Like many companies, the economic downturn brought about a very slow period for a mid-size U.S. ad agency.
The recession hit many of the agency’s clients hard. Rather than the 30-day payment cycles the agency was used to, the A/R invoices weren’t being paid until 45-60 days out.
The delay in these payments started to cause some serious cash flow problems.
The company’s CEO didn’t want to lose any of his remaining clients by putting too much pressure on them to pay sooner, but he had to do something. After cutting expenses as much as possible and even reducing his own salary, he was worried he might have to pay some of his bills with a personal credit card, which, for obvious reasons, he really did not want to do.
Luckily for this CEO, his brother ran a glass manufacturing company and had been factoring receivables for a few years in order to bridge the gap between invoicing and receiving payment from his customers.
It’s a good thing the brothers spoke before the ad man began charging up his personal credit card. A quick referral to Universal Funding Corporation fixed everything.
After speaking with a factoring specialist, the agency CEO filled out Universal’s quick one-page application and faxed it back, along with an A/R aging report and a sample invoice. That same day he had a
proposal in his inbox that detailed the amount that could be advanced on his A/R invoices and the rate that would be charged.
Three days later, Universal approved the agency for a factoring line of $75,000 per month, which consisted of an 85 percent advance and a 1.5 percent fee. (The agency received 98.5 percent of the face-value of each invoice).
The agency CEO faxed over his first set of invoices that same day and had cash in his bank account the next.
Invoice factoring was able to speed up the payment process, so the agency could stay current on its payables and keep away from credit card debt.
Putting its receivables to work created a cash flow buffer through a difficult time and soon enough, business was back to usual.
Would your business benefit from having a factoring line?