project while awaiting customer payment.
Example 3: A Tech Startup
A software development company with several corporate clients faces a funding gap between seed and Series A investment rounds. Though it has solid contracts and invoices pending payment in 60 days, it lacks cash for payroll and rent. Factoring those receivables helps the startup survive the interim without taking on high-interest loans or diluting equity.
When Factoring Is the Right Bridge Financing Option
Factoring may be a strategic bridge financing option if:
You have a predictable flow of accounts receivable.
Your customers are creditworthy and pay on time.
You need funds quickly to cover essential operations or fulfill new business.
You want to avoid additional debt or can’t qualify for a bank loan.
You are in a high-growth or seasonal industry that demands immediate working capital.
Selecting a Factoring Partner
Not all factoring companies are created equal. When choosing a partner, small businesses should consider:
Reputation and Experience: Choose a factor with industry experience and positive reviews.
Fee Structure: Understand all costs, including advance rate, factoring fee, and any hidden charges.
Recourse Terms: Know who is responsible in case of customer non-payment.
Flexibility: Can you factor only the invoices you choose?
Customer Service: Will the factor treat your customers professionally and protect your relationships?
Conclusion
Accounts receivable factoring is a powerful and flexible tool for small businesses facing short-term cash flow challenges. As a form of bridge financing, it offers quick access to working capital without the burden of debt or the wait for customer payments. While it comes at a cost and involves handing over some control, the benefits—especially for businesses with steady receivables and creditworthy customers—can far outweigh the downsides.
In an economic landscape where agility is often the key to survival and success, factoring can be the bridge that helps small businesses cross from financial uncertainty to stability and growth.
Is your client experiencing a working capital shortfall, unable to meet immediate funding needs for essential expenditures. With Spot Factoring, they can quickly obtain funding against a single invoice, providing vital liquidity without ongoing factoring obligations.
Our accounts receivable factoring program can quickly meet the funding needs of businesses which do not meet the financing standards of traditional lenders, but require a cash infusion for basic survival.
Addressing the common client objection regarding how their customers will perceive their use of factoring.
Factoring and its effect on customer relationships
Factoring generally does not negatively impact client-customer relationships and can often even improve them.
Factoring generally does not negatively impact client-customer relationships and can often even improve them. Factoring is more common a practice than many small business owners realize.
It is quite routine for large companies to have suppliers which are factoring their invoices. A clients’ access to cash through factoring in many cases can be seen as a positive development by their customers, particularly if there were prior concerns about the supplier’s financial stability.
The worry among potential factoring clients about how their customers will react to the knowledge that they are using factoring service is one of the most common objections you’ll receive from your clients when they consider factoring and that objection is “What will my customers think of me?”
This concern is largely unfounded: This concern is largely unfounded: Invariably the answer is it does not negatively impact relationships with customers.
Our clients generally have very strong customers and that’s why we’re able to factor for them. We rely upon the creditworthiness of those strong customers those big companies they are already paying factors for many of their suppliers. This normalizes factoring as a standard business practice.
For the customer, adopting factoring often takes nothing more than updating a payable address in an accounts payable system and now payments coming directly to the factor rather than going to their supplier. This underscores the operational ease for the client’s customers.
In situations where a client might be experiencing financial difficulties, factoring can actually be perceived positively by customers. It’s not uncommon that if our clients have a need for factoring their customers may be aware that there is some financial distress or they might be a bit of a cash crunch so the fact that they can now tell their customers that they have access to cash through factoring could often benefit the relationship. This reframes factoring as a solution that ensures the supplier’s stability and ability to continue fulfilling orders.
While all of our clients will worry what this is going to do to their relationship with their customers what it will most likely do is improve their customer relationships
Factoring: A financial transaction where a business sells its accounts receivable (invoices) to a third party (the factor) at a discount in exchange for immediate cash.
Accounts Receivable: Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.
Creditworthiness: The ability of a borrower to repay a debt. In this context, it refers to the financial reliability of a client’s customers.
Payable Address: The designated location (physical or electronic) where a customer sends payments to their supplier.
Accounts Payable System: The system a company uses to manage and track its outstanding debts to suppliers.
Business Development Officer: An individual responsible for generating new leads and nurturing relationships to expand a company’s business.
Objection (in sales): A reason given by a potential client for not wanting to purchase a product or service.
