negotiating business deals

Your Supplier Hikes Your Prices. What’s Your Move?

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You open your inbox on a Tuesday morning. There it is: a letter from one of your key suppliers. Effective next month, prices are going up 12%. No negotiation. No warning. Just a gut punch you are expected to absorb.

For most business owners, the instinct is to accept it. The supplier holds leverage. You need the materials. What choice do you have?

More than you think.

This article is a practical response plan for one of the most common and costly surprises in business: the overnight supplier price hike. With U.S. tariffs at their highest effective rate since 1946, the Institute for Supply Management Prices Paid Index hitting 78.3 in March 2026 (its highest since June 2022), and diesel forecast to average $4.80 per gallon for the year, supplier cost increases are hitting nearly every industry at once. 

For businesses in manufacturing, trucking, and distribution, especially those holding fixed-price contracts with their own customers, the math is rough. Your costs go up while your revenue stays level.

But you don’t have to take it lying down. Here’s what to do.

Put Suppliers On The Defense

Before you accept any increase, ask for documentation. Request a written, line-item breakdown showing exactly what inputs drove the change: raw materials, labor, energy, freight, and overhead. Ask for the prior baseline, the current value, and the percentage change in each category.

This request alone changes the conversation. Many price increase notices are test balloons. Suppliers know that most buyers accept without question. When you ask for justification, you signal that you will not.

Once you have the breakdown, verify it. Public indexes let you check the supplier’s claims against real market data:

  • Raw materials: The U.S. Bureau of Labor Statistics Producer Price Index (https://www.bls.gov/ppi/) tracks commodity prices including steel, aluminum, copper, lumber, and resins.
  • Diesel and fuel: The U.S. Energy Information Administration (https://www.eia.gov/petroleum/gasdiesel/) publishes weekly on-highway diesel prices by region.
  • Labor costs: The BLS Employment Cost Index (https://www.bls.gov/eci/) tracks wage and benefit changes by industry and occupation.

If a supplier claims a 15% increase driven by material costs but the relevant PPI shows a 6% move, you have a data-backed case for pushing back.

negotiate supplier price

Negotiate Beyond the Unit Price

Most business owners focus the entire conversation on price per unit. That is a mistake. Experienced procurement professionals negotiate across multiple variables simultaneously. Payment terms, volume commitments, contract length, and delivery scheduling all have value to your supplier.

Consider offering to pay faster. A 2/10 Net 30 arrangement (2% discount for paying within 10 days rather than 30) represents a significant annualized yield for your supplier. That has real value to them. It costs you something, but it may be far less than absorbing the full hike.

Volume commitments work in the same way. If you can credibly offer to consolidate purchasing or extend a contract in exchange for a price hold, many suppliers will take that deal. Predictability has value on their side of the ledger too.

When a cost increase is genuinely legitimate, push for a phased structure rather than accepting it all at once. Accepting 50% of the proposed increase now and deferring the remaining 50% for six months can be a meaningful win. It buys you time to reprice your own contracts, adjust your margins, or qualify a second source.

For any agreement you sign going forward, shoot for indexed escalation clauses rather than supplier discretion. A well-structured clause caps annual increases at a defined percentage, ties adjustments to a named public index (BLS PPI for materials, EIA for diesel, ECI for labor), requires bidirectional movement (when the index falls, your price falls), and gives you at least 60 to 90 days’ written notice before any change takes effect.

Build Your Diversification Defense

A single supplier relationship is a concentration risk. The COVID disruptions of 2020 to 2022, the current tariff environment, and ongoing energy volatility have made that clear. A second qualified supplier for your most critical inputs gives you negotiating leverage and operational resilience at the same time.

The practical approach is a 70/30 allocation. Your primary supplier gets 70% of the volume, keeping your pricing tiers intact. Your secondary supplier gets 30%, enough to stay current on your specifications and able to scale up quickly if needed. Don’t think of it as splitting the relationship; think of it as insuring it.

Qualifying a second supplier takes time. Quality audits, specification reviews, and trial runs rarely complete in fewer than 90 days. The time to start is not after the next hike letter arrives. It is now.

Watch for the next article in this series, which examines the full cost of single-supplier dependency and how to structure a diversification strategy.

Keeping Your Business Running During Negotiations

Here is the practical problem: even a successful negotiation takes time. Your supplier’s new pricing may hit next week. Your bank line of credit increase may take months to process. An SBA loan typically takes 60 to 90 days to fund, even with expedited review.

According to JPMorgan Chase Institute research, the median small business holds roughly 27 days of cash buffer. A sudden 12% increase in input costs can wipe that out fast, especially for businesses with 30 to 90 day payment terms from their own customers. Accelerated burn creates a sense of urgency that threatens your negotiation and your business.

This is exactly where invoice factoring serves a function that traditional financing cannot. Factoring converts your outstanding invoices into immediate working capital, typically within 24 to 72 hours. Approval is based on your customers’ creditworthiness, not your recent margins or credit history, which matters most when a cost shock has temporarily squeezed your financials.

One manufacturing company that Liquid Capital works with faced a similar challenge during the 2009 recession. A major bank pulled their line of credit just as they had landed a large grocery retail contract. Liquid Capital provided $1.2 million through invoice factoring over the course of that contract, allowing the company to pay suppliers, keep production running, and deliver on the order. By 2024, that same company had returned to full bankable status and achieved significant sales growth.

Factoring is not the cheapest form of capital. It is the fastest form that scales with your sales, remains available when banks tighten lending standards, and does not require months of documentation a traditional credit facility demands. When your cost structure shifts overnight, speed has real dollar value.

Slow is Smooth. Smooth is Fast.

When a supplier hike notice lands in your inbox, the response is not a single decision. It is a sequence.

Slow the conversation down. Request documented cost justification and verify the claims against public indexes. Negotiate across payment terms, volume, and contract structure, not just unit price. Phase any legitimate increase and lock index-based guardrails into your next contract. Begin qualifying a secondary supplier. Make sure your working capital can sustain operations through the 30 to 60 days it takes to resolve the situation.

The businesses that absorb cost shocks best are not the ones with the deepest pockets. They are the ones who know they have options and act on them.

