Benefits of Alternative Funding for the Hospitality Industry

Hospitality is a multi-billion dollar industry that continues to grow every year. If you have a business in this sector, you may be facing the challenge of obtaining working capital. Let’s look at an alternative funding for hospitality businesses, known as invoice factoring. 

Why You May Need Funding

Hospitality businesses need to keep growing and improving to stay competitive. Businesses may need funding for a number of reasons, including the following:

• Your business may be seasonal. For example, some hospitality businesses are very busy in the summer and slow the rest of the year. This makes it difficult to maintain steady cash flow.
• Your payroll has increased and you need funds to cover it.
• You need to buy or upgrade equipment or technology.
• You want to expand by opening new branches or locations.

Drawbacks of Traditional Financing

Above are some common reasons you may need funding for your hospitality business. Now let’s compare traditional financing to invoice factoring, an alternative type of hospitality funding.

If you own a staffing company, or other hospitality business, you’ve probably applied for a business loan or have at least considered it. However, businesses often encounter problems when they apply for loans.

• Loans can be hard to qualify for. Banks look at your credit and business history.
• It can take a long time to apply for and receive a loan.
• The loan amount may not be enough to cover your needs.
• You end up with debt and have to pay interest over a long period.

These are some reasons that it makes sense to seek alternative hospitality business funding. One solution to consider is invoice factoring.

How Does Invoice Factoring Work?

Invoice factoring is a financing method in which you sell your outstanding invoices to a factoring company. You are paid immediately for most of the invoice’s face value, typically 80% to 90%. When your customer pays the invoice (to the factoring company rather than you), you receive the remainder of the money with a small factoring fee deducted.

Advantages of Factoring for Hospitality Business Funding

There are several reasons you should consider invoice factoring as an alternative to traditional financing.

• Easy to Qualify: It’s relatively easy to qualify for invoice factoring. Factoring companies analyze your customers’ credit rather than yours.
• Get Cash Quickly: You are able to obtain cash quickly. Instead of waiting months to be accepted for a loan, you can receive funding in as little as 24 hours.
• Reduce Collection Time: The factoring company helps reduce the time you spend on collections. They will handle collections for invoices that are factored.
• No New Debt Created: You get funding without taking on any new debt.
• Get More Funding: As your business grows and you take on additional customers, you can factor more invoices and get more funding.
• Keep Equity: You can get funding without giving up equity in your business.

What Type of Businesses Benefit From Hospitality Funding?

If you have a business in the hospitality industry, you probably qualify for invoice factoring. The following is a partial list of hospitality businesses that may benefit from invoice factoring.

• Food service providers
• Vendors to the hospitality industry such as maintenance or distributors
• Staffing – agencies that staff restaurants, hotels, etc.
• Companies that rent furniture or provide decorating services to hotels.

How to Apply For Hospitality Financing

Invoice factoring for hospitality companies is easy to apply for. The steps are as follows.

• Find a reputable company, like Riviera Finance, that offers invoice factoring and submit your application.
• Deliver your products or services to your customers as usual.
• Get paid for the invoices you factor.
• Your customers pay the factoring company.
• Receive the remainder of the invoice’s value with a small fee deducted.

The hospitality industry is very competitive and prone to fluctuations based on seasons and economic conditions. Invoice factoring can help you maintain stable cash flow so you can more easily meet your expenses and grow your business

Other blogs you may be interested in: 

• The History of Factoring
• Advantages of Small Business Invoice Factoring
• Get Your Invoices Paid Faster With Business Services Factoring
• Cash Flow Basics: What To Look For and How To Improve It