Cash Crunch: A situation where a business does not have enough liquid assets (cash) to meet its short-term obligations.
Supplier: A business that provides goods or services to another business.
Factor: The third-party financial company that purchases a business’s accounts receivable at a discount.
For small manufacturers, navigating the global economy means walking a tightrope between fluctuating material costs, tight production schedules, and often thin profit margins. When a trade war strikes—bringing new tariffs, disrupted supply chains, and payment delays—it can push even well-run businesses into a cash crunch.
That’s where accounts receivable factoring comes in. It offers an immediate and flexible source of working capital, giving small manufacturers the breathing room they need to keep production running.
What Is Accounts Receivable Factoring? Factoring is a financing method where a business sells its unpaid invoices to a factoring company at a discount. The business receives up to 90% of the invoice value upfront, and the rest (minus a small fee) when the customer pays.
Unlike loans, factoring doesn’t create new debt—it simply accelerates access to cash that’s already owed to the business.
The Trade War Toll on Small Manufacturers—By the Numbers Trade wars hit manufacturers hard, especially the smaller players. Consider the impact:
According to the National Association of Manufacturers (NAM), tariffs in recent U.S.-China trade conflicts cost manufacturers over $57 billion between 2018 and 2021.
A 2023 survey by SCORE found that 58% of small manufacturers reported cash flow issues as their biggest challenge, exacerbated by rising input costs and delayed payments.
Tariffs on steel and aluminum alone have raised material costs by 10%–25%, depending on sourcing location and grade.
Payment terms have been lengthening, especially for B2B international orders, with many small manufacturers now facing average payment cycles of 45–60 days.
These disruptions don’t just create headaches—they create gaps in working capital that can slow or stop production entirely.
How Factoring Helps Small Manufacturers Bridge the Gap Fast Access to Cash Instead of waiting 60+ days for payment, manufacturers can get most of the invoice value within 24–48 hours. That can help cover materials, payroll, and urgent orders.
Avoiding New Debt Factoring doesn’t affect your debt-to-equity ratio or add to your liabilities—an advantage when applying for future financing or trying to stay lean during a volatile period.
Buffering Against Extended Payment Terms In sectors like electronics or industrial equipment, large buyers often demand longer terms. Factoring fills the working capital gap so you don’t have to delay supplier payments or production schedules.
Cash Flow to Offset Cost Increases If your materials cost has jumped by 15% due to tariffs, factoring helps ensure you can still purchase inventory without taking a hit to your credit line or delaying deliveries.
Freeing Up Time and Resources Many factoring companies also handle credit checks and collections. For small teams, this means more time focused on production and growth rather than chasing down late payments.
A Practical Example Let’s say a small plastics manufacturer supplies custom parts to a U.S.-based electronics company. They ship a $75,000 order with 60-day payment terms, but they need to purchase new resin (now 20% more expensive due to tariffs) and cover payroll next week.
By factoring the invoice, they receive $63,750 upfront (85% advance). That infusion keeps production moving, employees paid, and suppliers happy—without waiting two months for payment or resorting to high-interest credit.
Is Factoring Right for Your Manufacturing Business?
Factoring is especially effective for:
B2B manufacturers with reliable customer invoices over $10,000 per month
Companies with growing sales but cash flow bottlenecks
Manufacturers needing fast, recurring access to working capital
Those impacted by international trade tensions, delays, or tariffs
Final Thoughts Trade wars will continue to create unpredictability in global markets. But for small manufacturers, the ability to stay nimble and maintain strong cash flow is a game-changer. Accounts receivable factoring offers not just survival—but strategic advantage. Whether you’re sourcing new materials, expanding capacity, or just keeping your lines running, factoring can provide the capital you need to stay ahead—even when the global economy throws curveballs.
Versant has access to the capital necessary to fund larger factoring transactions than many other funding sources. Large deals!
Versant has access to the capital necessary to fund larger factoring transactions than many other funding sources.
Factoring Program Overview $100,000 – $30 Million Quick AR Advance No Audits No Financial Covenants No Long-Term Commitment Ideal for Companies with Strong Customers
We excel at LARGE & CHALLENGING deals : Turnarounds Historic Losses Customer Concentrations Poor Personal Credit Character Issues
Versant focuses on the quality of your client’s accounts receivable, ignoring their financial condition.