To learn more about how invoice factoring can help your business manage cash flow through supply chain disruptions and cost increases, read our guide to understanding invoice factoring contracts.

invoice factoring paperwork

How to Avoid Becoming an Invoice Factoring Horror Story

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Bills are coming due. Payroll is two weeks away. A new contract just landed that your cash on hand can’t deliver. These are the moments that motivate business owners to look for financing solutions they had never considered before, including invoice factoring.

That same urgency often motivates those same business owners to sign financing agreements they later regret. The fees buried on page six, the auto-renewal clause tucked into the termination section, the credit limit that looks manageable today but will stall your growth next quarter. These details are easy to miss when the pressure to get funded feels more urgent than the patience to read a contract. For some business owners, a factoring agreement intended to solve a cash flow problem ends up making an already difficult situation worse.

This article covers the five invoice factoring contract terms most likely to cause problems, the warning signs to watch for during the sales process, and the options available if you are already in a difficult relationship. Factoring is the right tool for many businesses. The goal here is to help you find the right partner.

When the Contract Becomes the Problem

Each of the following cases is a real invoice factoring deal that caused more problems than it solved.

Case 1: Minimum Volume Misery

A manufacturer signed a one-year agreement that included a minimum volume requirement: a minimum dollar amount of invoices to sell each month. Business slowed and the company could not hit the minimum. The exit fee, calculated on the shortfall between what they had factored and what the contract required, came to $160,000.

Case 2: Costly Escape

A second company had a $1 million factoring facility. When they tried to switch to a different factor, they discovered their contract included a facility termination fee of 10% of the total facility amount. That meant that the cost to exit early totaled $100,000.

Case 3: Inflexible and Inadequate

A third company’s factor set customer credit limits too low to cover the invoices those customers were actually generating. The company could not factor the invoices coming in, could not grow within the facility, and could not afford to exit. Hands tied.

Each situation traces back to specific contract terms the business owner did not fully understand at signing. Those terms are worth knowing before you need them.

Five Invoice Factoring Contract Terms You Need to Know

1. Customer Credit Limits

Invoice factoring works by having a factor (a financial services firm that purchases your unpaid invoices) advance you most of their value, then collect payment from your customers directly. 

Within that arrangement, factors set a credit limit on each customer, capping how much of that customer’s invoices they will buy at any given time. A limit of $75,000 on a customer generating $100,000 in invoices means $25,000 of that business cannot be factored. 

More critically, a limit set today may not grow with your business. Before signing, ask: what is the credit limit on each of my key customers, and what does it take to increase it?

2. Contract Term and Auto-Renewal

Most factoring agreements run for an initial term of 6 to 12 months and auto-renew for another full term unless written cancellation notice is provided within a specific window, often 30 to 90 days before the renewal date. Missing that window (even by a day) can lock a business into another year. 

Set a calendar reminder 90 days before your renewal date, confirm your intentions in writing, and look for agreements that convert to month-to-month terms after the initial period, with no added penalty for leaving.

3. Early Termination Fees

Early termination fees vary widely. Some factors charge a flat fee of a few hundred dollars or a small percentage of recent volume. Others charge a percentage of the total facility amount, charge fees based on how far short of a minimum volume requirement you fell, or charge fees for every month left on the contract. The $100,000 and $160,000 exits described above came from the latter category. 

Before signing, ask the factor to walk through exactly how the exit fee would be calculated if you needed to leave after three months.

4. Default Penalties

Every factoring agreement specifies what happens if the client violates facility terms. Missing a reporting deadline, failing to redirect a customer payment that came to you instead of the factor, or allowing invoices to become disputed can all trigger default. The associated fees are typically steep and often listed separately from the standard fee schedule. 

Ask the factor to explain their firm’s penalty fees and charges as well as what triggers them.

5. UCC Lien Scope

When entering a factoring agreement, the factor files a UCC-1 financing statement, a public notice that establishes its legal claim on your collateral. In Canada, this is called a PPSA registration. The filing may cover only accounts receivable or, in many cases, all business assets.

An all-asset lien is common in factoring, especially in full-recourse agreements. The more important question is how the factor handles other financing needs. A broad lien can make it harder to add another lender, such as a bank, equipment finance company, or SBA lender, unless the factor is willing to cooperate.

Before signing, ask how the factor works with other lenders and whether it will subordinate its lien when appropriate, such as when you need equipment financing or other growth capital. Also ask how quickly it will file a UCC-3 termination, the document that formally releases its claim, when the relationship ends.

Red Flags in the Sales Process

Contract terms are the formal record of a factoring relationship. How a factor conducts the sales process is often the early signal of what that record will look like. These three patterns are “buyer beware” warning signs.

  • A transactional tone and pressure to sign quickly. A factor focused on closing rather than understanding your business may not be a thoughtful partner when problems arise. The first conversation should include questions about your industry, your customers, and whether factoring actually fits your situation. If those questions do not come up, that is worth noting.
  • Reluctance to share the contract. You should receive the full purchase and sale agreement before you are asked to sign anything. A factor who resists providing it in advance, discourages legal review, or summarizes terms verbally rather than in writing is not operating in your interest.
  • Evasive answers to direct questions. Ask what happens if you default. Ask how the early termination fee is calculated. Ask what it takes to increase a customer credit limit. A reputable factor answers these questions directly, including the parts that are not favorable to you. Vague or redirected responses are danger signals.

invoice factoring paperwork

If You Are Already in a Difficult Factoring Relationship

If you recognize your situation in any of the cases above, you are not alone and you are not out of options. The path forward depends on your specific contract terms, but there are three routes worth considering.

Option 1: Negotiate a Buyout

A new factor may be willing to pay off the outstanding balance owed to your current factor, including any early termination fee, and open a new facility. Whether a buyout makes financial sense depends on the exit cost relative to the savings the new arrangement offers. Some factors will also explore bridge options to help cover the exit cost over time, paid down through the new facility. Not every situation qualifies, but it is worth the conversation.

Option 2: Document Problems and Negotiate

If your factor has not performed as agreed, such as failing to credit debtor payments, funding late, or setting limits so low the facility cannot be used, document every instance with dates, amounts, and written communications. Factors generally prefer a negotiated exit to a formal dispute. Present your documentation and request a reduced termination fee or structured exit. If failures have been significant or ongoing, a commercial attorney can advise whether the factor’s conduct provides grounds to challenge the exit fee. Stopping payments without a formal exit is the one approach that reliably makes the situation worse.

