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!
How Small Businesses can use Factoring as Bridge Financing
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.
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.
The factoring process generally follows these steps:
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:
Bridge financing is crucial in time-sensitive situations and often carries higher costs or stricter terms due to the short-term risk for lenders.
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:
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.
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:
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.
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.
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.
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.
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.
By converting receivables into immediate cash, businesses can better plan and manage their operational expenses without delays.
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.
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.
Some factoring arrangements include credit checks and collections, saving the business time and resources in chasing down payments.
While factoring offers many benefits, it’s not without downsides. Business owners should consider the following:
Factoring fees can range from 1% to 5% or more per month. Over time, this can be more expensive than traditional financing.
Some customers may view factoring negatively, especially if they are contacted by the factoring company. This can affect customer relationships if not handled properly.
Not all invoices are eligible. Factoring companies typically only accept invoices from creditworthy customers, which may limit the amount of capital available.
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.
Understanding the different types of factoring is important when considering it as bridge financing.
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.
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.
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.
Factoring may be a strategic bridge financing option if:
Not all factoring companies are created equal. When choosing a partner, small businesses should consider:
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.
Program Overview
We fund tough deals:
In about a week, we provide qualified businesses the funds to meet working capital needs.
Contact me today to learn if your client is a fit.
| Chris Lehnes 203-664-1535 chris@chrislehnes.com A Recent Spot Factoring Deal |
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.
Program Overview
We specialize in challenging deals :
Versant focuses on the quality of your client’s accounts receivable, ignoring their financial condition and aspects of management.
This enables us to move quickly and decisively to fund businesses which other lenders (and even other factoring companies) have declined
Keep us in mind for Manufacturers, Distributors and a wide variety of Service Businesses (includes SaaS) in need of working capital.
Contact me to discover foundational benefits of our AR financing program!
Chris Lehnes, Factoring Specialist | 203-664-1535 |clehnes@chrislehnes.com
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
Contact Factoring Specialist, Chris Lehnes
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.
Contact Factoring Specialist, Chris Lehnes to learn if your client could benefit from factoring.
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. This enables us to move quickly and fund qualified businesses including Manufacturers, Distributors and a wide variety of Service Businesses ( includes SaaS) in as few as 3-5 days. Contact me today to learn if your client is a factoring fit |
PRESS RELEASE: Versant Funds $3 Million Non-Recourse Factoring Facility to Housewares Designer & Distributor
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.
To learn more contact: Chris Lehnes| 203-664-1535 | clehnes@VersantFunding.com
Press Release Podcast Discussion:
Key Concepts to Understand our latest Press Release:
Quiz:
Answer Key:
Essay Format Questions:
Glossary of Key Terms:
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:
Key Takeaways:
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.
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.
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.
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.
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.
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.
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.
Can be a valuable tool for businesses that:
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.
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.
Contact Factoring Specialist Chris Lehnes to learn if your client is a fit
Chris Lehnes | 203-664-1535 | clehnes@chrislehnes.com
New Podcast Episode – Factoring – A Non-Recourse Financing Alternative
The presentation targets individuals who work with businesses that may have difficulty securing traditional financing. The core message is that factoring provides a viable alternative for companies with strong receivables (invoices owed by their customers), especially those who don’t qualify for conventional loans. Key Themes and Concepts: Factoring Defined: Factoring is presented as the sale of a company’s accounts receivable to obtain working capital, not a loan. Versant offers a “non-recourse full notification” program. This means: Sale of Receivables: Versant buys the receivables, taking ownership of the debt owed to the client. Notification: The client’s customers (account debtors) are notified to pay Versant directly. Non-Recourse: Versant assumes the credit risk if the client’s customers fail to pay (except in cases of defective product or service). “We also take on all the credit risk of non-payment of those customers.” Why Factoring? Factoring is positioned as a solution for businesses that are “unbanked” or have been turned down by traditional lenders (banks) and often even by other factoring companies. “All of our clients in person have been turned down by banks and in many cases turned down by other factoring companies.” This typically includes companies that are: New or rapidly growing. Seasonal with fluctuating revenues. Experiencing losses or financial difficulties. Have violated bank covenants. Versant’s Ideal Client: Versant focuses on small to medium-sized companies with revenues between $1 million and $100 million. A key requirement is that their clients have “good, creditworthy” customers (account debtors). “Our analysis is on who our clients are selling to… it’s important to us that our clients customers be strong.” Customers should be corporations, municipalities, or government agencies. Versant avoids medical and construction industries due to their specialized nature. The Factoring Process: Invoice Submission: The client submits invoices to Versant for funding. Verification: Versant verifies the invoices by contacting the customer. Advance: Versant advances 75% of the face value of the invoice to the client. “We’re typically verifying by contacting the customer confirming what the invoice tells us is true and then immediately wiring seventy-five percent of the face value that invoice to our customer” Customer Payment: The client’s customer pays Versant directly. Rebate & Fees: Versant pays the remaining 25% (the “rebate”) to the client, less their fee which accrues at a rate of 2.5% for the first 30 days and .84% for each additional 10 day period thereafter. “When we receive payment well now we fold our client that remaining twenty-five percent we call it the rebate it’s the twenty-five percent we didn’t advance initially when we we funded on that invoice less our fee” Versant’s Competitive Advantages: Flexibility: Versant can handle deals that are too difficult for other factors, including those turned down by banks and other factors. “Versant’s niche is really for the most part deals that can’t get done elsewhere.” Speed: Versant can fund clients very quickly, potentially within five days of introduction if the initial information is accurate. “we can go from an introduction to a client to funding five days later” Personalized Service: Each client is assigned an account executive for personalized support and communication. Technology: Versant provides clients with online access to data about their receivables, promoting better receivables management. Non-Recourse: No personal guarantees are required from the client’s principals, which is a key differentiator from other lenders. “we do not require any financial statements…we do not require personal guarantees” Use of Factoring Proceeds: Factoring can be used for various purposes, including funding projects, fueling growth, capitalizing on inventory discounts, or managing business crises. “we’re not going to monitor we’re not going to track how our clients use the factoring proceeds but it can be any of these these bridge needs” Customer Notification: Versant uses full notification, meaning that the client’s customers are notified to pay Versant directly. Versant argues that it is a normal practice for many companies, especially the large ones that are often their clients’ customers. “factoring just isn’t the red flag that they expect…particularly when a client of ours is selling to one of the big guys…those companies are paying factors like crazy right now” Factoring’s Impact on Profit: Factoring can increase a business’s profits by allowing them to pursue incremental sales that their lack of cash flow might have prevented. “factoring will allow a business to do more revenue than it’s doing today” **podcast created with AI Assistance (https://notebooklm.google)
Contact Factoring Specialist, Chris Lehnes to learn if your client is a fit.