Accurate Machining, Inc., a 30 year old machine shop specializing in the aerospace industry, recently received two multi-year contracts with large aerospace manufacturers. "We spent months on engineering and prototype designs and even more time building rapport with these potential customers... finally, all of our hard work paid off. During the time spent winning their business we spent large amounts of cash on new equipment and activities that generated no revenue. When we won the contracts, we had a new problem."
During the months spent working on the prototypes, Accurate operated unprofitably and unfortunately their bank was unable to increase their credit facility. "We have a great relationship with our bank and when they were unable to help, I was devastated. Thankfully, our bank had partnered with Gateway in the past and had an alternative to support our needs... almost overnight. Now we have a reliable source of working capital to support our growth."
In the business world, you sometimes have to overextend yourself a little bit to pave the way for success. But when you really overextend yourself and your financial foundation starts to shake, then it is time to call help. The selling cycle in the aerospace industry is one of the longest in the corporate world and the time it takes customers to actually pay on invoices can be even longer. If you overextend yourself in the aerospace industry without a good financial plan, then you are asking for trouble.
In The Technology Sector, Investing In The Future Is A Challenge
For the manufacturers of multi-million dollar jet airplanes, it can be a little easier to invest in new technology that will not pay off with immediate dividends. But for the smaller aerospace contractors, developing prototypes can be an expensive proposition. Millions of dollars invested in equipment and materials may never show a profit and that can do permanent financial damage. That is why aerospace contractors need to have a good financial plan in place whenever they take on a new venture.
Aerospace Factoring Prevents Cash Bottlenecks
In the aerospace contracting world, nothing solves a problem like strong cash flow. There may come a time when you have overextended yourself so much that not even your bank can help you. A bank can only fund your business to a certain point and then it must stop, for its own preservation. That is when you need to partner with a A/R Factoring company to keep your business going.
Just because you are investing money into research on a huge project does not mean that your stream of incoming receivables stops. You are still billing out work to other clients and you need that cash to keep your business going, especially when you are overextended. Factoring of invoices will turn those receivables into the cash you need to keep going until the next big contract kicks in.
A/R Factoring Puts Aerospace Contractors Back In Business
For industries such as aerospace contracting, where the sales and payment cycles are so long, maintaining good cash flow is extremely important. You can try to rely on your bank to sustain your business, but there will come a time when your bank can no longer help. What you need is a sustainable cash flow that will see your business through those times when you are investing in the future, but still need to pay for present day operating costs.
The business you have worked hard to secure needs to be the income you use to keep your business going. When you use a/r factoring, then you can use those present day invoices to fund your company's future. When your financial partner is a factoring company, then you are able to utilize all of your financial resources to grow your business into the success that you have always wanted it to be.