Option 3: Wait and Prepare

If the exit cost is prohibitive today but the contract has a defined end date, serve out the remaining term. Submit your termination notice within the required window, confirm it in writing, and begin evaluating new factors now. Use the remaining time to clean up your accounts receivable aging (the record of which invoices are outstanding and how long they have been unpaid) and gather the financial information a new factor will want to review. A well-prepared transition moves faster and causes less disruption.

Write Your Own Factoring Success Story

The urgency that brings most business owners to factoring does not go away when the agreement is signed. Bills still need paying. Payroll still comes due. The difference between a good factoring relationship and a damaging one is often a single conversation that happened, or did not happen, before the ink dried.

The right factor asks hard questions before approving you. They want to know whether factoring is the right fit, whether the facility amount will meet your actual needs, and what happens if things do not go as planned. They answer your questions about default and exit directly, including the parts that are not in their favor. That transparency is the foundation of a partnership that solves today’s cash flow problem and helps build toward a more stable financial position tomorrow.

Before signing any factoring agreement, request the full contract, read the termination and default sections carefully, ask direct questions about credit limits and auto-renewal, and note whether the factor is asking questions about your business rather than simply moving toward a signature. That preparation is a small investment compared to the cost of discovering the details later.

Visit the Liquid Capital Learning Center for a library of helpful articles and resources on factoring, working capital, and business finance.

Chess board showing an advantage as one player knocks out another representing small business advantage with invoice factoring

Trust as Strategy: Turning Payment Terms Into Unbeatable Competitive Advantage

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The Gift Only Small Businesses Can Give

Every small business owner knows the challenge of competing against companies with deeper pockets, bigger marketing budgets, and established brand recognition. In a world where size confers advantage, how can a smaller business not just survive, but actually outmaneuver the competition?

The answer lies in recognizing what you can offer that they cannot: agility, personal service, and perhaps most importantly, the strategic use of payment terms as a competitive weapon. Through invoice factoring, small businesses can transform what appears to be a disadvantage into their greatest strength.

“When you’re smaller, you have to be smarter,” explains Rebecca Perren, co-founder of Pehr Designs. After using factoring to build relationships with major retailers, her company achieved 5X sales growth. “Having seen how well it worked for us, I think businesses should take advantage of factoring when they don’t yet qualify for bank financing. It’s easy, efficient, and it really helped our business grow.”

When Bigger Isn’t Better

Large corporations struggle with the very size that gives them market presence. Their payment processes are bureaucratic, involving multiple approval layers and rigid payment schedules that prioritize consistency over customer relationships.

This creates opportunity for smaller businesses that understand a fundamental truth that in B2B relationships, cash flow challenges affect everyone. Your customers and prospects all share the same constraint that you do: they need better cash flow management.

While your competitors are often constrained by corporate payment policies that demand Net 15 or even payment on delivery, you can offer Net 60, Net 90, or even longer terms that actually help your customers’ businesses succeed. This isn’t just about being accommodating. It’s about giving your business a compelling point of difference.

The Trust Advantage

When you offer extended payment terms, you’re giving your customers something far more valuable than a discount: you’re giving them trust. Credit is an expression of confidence. When you tell a customer “I trust you to pay me in 90 days for what I’m delivering today,” you’re saying “I believe in you and what you’re doing.”

This gesture builds the foundation for profitable, long-term business relationships. It signals that you see your customers as partners, not just transactions. You understand their challenges because you’ve faced similar ones yourself.

Consider the psychological impact. When a large corporation demands payment on delivery, they’re essentially saying “We don’t know you well enough to trust you.” When you offer generous payment terms, you’re communicating “We’re confident in your success and want to support it.”

Research in trade credit demonstrates that these relationships create “mutual commitment and trust between the receiver and provider, forming closer and stronger” business bonds. Extended payment terms don’t just ease cash flow … they build competitive moats around your customer relationships.

Strategic Payment Terms in Action

Compare:

The Standard Corporate Approach

  • Net 10 or payment on delivery
  • “This is company policy”
  • No exceptions for customer circumstances
  • Payment terms used to minimize risk

The Small Business Strategic Approach

  • Net 60 to Net 90+ terms available
  • “Let’s find terms that work for your business”
  • Flexible arrangements based on relationship strength
  • Payment terms used to build customer loyalty

Summit Retail Solutions exemplifies this strategic approach. By factoring $3 million over 65 transactions, they built the capacity to offer terms that larger competitors couldn’t match. “With Liquid Capital’s help, we solidified our company through growth to maturity,” explains co-founder Ted Hope. “Teaming with Liquid Capital was the best thing our company could have done to allow us to grow and prosper.”

Their sales more than doubled from $1.4 million to over $4 million in 18 months … not because they had a better product, but because they could offer better terms than competitors who were constrained by traditional financing.

The Early Payment Discount Multiplier

Even though offering extended terms builds loyalty, you can also use the reverse strategy to accelerate cash flow and create win-win scenarios. By offering early payment discounts (such as 2/10 Net 60: a 2% discount if paid within 10 days, otherwise Net 60), you give customers choices that larger competitors often can’t match.

Corporate accounting departments typically lack the flexibility to take advantage of early payment discounts, even when the math clearly favors it. A 2% discount for paying 50 days early represents an annualized return of roughly 15%, a deal most finance managers would love to take, but corporate payment systems often can’t accommodate.

Your small business, powered by factoring, can offer these opportunities while still maintaining positive cash flow. When customers take the early payment discount, you get faster payment. When they don’t, you’ve still differentiated yourself through superior terms.

Best Broadcast discovered this advantage when CEO Dave Kip realized that “if other companies are offering early payment discounts, then you should consider factoring as a real option. I had always assumed that it would cost much more, but when looking at the calculations, invoice factoring was a much cheaper option.”

Breaking the Credit Constraint

Companies face internal constraints that prevent them from using payment terms strategically:

Budget Cycle Rigidity: Corporate financial planning operates on rigid cycles. Changing payment terms requires approvals that can take months.

Risk Management Focus: Many companies have departments dedicated to minimizing risk, which translates to shorter payment terms and stricter credit requirements.

System Limitations: Enterprise systems are often configured for standard terms and lack flexibility for customer-specific arrangements.

Small businesses, particularly those using factoring strategically, can move around these constraints with speed and flexibility that competitors simply cannot match.