Press Release: (March 25, 2025) Versant Funding LLC is pleased to announce it has funded a $3 Million non-recourse factoring facility to a company which designs and distributes housewares through major grocery and retail channels.
This business was having trouble fulfilling new orders due to funding restrictions put in place by their current factoring company. An advance against all outstanding accounts receivable was needed to provide the cash to meet product demand and that is what Versant was able to offer. In addition, Versant was able to pay off and consolidate a number of other loans that had been taken out by the business.
“Versant’s factoring program was a great match for this business that was continuing its recovery from pandemic-era disruptions,“ according to Chris Lehnes, Business Development Officer for Versant Funding, and originator of this financing opportunity. “Because our approach to factoring focuses solely on the quality of accounts receivable without imposing customer-concentrations limits, we were able to provide our new client more funding than their existing factor, allowing the business to better serve its customers.”
About Versant Funding Versant Funding’s custom Non-Recourse Factoring Facilities have been designed to fill a void in the market by focusing exclusively on the credit quality of a company’s accounts receivable. Versant Funding offers non-recourse factoring solutions to companies with B2B or B2G sales from $100,000 to $10 Million per month. All we care about is the credit quality of the A/R.
Versant Funding Transaction Study Guide for Press Release
Key Concepts to Understand our latest Press Release:
Factoring: The process of selling a company’s accounts receivable (invoices owed by customers) to a third party (the factor) at a discount to obtain immediate cash.
Non-Recourse Factoring: A type of factoring where the factor assumes the risk of the accounts receivable not being paid due to the customer’s financial inability to pay. If the invoice is not paid for a reason other than a dispute between the client and their customer, the factor bears the loss.
Accounts Receivable (A/R): Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.
Funding Restrictions: Limitations placed on the amount of money a company can access, often by lenders or existing financial partners.
Advance Rate: The percentage of the face value of the accounts receivable that the factor provides to the client upfront.
Customer Concentration Limits: Restrictions imposed by some factoring companies on the percentage of a client’s total accounts receivable that can come from a single customer.
B2B (Business-to-Business): Transactions conducted between businesses.
B2G (Business-to-Government): Transactions conducted between businesses and government entities.
Quiz:
What is the primary service that Versant Funding LLC provides, as highlighted in the press release?
Specific type of factoring facility did Versant Funding provide to the housewares designer and distributor? What does this imply about the risk associated with unpaid invoices?
According to the press release, what was the main financial challenge faced by the housewares distributor before partnering with Versant Funding?
How did Versant Funding’s approach to factoring differ from the housewares distributor’s previous factoring company, allowing them to provide more funding?
What does the term “advance against all outstanding accounts receivable” mean in the context of this press release?
Besides providing an advance on receivables, what other financial action did Versant Funding take for the housewares distributor?
Who is Chris Lehnes, and what is his role in the transaction described in the press release?
What is Versant Funding’s target market in terms of the types and volume of sales their clients typically have?
Explain the significance of Versant Funding focusing “solely on the quality of accounts receivable.”
What is the dollar amount of the non-recourse factoring facility funded by Versant Funding in this specific transaction?
Answer Key:
Versant Funding LLC primarily provides non-recourse factoring facilities to businesses. This involves purchasing a company’s accounts receivable at a discount to provide them with immediate cash.
Versant Funding provided a $3 million non-recourse factoring facility. This means that Versant Funding assumes the risk if the housewares distributor’s customers are unable to pay their invoices (for reasons other than disputes).
The main financial challenge was funding restrictions imposed by their previous factoring company, which prevented them from fulfilling new customer orders due to a lack of available cash flow.
Versant Funding focuses solely on the credit quality of the accounts receivable and does not impose customer-concentration limits, unlike the previous factor, allowing them to provide more funding based on the total value of good invoices.
An “advance against all outstanding accounts receivable” means that Versant Funding provided the housewares distributor with an upfront payment based on a significant portion of the total amount owed to them by their customers.
In addition to providing an advance on receivables, Versant Funding also paid off and consolidated a number of other loans that the housewares business had previously acquired.
Chris Lehnes is a Business Development Officer for Versant Funding and the originator of the $3 million non-recourse factoring financing opportunity for the housewares distributor.
Versant Funding targets companies with B2B or B2G sales ranging from $100,000 to $10 million per month, emphasizing the quality of their accounts receivable.
