Too often, small businesses get caught in the trap of trying to control situations they cannot control.
We’ve witnessed several circumstances outside of an entrepreneur’s comfort zone. COVID-19, a rollercoaster economy, and tightening credit markets weren’t factors many small businesses owners could have predicted.
One of the other things that may have fallen outside a small business’s control was its cash flow. Many companies had large customers with long payment terms ranging from 60 to 90 days. But their frustrations rose when many large customers extended these payments due to the pandemic and a range of other factors.
Waiting well beyond agreed-upon payment terms can put a lid on a company’s growth at best and threaten its survival at worst.
But invoice funding has emerged as a viable best practice that puts businesses of all sizes back in control of their cash flow. During the pandemic, many businesses discovered relief by exchanging outstanding invoices for working capital and reducing their wait times.
Today, we highlight three companies that use invoice funding as a best practice to accelerate their business growth in innovative ways.
Second Run, Third Run, No Problem
Imagine launching a small consumer goods business and making a big first sale. The customer takes delivery of the products and prepares to sell them in stores. The customer sells out, and they order a second run. There’s just one problem.
The customer had 60-day payment terms and still hasn’t paid for the original shipment. How can a small company get the capital to boost its manufacturing and meet rising demand? This was the challenge facing MapleX as CEO Dave Thomspon grew his personal care business that is based in Canada.
Thompson considered seeking a loan with purchase orders, but banks might not issue a credit to a young company. It could seek another investor, but why give up more equity in the company?
MapleX faced these very questions. But invoice funding provided a better option.
Traditionally, the company worked with customers that offered 60-day payment terms. In many cases, these same customers would turn around and make additional orders within that payment window. But invoice funding would be even more essential when one of his largest customers extended their payment terms from 90 days to a staggering 150 days during the COVID outbreak.
Rather than waiting for ten full payment cycles before receiving payment, Thompson uses invoices to access funding on his terms. This practice has enabled him to accelerate MapleX’s growth, fulfill orders from repeat buyers, and establish trust with suppliers and customers across Canada.
Manage Inventory and Pass on the Savings
In 2018, Jermaine Kelly recognized a problem in the food production and catering industry. Restaurants, food producers, beverage makers, and government contractors struggled to source ingredients and other products on a regular basis.
As COVID-19 began to impact the city, procurement challenges got worse.
Last year, Kelly put the run in his company Run Veggie. He began grouping his clients together based on their buying habits and their specific product needs. Then, he could begin sourcing the much-needed products for government contractors and other clients.
The challenge, however, was cash flow. With government contractors only offering 60-day terms, he needed access to cash to build inventory and sell available products.
Kelly turned to FundThrough to get working capital in exchange for his outstanding invoices. Invoice funding ensured he could reduce the wait time for working capital from 60 days to roughly 24 hours. The access to capital always ensured he had cash on hand to make bulk purchases when products became available.
The additional, tangible value he provides to customers is lower prices. His ability to make bulk purchases allows Run Veggie to pass on the lower price to his customers.
In just two short years, Run Veggie is now thriving and now connects buyers and sellers across the U.S. The company has now expanded to multiple cities including New York and Los Angeles.
Bid Bigger, Bid Bolder
The energy infrastructure business is one of the most competitive in North America. ‘
Pipeline projects, in particular, require significant cash on hand to bid for new projects that connect oil-and-gas fields to downstream refineries and storage networks. For a small business trying to compete against large industry players, cash flow management is essential to any future growth.
Global Pipeline is a family-owned business. It started its operations in true Mom-and-Pop fashion and benefited from a friendly energy producer that offered 13-day payment terms. But working with just one company in the energy space creates its own threats.
As Global Pipeline diversified its business, it couldn’t find another company that offered such generous payment terms as its first customer. As Global Pipeline bid for new business, it found a new prospective client who could only promise 60-day payment terms.
Given the labor- and material-intense costs of energy construction, Global Pipeline needed cash flow to get the project off the ground. Invoice funding with FundThrough slashed the wait for outstanding invoices from its new client from 60 days to less than 24 hours. The result was a successful project, and the ability to showcase its expanded capacity to take on bigger projects and newer customers.
The little Mom-and-Pop pipeline shop has accessed a continuous source of capital to win bids. It just announced in August that it is on the official bid list of a new 70-mile pipeline project. This is now the second project bid north of $20 million, quite an accomplishment in an industry ravaged by COVID in 2020.
Small businesses can get access to working capital in as little as a day and put that money to work immediately. What would you do with access to unlimited funding based on the value of your outstanding customer invoices?
Think bigger than payroll, supplies, and other fixed costs.
If you’re seeking inspiration on how to put money to work, learn more at FundThrough.com.