The Factoring-powered Payment Strategy

Invoice factoring transforms payment terms from a cash flow constraint into a competitive weapon. Instead of being limited by your bank balance, you can offer terms based on what will win and retain customers.

Without Factoring: You’re constrained by your cash conversion cycle. If you offer Net 60 terms, you must wait 60 days for payment while still covering payroll, supplies, and overhead. This limits your ability to offer competitive terms.

With Strategic Factoring: You can offer Net 60 or Net 90 terms while accessing cash within 24-48 hours. Your customer gets the extended terms they need; you get the cash flow to operate and grow.

This isn’t about covering emergency cash flow gaps: it’s about creating sustainable competitive advantages through superior customer terms.

How to Get Started

  • Competitive Term Analysis: Research what payment terms your competitors offer. Most corporate websites publish standard terms in their vendor information. Identify opportunities to offer more attractive alternatives.
  • Customer Segmentation: Identify which customers would benefit most from extended terms. Growing companies, seasonal businesses, and customers facing cash flow challenges are prime candidates.
  • Term Flexibility as Value Proposition: Build payment term flexibility into your sales presentations. Instead of leading with price or features, lead with “How can we structure payment terms that work for your business?”
  • Early Payment Incentives: Offer discounts for early payment (2/10 Net 60) to create win-win scenarios. Customers who can pay early get savings; those who can’t get extended terms.
  • Strategic Account Development: Use generous payment terms to build relationships with strategic accounts that competitors might overlook due to size or credit constraints.

Measuring Competitive Advantage

Track how payment terms impact your competitive position. Monitor win rates when payment terms are part of evaluation criteria. Extended terms typically improve customer retention as switching costs increase. Customers with better payment terms often place larger orders since cash flow isn’t constraining purchases. Relationships built on trust and favorable terms typically generate higher lifetime value than purely transactional relationships.

Building Lasting Competitive Moats

The most powerful aspect of this strategy is that once customers experience superior payment terms, they become reluctant to switch to competitors offering less favorable arrangements. You’ve created switching costs that go beyond product features or pricing.

SiSTEM Tutoring discovered this when working with school districts that required Net 30 terms. By using factoring to accommodate these payment schedules while maintaining weekly payroll for tutors, they built competitive advantages that larger tutoring companies, constrained by traditional cash flow management, couldn’t match.

“We just felt like we didn’t really need a loan per se. We just needed quick access to the money that we’ve earned through our services,” explains founder Pearl Ubaru. This understanding allowed SiSTEM to offer payment flexibility that supported both their customers’ budget cycles and their own operational requirements.

The Trust Multiplier Effect

Extended payment terms signal partnership. When you offer a customer Net 90 terms, you’re communicating investment in their success, not just the immediate transaction. This builds relationship equity that compounds over time.

Customers begin to see you as a business partner who understands their challenges rather than just another vendor demanding quick payment. This psychological shift often leads to earlier involvement in planning processes, preference when multiple vendors are considered, referrals to other potential customers, larger orders due to improved cash flow confidence, and longer-term contracts.

From Payment Terms to Competitive Strategy

Strategic use of payment terms represents a broader competitive philosophy: using your size and agility as advantages rather than seeing them as limitations. While larger competitors are constrained by corporate policies and shareholder demands for quick cash conversion, small businesses can build customer relationships through financial partnership.

This approach works because it addresses a universal business need. Every business, regardless of size or success, faces cash flow management challenges. By offering solutions to your customers’ cash flow constraints, you’re not just selling products or services. You’re solving business problems.

The companies that thrive in competitive markets are those that understand this principle: competitive advantage often comes not from what you sell, but from how you sell it. Payment terms, powered by strategic factoring, give small businesses a way to compete not on size or resources, but on customer value and relationship building.

Getting Started with Strategic Payment Terms

If you’re ready to transform payment terms from a constraint into a competitive advantage:

  • Analyze your competitive landscape: Research standard payment terms offered by your competitors and identify opportunities to differentiate.
  • Identify strategic customers: Focus on growing companies, seasonal businesses, or those in industries known for cash flow challenges.
  • Calculate the competitive advantage: Model how different payment terms would impact both your cash flow (with factoring) and your customers’ operations.
  • Develop your payment term strategy: Create a framework for offering different terms based on customer relationship, order size, and strategic value.
  • Partner with a factoring company: Choose a factoring partner who understands your strategic approach and can support flexible payment terms without constraining customer relationships.

Your Competitive Edge Awaits

The businesses that succeed in competitive markets find ways to offer unique value. Where product and service features and pricing become rapidly commoditized, the companies that win solve intangible problems their competitors cannot.

Payment terms, strategically deployed through factoring, give you the ability to offer something competitors cannot: trust, flexibility, and partnership. You can give your customers the gift of improved cash flow while building the loyal relationships that sustain long-term business success.

Your size isn’t your limitation: it’s your competitive advantage waiting to be unlocked.

Continue Your Factoring Education

This article is the eighth installment in our 2025 Strategic Factoring Series. If you found this strategic approach valuable, explore our previous articles to develop a comprehensive understanding of how factoring can fuel your business growth:

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Say “Yes” to Larger Orders: How Invoice Factoring Lets You Take On Bigger Opportunities Without the Cash Flow Stress

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Every business owner knows that heart-sinking moment. A major opportunity lands on your desk – the kind that could transform your company’s trajectory. But instead of excitement, you feel a knot in your stomach. The order is simply too big for your current cash flow to handle.

It’s a cruel paradox of business growth: The bigger the opportunity, the more working capital you need to seize it. And traditional funding sources often can’t bridge this gap fast enough, if at all.

The Growth Plateau Trap

This scenario plays out countless times across industries, forcing businesses into what we call the “growth plateau trap.” It’s a frustrating cycle where companies have the capability and market demand to grow but lack the working capital to make that growth possible.

The consequences go beyond just missed opportunities. When businesses can’t grow, they often become trapped in survival mode – barely covering overhead, unable to invest in improvements, and leaving both owners and employees stressed and demoralized.

Breaking Free with Strategic Factoring

This is where invoice factoring enters the picture – not as an emergency measure, but as a strategic growth tool. Think of it less like a fire extinguisher and more like a rocket booster for your business.

Consider the story of Best Broadcast, a Florida-based HVAC installation company. When they landed a series of contracts with Marriott International worth $150,000, it should have been cause for celebration. Instead, owner Dave Kip faced a dilemma: The jobs would require thousands in upfront costs for labor and materials, but payment wouldn’t come for 45-60 days after completion.

