Last Updated on October 28, 2022
Supplemental education providers often have to wait long for the school district to pay them. Long payment terms that take weeks or even months create cash flow issues leading to a frustrating cycle of negative cash flow and increasing debt.
To keep your education provider company in good financial health, you need cash to make payments, hold seminars, and meet payroll – this is where education invoice factoring comes in.
In this article, we discuss how invoice factoring for education providers works, its benefits, and how it compares to other financing alternatives. Read on to learn how altLINE can improve cash flow and helps you pay expenses with education invoice factoring!
What Is Education Provider Factoring?
Education provider factoring is when your business sells invoices to a third-party company like altLINE in exchange for a cash advance. Education provider companies often get paid on credit, so there may be delays in receiving payment, which results in negative cash flow that can hurt their business. Invoice factoring lets companies access working capital whenever necessary, reducing their reliance on on-time customer payments.
Benefits Of Invoice Factoring For Education Providers
Education provider factoring offers cash advances to unlock funds by covering late customer invoice payments. Check out the benefits altLINE offers with our factoring services:
Get Your Accounts Receivable Invoices Paid In Days, Not Months
The best education provider factoring companies fund your invoices within 1 or 2 days. This means you can get up to 90% of your hard-earned money right away instead of in 30, 60, or even 90 days.
Access Capital To Grow Your Business While Maintaining Equity
Business owners sometimes must sacrifice equity to fund company growth, but invoice factoring can set them up for long-term success. Education provider factoring provides quick cash to pay debts, fuel growth, and meet payroll without sacrificing assets or equity.
Get Cash When You Need It Most
Late customer payments and overdue invoices affect your finances negatively because they create low-cash situations that hurt your business. Invoice factoring accelerates these late payments and increases cash flow, ensuring your business stays financially healthy.
How Does Education Provider Factoring Work?
altLINE’s education provider factoring service works by turning unpaid invoices into cash to improve cash flow, fund growth, and help pay for business expenses. Moreover, factoring invoices through altLINE softens the financial blow of delayed payments. Instead of waiting on customers to pay their invoices, you can use our services to get cash whenever needed.
Here is a guide to applying for invoice factoring with altLINE:
Submit Your Unpaid Invoices
altLINE accepts all kinds of education seminar invoices for factoring. We generally favor creditworthy customers and large or medium-sized companies. Additionally, we do not factor invoices for customers who consistently make late payments.
If your invoice turnover time is between 30 and 90 days, your receivables are well-positioned for factoring.
altLINE Advances Up To 80-90% Of The Invoice Face Value
You can typically expect a factoring advance rate of 80-90% of your invoice’s face value, deposited within 24 to 48 hours of submission to altLINE. The exact timing of our deposit may vary depending on when you complete the job.
altLINE Helps Collect Payment For Your Outstanding Invoices
Our team will assist you in invoice collection by providing a secure lockbox for the money and reporting payments through an online customer portal. If issues arise, we can resolve disputes professionally to help you maintain good business relationships.
altLINE Pays Out The Remaining Unpaid Invoice
After payment collection, we deduct our factoring fee (typically 1-5% of your invoice) and transfer the remaining invoice value to your company.
Uses For Your Factoring Cash Advance
Receiving cash advances from education provider invoice factoring means you do not have to wait on customer payments to fund your business. Instead, you can accelerate payment cycles and gain growth capital to develop your company sooner.
Here are some ways you can use invoice factoring cash advances:
As education providers, teachers, tutors, and lecturers are the core of your business. Unfortunately, late customer payments often lead to delayed payroll, reducing morale and productivity.
Getting invoice factoring cash advances ensure payroll obligations are met on time, improving productivity and satisfaction.
Take On New Jobs
You should not be forced to wait for customer payments to take on new seminar or class offers and grow your business. Education provider factoring gives you the cash required to buy everything you need for seminars and classes without sacrificing assets or equity.
Pay Operating Expenses
Licenses, transportation, and permits are just some of the things you must pay for as an education provider. Invoice factoring for education providers helps you pay these obligations with cash advances instead of equity or assets.
Education Businesses We Fund And Finance
As one of the most prominent factoring companies in education, altLINE finances various businesses in the sector. Here are some businesses that can benefit from our services:
- Homeschooling services
- Hobby or special interest courses
- Lesson plan creators
- Online English teachers
- Employee training centers
- Skill development centers
Factoring Your Education Provider Invoices vs Other Funding Options
In addition to invoice factoring, education providers have a few other funding options to improve cash flow. What are these options, and are they better than invoice factoring? Here is a detailed look at how each alternative compares to invoice factoring:
Education Provider Factoring vs Bank Line Of Credit
A bank line of credit is the most common financing solution chosen by businesses. However, education provider companies may not get enough funds to grow their business even if they qualify for a line of credit.