Focusing solely on the quality of accounts receivable means that Versant Funding’s lending decisions are primarily based on the creditworthiness of the housewares distributor’s customers, rather than solely on the financial health of the distributor itself.
The dollar amount of the non-recourse factoring facility funded by Versant Funding for the housewares designer and distributor was $3 million.
Essay Format Questions:
Discuss the benefits of non-recourse factoring for a business experiencing rapid growth or recovering from financial disruptions, using the housewares distributor in the press release as an example.
Compare and contrast traditional bank loans with non-recourse factoring as sources of working capital for a business. What factors might lead a company to choose factoring over a loan?
Analyze the significance of Versant Funding’s emphasis on the “quality of accounts receivable” and its lack of “customer-concentration limits” in the context of providing flexible financing solutions.
Based on the information provided, evaluate how factoring can help a business overcome funding restrictions and improve its ability to meet customer demand.
Explain the roles and responsibilities of a factoring company like Versant Funding and a business development officer like Chris Lehnes in facilitating a factoring transaction.
Glossary of Key Terms:
Accounts Receivable (A/R): The total amount of money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for; essentially, unpaid invoices.
Advance Rate: The percentage of the face value of an invoice that a factoring company pays to its client upfront. The remaining amount, minus fees, is paid when the customer pays the invoice.
B2B (Business-to-Business): A business model where companies primarily sell products or services to other businesses rather than directly to consumers.
B2G (Business-to-Government): A business model where companies primarily sell products or services to government agencies or entities.
Factoring: A financial transaction in which a business sells its accounts receivable (invoices) to a third party (the factor) at a discount to obtain immediate cash flow.
Funding Restrictions: Limitations or constraints on the amount of capital a business can access from lenders or other financial sources.
Non-Recourse Factoring: A type of factoring agreement where the factor assumes the credit risk associated with the accounts receivable. If the customer fails to pay due to insolvency, the factor bears the loss (provided there are no disputes regarding the goods or services).
Working Capital: The difference between a company’s current assets (such as cash, accounts receivable, and inventory) and its current liabilities (such as accounts payable and short-term debt). It represents the liquid assets available to fund day-to-day operations.
Executive Summary:
This press release announces that Versant Funding LLC has provided a $3 million non-recourse factoring facility to a housewares designer and distributor. The client was facing funding restrictions from their previous factoring company, hindering their ability to fulfill new orders driven by strong product demand and recovery from pandemic-era disruptions. Versant Funding’s solution provided the necessary advance against all outstanding accounts receivable to meet this demand and also enabled the consolidation of other existing loans. A key differentiator highlighted by Versant is their focus solely on the quality of accounts receivable without imposing customer concentration limits, allowing them to offer more funding than the previous factor.
Main Themes and Important Ideas/Facts:
Versant Funding Provided a $3 Million Non-Recourse Factoring Facility: The core announcement is the successful funding of a significant factoring agreement. The term “non-recourse” is crucial, indicating that Versant assumes the risk of non-payment on the factored invoices, provided the debt was valid at the time of purchase.
Quote: “Versant Funding LLC is pleased to announce it has funded a $3 Million non-recourse factoring facility to a company which designs and distributes housewares through major grocery and retail channels.”
Client Profile: Housewares Designer and Distributor: The recipient of the funding is identified as a company involved in both the design and distribution of housewares, operating through major grocery and retail channels. This suggests a business with potentially large and diverse customer relationships.
Quote: “…a company which designs and distributes housewares through major grocery and retail channels.”
Addressing Funding Restrictions and Growth Opportunities: The client was experiencing limitations with their previous factoring arrangement, preventing them from capitalizing on new order demand. Versant’s funding directly addressed this constraint.
Quote: “This business was having trouble fulfilling new orders due to funding restrictions put in place by their current factoring company.”
Quote: “An advance against all outstanding accounts receivable was needed to provide the cash to meet product demand and that is what Versant was able to offer.”
Consolidation of Existing Debt: Beyond providing working capital, Versant’s facility also enabled the client to streamline their financial obligations by paying off and consolidating other loans. This suggests a more comprehensive financial solution was provided.
Quote: “In addition, Versant was able to pay off and consolidate a number of other loans that had been taken out by the business.”
Versant’s Differentiated Approach: Focus on A/R Quality and No Customer Concentration Limits: A key selling point for Versant is their unique approach to factoring, which prioritizes the creditworthiness of the accounts receivable itself and does not restrict funding based on the concentration of a client’s customers. This was the primary reason they could offer more funding than the previous factor.