“If we couldn’t get funding really quickly, we probably couldn’t have done the jobs,” Dave explained. Traditional financing wasn’t an option – the bank’s timeline simply didn’t match the opportunity’s urgency.

By partnering with Liquid Capital for invoice factoring, Best Broadcast was able to:

  • Take on contracts worth five times their typical project size
  • Get paid within days of completing each job instead of waiting months
  • Scale their average daily revenue from $1,000 to $5,000
  • Build a strong relationship with a major client that led to ongoing work

How Strategic Factoring Works

Unlike traditional loans that focus on your company’s credit history and assets, factoring leverages your customers’ creditworthiness. Here’s how it enables growth:

  1. Immediate Capital: Convert unpaid invoices into cash within 24-48 hours
  2. Scalable Funding: Your available capital grows automatically with your sales
  3. No New Debt: Since you’re accessing money you’ve already earned, there’s no loan to repay
  4. Flexible Terms: Use factoring as needed for specific large projects or opportunities

When to Consider Strategic Factoring

Factoring can be particularly powerful when:

  • You have opportunities to take on larger contracts
  • Your customers are creditworthy businesses but have longer payment terms
  • You need working capital faster than traditional financing can provide
  • You want to grow without taking on additional debt

Beyond Crisis Management

Too often, businesses view factoring as a last resort – a “fire extinguisher” to use only in emergencies. This mindset can cost you valuable growth opportunities.

Instead, consider factoring as a proactive growth strategy. With a factoring relationship in place before you need it, you can say “yes” when transformative opportunities arise.

Getting Started

To determine if strategic factoring could help fuel your growth:

  1. Assess Your Opportunities: What size contracts could you pursue with better cash flow?
  2. Review Your Cash Cycle: How long do you typically wait for customer payments?
  3. Calculate the Return: Compare factoring costs against the potential profit from larger projects
  4. Consider Timing: Don’t wait for a crisis – set up factoring relationships when you’re stable

The Path Forward

Business growth doesn’t have to be limited by working capital constraints. With strategic factoring, you can break through growth plateaus and transform “too big to handle” opportunities into stepping stones toward your company’s next level of success.

A collection of presents under a pine tree during the holiday season.

Three Gifts To Brighten Your Client’s Holidays

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Have some clients who made it to your “nice” list and want to give them something more meaningful than a tin of Moose Munch, a five-pound summer sausage, and a box of magical pears?

As always, your friends at Liquid Capital have you covered.

We’ve put together three thoughtful invoice factoring-inspired gifts that address the holiday season stressors common to many B2B operations. We have gifts that help solve their immediate challenges and others that put them on stronger financial foundations for the new year.

No need to wait until December 25th to unwrap and enjoy all year long. Let’s see what Liquid Capital’s hard-working elves have prepared for you to gift … after all, Santa shouldn’t get all the credit.

1. Properly-Stocked Shelves

Many B2B businesses struggle with the cosmic irony that is the annual overlap of peak demand and year-end cash scarcity. With their money tied up in unpaid invoices, these businesses are forced to miss opportunities because they cannot restock adequately.

Invoice factoring offers a smarter solution. Here’s how to help your clients use it effectively:

  • Convert upcoming receivables into immediate cash to fund inventory purchases
  • Maintain optimal stock levels without maxing out credit lines
  • Keep supplier relationships strong by paying on time or early
  • Take advantage of supplier early payment discounts

Consider a former client, a retail store that used purchase financing to make larger inventory purchases and maintain optimal stock levels. This allowed them to save on shipping costs, secure vendor discounts, and keep products available longer – leading to 100% growth in sales even during challenging market conditions.

2. A Little Holiday Cash

Remember opening Christmas presents your grandparents or other relatives sent. There was usually one grandparent (usually a grandma) who sent hot, itchy hand-knit wool socks. But then there was the relative (maybe the rich, fun uncle … the “FUNcle”) who sent the #10-size envelope that contained the card with the money flap. You could almost see beams of light radiating from the card as it opened.

You can be the FUNcle by helping your clients free up cash. How? Many businesses carry expensive short-term financing that strains their cash flow. Factoring can help create breathing room to restructure these obligations.

Consider these strategic approaches:

  • Use factoring proceeds to pay down merchant cash advances or high-interest loans
  • Consolidate multiple payment obligations into more manageable structures
  • Improve cash flow by reducing monthly debt service
  • Start the new year with a stronger balance sheet

Consider Silani Cheese, a family-owned specialty cheese manufacturer that used factoring to restructure its outstanding debts and rebuild its business. By establishing a reliable factoring relationship, they not only resolved their immediate debt challenges but also secured the steady working capital needed to return to profitability and fund future growth.

3. A “Future Favor” Certificate

Admittedly, this gift does not have the immediate curb appeal of the previous two … but it is by far the most valuable. It’s like the “Future Favor” certificate a parent puts into a card promising help on demand when redeemed. Sure, it’s not a plastic candy cane filled with M&Ms but what good are all the M&Ms in the world when you need help building a dinosaur out of toothpicks for school tomorrow because you put it off until the night before? Time to redeem that certificate!

That’s kind of what it is like when you help a client set up a factoring relationship BEFORE an urgent need surfaces. That’s the thing about urgencies and opportunities: they are very difficult to plan for but they need to be addressed quickly. This is where strategic factoring relationships become vital.

Help your clients lay the groundwork now by:

  • Establishing factoring relationships before urgent needs arise
  • Creating flexible funding that grows with their sales
  • Building a track record that can support larger credit lines later
  • Ensuring they can quickly fund new contracts or opportunities

Consider Defense Products & Services Group USA, who secured a $5 million military contract but needed to place manufacturing orders 30 days in advance. By establishing their factoring relationship early, they created a reliable $2 million credit facility that lets them confidently take on new contracts without waiting for customer payments to start production.

Merry Christmas and here’s to the happiest and most prosperous of New Years!

The Gift of Strategic Preparation

The intent of all of these gifts is to give you resources you can use to help your clients not just finish strong but to prepare for an even stronger new year. By helping your clients look beyond immediate cash needs, they can see how factoring can strengthen their long-term financial position.