Banks typically determine your line of credit approval and lending limit by looking at fixed assets. However, education providers don’t usually have many fixed assets, so you may find line of credit qualification harder.
Education provider factoring is typically better because financial companies approve funding based on your customers instead of fixed assets. If you work with an established and reputable customer base, factoring companies will give you enough working capital when banks cannot.
Education Provider Factoring vs ACH/MCA Loans
ACH (automated clearing house) and MCA (merchant cash advance) loans are popular thanks to their easy qualification process and fast approval times. With just your bank statement, you can get funding within one or two days.
On the other hand, ACH and MCA loans have notoriously high interest and lender fees that may reach up to 60% of your initial loan. If you cannot pay this loan back, the lender may offer additional debt that can put your company in financial trouble.
Education provider factoring is not debt-free, but factors use customer invoices as collateral, which are more likely to be repaid. Therefore, you do not have to worry about debt repayment and can focus on growing your business.
Related: Pros and Cons of an MCA
Education Provider Factoring vs Quick Pay Discounts
In quick pay discounts, you offer a lower rate to customers who clear invoices quickly to encourage quick repayment, accelerating your cash flow. While this may sound like a good deal, quick pay discounts heavily depend on your customer’s priorities. If a customer prefers having more cash on hand over short-term savings, they may ignore your offer and delay payment, leaving you low on cash and unable to grow your business.
Invoice factoring for education seminars is typically more reliable because as long as your invoice is approved, you’re guaranteed to get a cash advance.
Typical Factoring Rates And Fees
We determine invoice factoring fees based on how much you plan to factor and how long customers take to pay. Factoring more amounts and getting customer payments faster usually result in lower factoring rates. We also consider other factors like your customers’ overall credit quality, customer base diversity, and your company’s age.
We charge two types of factoring fees:
- Initial fee: This fee covers our factoring expenses for an initial period (typically the first 30 days) and generally costs up to 3.50% of your invoice.
- Incremental fees: These periodic fees kick in after your initial fee period to cover subsequent expenses and cost up to 1.50% of your invoice per charge.
Requirements To Apply For Education Provider Factoring
You need to apply for invoice factoring to receive cash advances. Here are the documents you need:
List Of Existing And Potential Customers
altLINE needs the names and addresses of your existing and potential customers to review their credit quality and determine factoring eligibility.
altLINE requires a completed application form as part of the factoring process. We also need these documents enclosed with your application:
- Business ownership identification
- Personal identification
- Employer Identification Number
- Customer contracts
- Articles of incorporation and other relevant corporate documents
Accounts Receivable Aging Report
An accounts receivable aging report lists your outstanding invoices categorized by their due dates. altLINE needs this report to research your customers’ payment behaviors and decide whether they are eligible for factoring.
We will factor invoices that are 30 to 90 days outstanding, but invoices where customers state they can’t pay may not be eligible for factoring.
Frequently Asked Questions About Our Factoring Services
Here are some common questions about education provider factoring answered:
Do you need to run a credit check before getting started?
altLINE runs a credit and background check on all education company owners. However, there are no minimum credit thresholds for approval. Background checks are reviewed for financial-related crimes or felonies. In the event a borrower has a spotty background, approval with altLINE may be in question, but in the event the borrower is disqualified, altLINE will often work with the borrower to identify an education provider factor that is willing to help.
Do you require UCC filings when factoring education provider invoices?
Upon executing a term sheet, altLINE will file a UCC on the client’s business. This UCC filing allows altLINE to properly secure the collateral (i.e. the invoices) it plans to advance against when the factoring facility is in place. UCC filings are an integral part of any form of lending.
Is education provider factoring debt or a loan?
Education provider factoring is neither debt nor a loan. Invoice factoring is the sale of your invoices to a third party. The money advanced against these invoices will be repaid by your customers. However, altLINE is a recourse factor, so you may need to pay the cash advance back if your customer fails to pay their invoice.
Do you offer non-recourse education provider factoring?
altLINE only offers recourse education provider factoring. While you must repay the cash advance if your customer fails to pay, recourse factoring structures often allow for factors to extend lower rates and larger credit limits on your customers.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.