How to Finance a Pallet Manufacturing and Distribution Company

The pallet manufacturing and distribution industry is very competitive. Whether you are manufacturing pallets, distributing them or both - managing income and expenses can be very challenging. You have to work with suppliers that demand quick or immediate payments. At the same time, your clients want to pay invoices in 30 to 60 days. Pallet manufacturing and distribution companies that cannot manage their income and expenses soon find themselves with cash flow problems.

Problems usually start when a client starts taking a little longer to pay their invoices, forcing you to dip into capital or to delay payments to your owns suppliers. If left unchecked, this situation can snowball into a major problem that threatens your company.

There are a few ways to manage this problem. One alternative is to try and negotiate delayed payments to your suppliers while trying to obtain quicker payments from your clients. Although worth a try, this type of juggling seldom works for the long term. A second alternative is to get business financing from an institution.

This can be a good alternative for larger companies who can show substantial assets and provide solid financial statements. Although qualifying for a business loan is not easy - business loans are usually available to well managed larger firms. But what can small or midsized firms do?

A better alternative may be to use factoring financing. Invoice factoring solves the dilemma of slow paying clients by providing an advance against their invoices. This quick payment provides the firm with the funds they need to meet expenses and grow the business.

Factoring has a number of benefits. It provides the company with stable and predictable cash flow, which smooths operations and planning. Furthermore, a.r factoring (as it's commonly called) is fairly easy to obtain. The biggest requirement is that the invoices you finance have to be from credit worthy commercial clients. Additionally, your company needs to be free from legal or tax problems or encumbrances.

Qualifying for factoring is relatively easy which makes it an ideal solution for small and medium sized clients whose biggest problem is that they cannot afford to wait to get paid by clients.