Factoring works best when it’s part of a broader financial strategy. Encourage your clients to consider:

  • How improved cash flow can support their growth goals
  • Ways to leverage factoring alongside other financing tools
  • Opportunities to strengthen supplier and customer relationships
  • Steps to build more sustainable financial operations

Work with an experienced factoring partner who can help you support your clients’ broader financial goals. The right partnerships help you deliver solutions that go beyond simple transaction funding to create durable business value.

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Year-End Financial Planning: How Invoice Factoring Can Help Your Clients

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As a financial broker, you know the fourth quarter brings unique challenges for your B2B clients. While they’re managing holiday season demands, they also need to position themselves for success in the coming year. Many struggle to balance immediate cash flow needs with longer-term financial planning.

Let’s explore three strategic ways to use invoice factoring in your clients’ year-end planning. These approaches help solve immediate challenges while building stronger financial foundations for the new year.

1. Maintain Optimal Inventory Levels During Holiday Season

Many B2B businesses face a common dilemma as the year ends: They need to stock up for holiday demand but their cash is tied up in unpaid invoices. They find themselves walking a line. This creates a risky choice between missing sales opportunities or overextending credit lines.

Invoice factoring offers a smarter solution. Here’s how to help your clients use it effectively:

  • Convert upcoming receivables into immediate cash to fund inventory purchases
  • Maintain optimal stock levels without maxing out credit lines
  • Keep supplier relationships strong by paying on time or early
  • Take advantage of supplier early payment discounts

For example, a retail store used purchase financing to make larger inventory purchases and maintain optimal stock levels. This allowed them to save on shipping costs, secure vendor discounts, and keep products available longer – leading to 100% growth in sales even during challenging market conditions.

2. Set Up Factoring Relationships to Support New Year Growth

Smart business owners use year-end planning to prepare for growth opportunities. But expansion plans often stall when traditional financing can’t scale quickly enough. This is where strategic factoring relationships become vital.

Help your clients lay the groundwork now by:

  • Establishing factoring relationships before urgent needs arise
  • Creating flexible funding that grows with their sales
  • Building a track record that can support larger credit lines later
  • Ensuring they can quickly fund new contracts or opportunities

Consider Defense Products & Services Group USA, who secured a $5 million military contract but needed to place manufacturing orders 30 days in advance. By establishing their factoring relationship early, they created a reliable $2 million credit facility that lets them confidently take on new contracts without waiting for customer payments to start production.

3. Restructure or Pay Down High-Interest Debt

Year-end offers a perfect opportunity to improve your clients’ debt positions. Many businesses carry expensive short-term financing that strains their cash flow. Factoring can help create breathing room to restructure these obligations.

Consider these strategic approaches:

  • Use factoring proceeds to pay down merchant cash advances or high-interest loans
  • Consolidate multiple payment obligations into more manageable structures
  • Improve cash flow by reducing monthly debt service
  • Start the new year with a stronger balance sheet

Consider Silani Cheese, a family-owned specialty cheese manufacturer who used factoring to restructure their outstanding debts and rebuild their business. By establishing a reliable factoring relationship, they not only resolved their immediate debt challenges but also secured the steady working capital needed to return to profitability and fund future growth.

Look beyond year-end to the year (and years) ahead

The key to successful year-end planning lies in taking a strategic rather than tactical approach. Help your clients look beyond immediate cash needs to see how factoring can strengthen their overall financial position.

Factoring works best when it’s part of a broader financial strategy. Encourage your clients to consider:

  • How improved cash flow can support their growth goals
  • Ways to leverage factoring alongside other financing tools
  • Opportunities to strengthen supplier and customer relationships
  • Steps to build more sustainable financial operations

Remember that year-end planning isn’t just about closing the books – it’s about positioning clients for success in the coming year. By helping them use factoring strategically now, you strengthen your role as a trusted advisor for their long-term growth.

Work with experienced factoring partners who understand these dynamics and can support your clients’ broader financial goals. The right partnerships help you deliver solutions that go beyond simple transaction funding to create durable business value.

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5 Common Invoice Factoring Misconceptions Debunked

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As a business owner, you’ve heard about invoice factoring. Maybe you’ve dismissed it as too expensive or complicated. But when bank loans aren’t an option and you need working capital, factoring deserves a clear-eyed second look.

Let’s cut through the confusion and examine the five most common invoice factoring misconceptions so you can decide if factoring fits your business.

1. “The fees are too high”

This objection comes up first in most conversations about factoring. Yes, factoring typically costs more than a traditional bank loan. But here’s what many miss:

  • Factoring isn’t a loan – it’s an advance on money you’ve already earned
  • The cost reflects the speed and flexibility you get
  • Unlike loans, factoring grows with your sales without taking on debt

The real question: Will the capital generate more value than the fees?

For example, if factoring lets you take on a large new contract or get supplier discounts through early payment, the returns often outweigh the costs. But if you’re using factoring just to cover regular expenses, it’s worth a closer look to see whether your business has deeper cash flow issues.

2. “Invoice factoring will make my business look weak”

Many owners worry factoring will make their business look financially weak. Consider these points:

  • Most customers already work with vendors who factor
  • Major corporations regularly factor their receivables
  • Professional factors handle customer communication with discretion
  • You can often choose notification or non-notification factoring

The key is finding a factor who understands your industry and communicates professionally with your customers. A good factor becomes an extension of your accounts receivable team.

3. “I’ll lose control of my customer relationships”

This fear stems from horror stories about aggressive collection practices. Here’s the reality:

  • Reputable factors succeed by maintaining good customer relationships
  • You can set communication parameters with your factor
  • Factors often improve customer relationships through professional AR management
  • Many businesses find that factoring helps them serve customers better

Look for a factor who values long-term partnerships over quick profits. Ask about their collection practices and communication style.

4. “The application process is too complicated”

While bank loans require extensive paperwork and weeks of waiting, factoring typically offers:

  • Simpler qualification requirements
  • Focus on customer creditworthiness over your credit
  • Faster approval process
  • More flexible terms

Most factors can pre-qualify you in a single conversation. The full setup usually takes days, not weeks or months.

5. “I’ll become dependent on factoring”

You might have a deeper worry about financial sustainability and becoming addicted to factoring. But factoring can actually be a great way to get ahead. Smart use of factoring means:

  • Using it strategically for growth opportunities
  • Having a clear plan for how factoring fits your cash flow
  • Understanding when to factor and when to use other financing
  • Working with your factor to optimize your AR processes

Many businesses use factoring as a stepping stone to stronger financial footing. Others make it a permanent part of their cash flow strategy. The key is choosing what works for your business model.