Quote: “Because our approach to factoring focuses solely on the quality of accounts receivable without imposing customer-concentrations limits, we were able to provide our new client more funding than their existing factor, allowing the business to better serve its customers.”
Context of Post-Pandemic Recovery: The transaction is framed within the context of the client’s ongoing recovery from disruptions caused by the pandemic, highlighting the role of flexible financing in supporting business resilience.
Quote: “Versant’s factoring program was a great match for this business that was continuing its recovery from pandemic-era disruptions,“
Versant Funding’s Market Positioning: The “About Versant Funding” section clarifies their niche: providing custom non-recourse factoring facilities to B2B or B2G companies with monthly sales ranging from $100,000 to $10 Million, with a singular focus on the quality of their accounts receivable.
Quote: “Versant Funding’s custom Non-Recourse Factoring Facilities have been designed to fill a void in the market by focusing exclusively on the credit quality of a company’s accounts receivable.”
Quote: “All we care about is the credit quality of the A/R.”
Key Takeaways:
Versant Funding successfully provided a $3 million non-recourse factoring facility to a growing housewares distributor facing funding constraints.
The transaction enabled the client to fulfill new orders, consolidate existing debt, and improve their overall financial position.
Versant Funding differentiates itself through its focus on accounts receivable quality and the absence of customer concentration limits, allowing for potentially greater funding availability compared to traditional factors.
This deal highlights the role of factoring as a flexible financing solution for businesses experiencing rapid growth or navigating post-disruption recovery.
Quick cash for small businesses using AR Factoring
Running a small business comes with a host of financial challenges, and cash flow management is often at the top of the list. Many businesses struggle with delayed payments from customers, leading to cash shortages that can hinder operations, payroll, and growth. One effective financial solution to this problem is accounts receivable factoring.
What Is Accounts Receivable Factoring?
A financing method where a business sells its outstanding invoices to a company at a discount. In return, the business receives an immediate cash advance—typically 70% to 90% of the invoice value. Once the customer pays the invoice, the factoring company releases the remaining balance, minus a small fee.
Unlike traditional bank loans, factoring does not create debt on the company’s balance sheet. Instead, it allows businesses to leverage their existing receivables to maintain a steady cash flow.
How Factoring Can Benefit Your Small Business
1. Improved Cash Flow
One of the primary advantages of factoring is that it provides businesses with immediate access to working capital. Instead of waiting 30, 60, or even 90 days for customers to pay their invoices, businesses can convert receivables into cash quickly.
2. Easier Access to Funding
Unlike loans or lines of credit that require extensive financial documentation and strong credit history, factoring is based primarily on the creditworthiness of your customers. This makes it a viable option for startups and small businesses that may not qualify for traditional financing.
3. No Additional Debt
Because factoring involves selling an asset (accounts receivable) rather than borrowing money, it does not add debt to your balance sheet. This keeps financial ratios healthy and preserves borrowing capacity for other needs.
4. Outsourced Accounts Receivable Management
Many factoring companies offer additional services such as credit checks on customers and collections management. This can save small businesses time and effort, allowing them to focus on operations and growth rather than chasing payments.
5. Flexibility and Scalability
Factoring is not a one-size-fits-all solution; businesses can choose which invoices to factor based on their cash flow needs. Moreover, as a company grows and generates more invoices, the amount of funding available through factoring increases, making it a scalable financing option.
Is Factoring Right for Your Business?
Can be a valuable tool for businesses that:
Experience cash flow gaps due to slow-paying customers.
Have a strong volume of receivables from creditworthy clients.
Need fast access to working capital without taking on additional debt.
Want to outsource invoice collection and credit management.
However, it’s important to consider the costs involved. Fees can range from 1% to 5% per month, depending on factors like invoice value, customer creditworthiness, and industry risk. Businesses should compare different factoring companies to find the best terms and ensure that factoring aligns with their financial strategy.
Lastly…
It is a powerful financial tool that can help small businesses bridge cash flow gaps, reduce financial strain, and fuel growth. By leveraging unpaid invoices, businesses can access the capital they need to stay competitive without the burden of debt. For many small business owners, factoring can be the key to maintaining stability and seizing new opportunities in an unpredictable economic landscape.
