A Banker’s Guide to Identifying Factoring Opportunities

When a business needs working capital but traditional lending isn’t the right fit, invoice factoring can provide another option. Catalyst Financial helps businesses turn unpaid invoices into cash while helping bankers retain the banking relationship.

Here are common signs that a client could benefit from factoring.

Growing Faster Than Their Financing

Growth can put pressure on cash flow long before new revenue reaches the bank account. Consider factoring when a business:

• Lands a major contract or experiences rapid growth.
• Needs cash for payroll or operating expenses before customers pay.
• Has outgrown its existing line of credit.
• Is a startup or newer company with limited operating history.

Outside Traditional Lending Criteria

A business may have creditworthy customers and strong receivables but still fall outside a bank’s lending requirements. Potential indicators include:

• High customer concentration.
• Poor owner credit.
• Seasonal or uneven sales.
• Difficulty meeting collateral, debt service coverage ratio (DSCR), or other lending requirements.
• A non-revolving line of credit or a need for availability beyond an existing line.

A Gap Between Invoicing and Payment

For some businesses, the challenge is timing. Factoring may be a fit when a business:

• Sells to other businesses on net 30, 60, or 90-plus-day terms.
• Has accounts receivable as a primary asset.
• Serves creditworthy customers whose slow payments restrict growth.
• Needs working capital before outstanding invoices are paid.

Relying on Costly or Poorly Matched Financing

A client’s current financing may warrant a conversation about alternatives. Look for businesses that:

• Rely on merchant cash advances or other high-cost short-term debt.
• Take on debt to bridge the gap between completing work and collecting payment.
• Experience frequent overdrafts.

Industries That Commonly Use Factoring

Factoring supports businesses across a range of industries, including:

• Distribution
• Oil and gas
• Business services
• Staffing
• Manufacturing
• Freight and transportation
• Wholesale

How to Make a Referral

Choose the level of involvement that works best for you:

Make an introduction. Send a quick email connecting your client with Catalyst.

Set up a joint call. Invite Catalyst to join a conversation about your client’s working capital needs.

Share a contact. Provide a name and phone number, and Catalyst can take it from there.

If you have a client in mind, contact Catalyst Financial to discuss whether factoring could be a fit.