The key is to make sure your factoring partner shares your goals. The goal at Liquid Capital is very future-focused: to get our clients “bankable.”

Making the Right Choice for Your Business

Invoice factoring isn’t right for every business. It works best when:

  • You sell to creditworthy business customers
  • Your profit margins can absorb the fees
  • You need flexible funding that grows with sales
  • Traditional financing doesn’t meet your needs

Focus on finding a funding partner who:

  • Understands your industry
  • Offers transparent terms
  • Provides the level of service you need
  • Treats your customers with professionalism

Understand both the costs and benefits. Talk to multiple factors. Ask tough questions about their processes (consider using this post as a guide). The right factoring relationship can transform your business – but only if you choose a partner who aligns with your needs and goals.

Reputable factors want you to succeed. They grow by helping businesses like yours thrive. Look for a partner who invests time in understanding your business and offers solutions tailored to your situation.

Next door neighbor's mail deposit boxes at a bank.

Invoice Factoring: A Better Alternative to Merchant Cash Advances

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Business owners lean on Merchant Cash Advances (MCAs) more and more to solve cash flow problems. MCAs offer quick access to cash based on future sales projections. But while MCAs can provide short-term relief, their high costs and rigid repayment terms make them an unsustainable solution. This may not seem like such a big deal when you need cash, but high costs and terms that might not be as aligned with long-term growth.

That’s why, in your search for sustainable and cost-effective financing solutions to facilitate growth, it’s good to look beyond the obvious options to alternatives that align with your business’s unique needs and goals. One alternative is invoice factoring, which immediately frees up cash tied up in your outstanding invoices. And it comes without some of MCA’s drawbacks.

In other words, there’s a time and a place for MCAs. But we’re here to talk about when invoice factoring might be a better long term solution, both for businesses and for brokers.

What is Invoice Factoring?

Invoice factoring allows you to leverage your outstanding invoices for immediate cash flow.

By selling your unpaid invoices to a factoring company at a discount, you get much of the invoice value upfront, typically 70% to 90%.

Unlike MCAs, which provide funding based on future sales projections, invoice factoring is tied directly to the value of your actual receivables. This means that the financing is based on work you’ve already completed and invoices you’ve already issued, providing a more stable and predictable source of funding.

And factoring doesn’t depend on your credit. So your company gets funding based on the credit of the companies that you invoice, giving you a much greater capacity to borrow, something no other financial tool can offer.

And with the right factoring relationship, you could truly accelerate your cash flow every month.

Is Invoice Factoring a Better Alternative to Merchant Cash Advances?

Cost-Effectiveness

MCAs are spendy. With interest rates and fees that can often reach triple digits (when annualized to compare apples to apples), MCAs can quickly eat into your profits and limit your growth potential. Invoice factoring, on the other hand, usually offers much lower rates, with fees ranging from 1% to 5% of the invoice value.

Read: You keep more of your money.

Better Cash Flow

Cash flow issues, like slow-paying customers, seasonal fluctuations, and unexpected expenses, can all put a strain on your finances, making it difficult to meet operational costs and invest in growth.

For some businesses, MCAs, with their quick repayment terms and high daily or weekly payments, can aggravate these cash flow issues, leaving you struggling to keep up.

Invoice factoring is more flexible and sustainable solution. By converting your unpaid invoices into immediate cash, you can smooth out your cash flow and ensure that you have the funds you need to meet your obligations and seize growth opportunities.

This is especially good for businesses with long payment cycles or in industries with extended payment terms, like construction or manufacturing.

Read: Payback isn’t a pain.

Flexible and Scalable

Unlike MCAs, which often come with fixed repayment terms and daily or weekly payments, factoring allows you to access funding on an as-needed basis. As your business grows and your invoicing volume increases, you can factor more invoices and receive more funding without the need for a new application or approval process.

This scalability makes invoice factoring an ideal solution for businesses that are experiencing growth or have fluctuating cash flow needs.

Whether you’re looking to hire new employees, purchase equipment, or expand into new markets, factoring can provide the financial support you need to achieve your goals.

Read: There’s no requirement to factor all of your invoices: just use it when you need it.

Choose the Right Factoring Partner

Look for track record and industry fit. Choose a factoring partner with a track record in your industry and an understanding of your unique needs and challenges.

In addition to good support and a dedicated team, a good factoring company will offer:

  • Transparent terms
  • Competitive rates
  • A streamlined application process

Whether you’re looking to improve your cash flow, invest in growth, or simply stabilize your finances, the right will be on your side, invested in your success.

Potential business partners discussing a deal overlooking a major city

Make the Switch from MCAs to Invoice Factoring

If you’ve been a little over-reliant on MCAs to meet cash flow needs, and want to switch to invoice factoring, compare some rates, terms, and services. Look for a partner that has experience in your industry and a good reputation.

Once you’ve found the right fit, the application process is typically pretty simple, with minimal paperwork and no long-term contracts.

Yeah, that’s a big one: make sure they don’t want you to sign a long-term contract.

Invoice Factoring Puts You on a Better Track than MCAs

MCAs can be a great quick fix, but for most business, invoice factoring can be a better long-term solution to put you on course to even better funding options.

Invoice factoring provides an alternative, unlocking the value of your receivables and improve your cash flow without the drawbacks of MCAs.

By partnering with a reputable factoring company and making the switch from MCAs to invoice factoring, you can take better control of your cash flow. With the flexibility, cost-effectiveness, and scalability of factoring, you’ll get the financial support you need to seize growth opportunities, navigate challenges, and achieve your goals. Learn more about working with Liquid Capital as a referral partner. Or if you’d like to see if factoring might be right for your situation, connect with us today.

Weather the recession with invoice factoring

Recession-proof your business and thrive during challenging times

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Recession-proof your business with these top tips.

Weather the recession with invoice factoring

In a recession, ensuring your business has enough working capital is not only key to continuing to meet your day-to-day obligations to employees, suppliers and customers – but it can also put you in a position to take advantage of opportunities to grow.

We recently explored why it’s crucial to find the right funding partner as recession looms – not only as lending standards are tightening at traditional financial institutions, but because alternative lenders often approach the funding process from a place of understanding, empathy, collaboration and responding quickly to challenges.

Ensuring your business is prepared for recession takes a multi-pronged approach – focused on your network, your cash flow and some strategic thinking. Here are ways to guard your company against the coming challenges:

 

1. Know where your cashflow stands

Whether you’re trying to meet biweekly payroll or looking to take advantage of an opportunity to scale your business, you need working capital to meet your obligations. But proceeding with confidence means knowing the state of your finances, so you’re clear on whether you’re on the right track or likely to face roadblocks in the near future.

Conducting a cash flow audit is an important step, as it allows you to take a closer look at your business’s working capital over a certain period. 

This will give you an updated picture of your businesses’ inflows and outflows and provide insight into any expected shortfalls before we head into recession, including whether you have more outstanding accounts receivables than you thought. If you do identify a gap, you then have the data in hand to take action to boost your cashflow, if necessary.

2. Cultivate relationships 

Along with working with the right funding partner, your focus on fostering strong relationships should also extend to your suppliers. Once a pattern of ordering and payment has been established over a number of months, you may be able to request extended or flexible payment terms, if needed. Some suppliers may also be willing to give you a lower rate on bulk orders or a discount if you pay your invoice on day 10 instead of day 90, for example. All of these measures will help keep your business cash flow positive.

3. Look for growth opportunities

When you’re feeling squeezed by inflationary pressures, it can be tempting to focus on putting out fires during recessionary times and instinctive to turn down chances to expand. But, as McKinsey explains, making it through tougher economic times like these means prioritizing growth – turning short-term challenges into opportunities. For example, taking advantage of new market share if or when it becomes available, launching or improving products or services to meet customers’ evolving needs can potentially pay off in a recession.

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4. Take a longer-term, strategic approach

In this environment, strategic thinking is one tool that will keep your business ahead of the curve – especially when it comes to anticipating challenges on the supply chain side or future price hikes in input costs.

Consider moving beyond a quarter-by quarter view to look at what’s happening to raw materials costs and take action to get ahead of potential increases. Recently, for example, one Liquid Capital client chose to take a longer-term view, purchasing raw materials with their invoice factoring capital – in this case, lumber – before inflationary pressures took hold. They were then able to resell the lumber to their clients using a peer-to-peer strategy at a markup that was lower than the market price.

Making strategic long-term investments, such as integrating more artificial intelligence (AI) technology into your business during this time can increase efficiency and help you come out of the recession with a competitive advantage.

5. Leverage invoice factoring to accelerate cash flow

Invoice factoring can play a part in a cost-savings strategy on the supply side – for example, when negotiating with your own suppliers for an early payment discount, using the cash you’ve received from factoring to pay your supplier can result in the supplier effectively paying for the cost of factoring.

Don’t just survive – thrive

Recession-proofing your business over the longer term can also involve working towards building a more resilient supply chain by reconfiguring supply networks, foregoing highly customized components in favour of easier to find inputs and lessening the risks of depending on only a few suppliers.

By strengthening your network, knowing where your accounts stand and thinking beyond the next quarter, you can bolster your business against the effects of a recession – and emerge from this period stronger, ready to take on your next business opportunity.

To learn more about how invoice factoring can help you or your client overcome the pressures of a recession, contact us today.

 

Advantages of factoring your invoices

Advantages of factoring your invoices with Liquid Capital

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Not all factoring companies are made the same. These are the benefits of factoring your invoices with Liquid Capital.

Advantages of factoring your invoices

Invoice factoring can be an excellent solution when you need business funding that’s as agile as your business. Many business owners have seized new growth opportunities and overcome cash flow challenges by partnering with a trusted and reliable alternative funding partner. 

However, not all invoice factoring companies are made the same. At Liquid Capital, here’s how we’re doing things differently:

1. We help accelerate your cash flow quickly

While some factoring companies can take several weeks to advance payment, long-established companies like Liquid Capital can often provide approved clients with funding in as little as one day.

2. We help navigate credit issues to access funding

Some traditional factoring companies may make it difficult to qualify for factoring advances, but that doesn’t make sense to us. Given that you’re effectively selling your invoices to a third party, so long as your customers’ credit ratings are good, you should qualify. 

Factoring, often considered one of the most accessible forms of financing, doesn’t rely on your company’s credit score, or level of revenue – and years in business are not part of the application process.

3. We give you access to significant funds upfront 

Some factoring companies advance smaller portions of the value of invoices. Liquid Capital advances at least 80% of the invoices’ value and sometimes more. That means you can get more funding, more quickly. 

4. We don’t overcharge our clients on fees

There are numerous factoring companies out there, and some of them charge high fees. Sometimes these fees are not clearly communicated. Trustworthy factoring companies like Liquid Capital are fully transparent and never charge hidden or egregious fees.

The amount you’ll pay can depend on several factors including the number of invoices you factor and their cumulative value, as well as the length of your factoring contract. Liquid Capital’s fees can often be comparable to what you would pay in interest on a loan.

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5. We don’t lock our clients into long-term contracts

Some factoring companies lock clients into contracts of up to two years. However, the more established and reputable factoring companies offer more flexible contracts, some as short as a month or two. And you usually pay lower fees if you do sign up to a longer contract.  

6. We protect your relationships with your clients

If your factoring company has poor customer service and pesters your clients for payment, this could adversely impact your relationships. However, this doesn’t happen with well-established factoring companies that offer high levels of consistently good customer service. The only aspect of your relationships with your clients that you will lose is chasing them for payment. Everything else remains the same.

All invoice factoring companies are not the same 

Until you’ve worked with a factoring company or two, you might think that all factoring companies provide similar services. But here at Liquid Capital, we pride ourselves on being different.

We’ve been successfully helping businesses for over 20 years by delivering:

  • Speedy financing: approved clients often receive funds within 24 hours.
  • Complete transparency: no hidden terms or complicated restrictions.
  • Expert advice: we consider your unique needs and offer a range of options.
  • Capital strength: we’ve deployed over $3 billion in working capital.

Ready to dive deeper? Check out our Invoice Factoring Guide, which provides some critical questions and info you may not have considered, which you should be asking of any factoring provider.

Contact us to find out more about how you can improve your cash flow by turning your invoices into immediate cash, with invoice factoring from Liquid Capital.