INVOICE FINANCE FOR DIGITAL MEDIA RECEIVABLES
Operating in the digital media space isn’t easy. If you’re on the supply side, you likely have to wait for payment from your demand partners. If you’re on the demand side, you probably wait to get paid from your advertising partners and agencies. The life cycle of a dollar in the digital media ecosystem starts with the company that decides it wants to advertise. Most of the ad spend is from a handful of the largest companies in the world. Because of their size, they are able to dictate the payment terms to agencies and ad networks. This has resulted in extended ad payments to their benefit, squeezing the digital media ecosystem for every dollar. For digital businesses generating ad revenue, factoring for digital media receivables is a great way to alleviate this pain.
The Cash Flow Crunch
Digital businesses on the supply side (publishers like websites, smart phone apps) drive ad revenue by increasing traffic and downloads. In order to drive traffic or downloads, publishers have to increase the number of eyeballs viewing their property. The quickest way to do this is to spend money via multiple platforms promoting content and app downloads. This requires an intensive capital commitment to be successful. On the demand side of the market, many agencies have to wait to get paid by the big companies, which causes them to delay their payment to intermediary partners like advertising exchanges and ad networks. This results in intermediary partners delaying payment to publishers. Factoring digital media invoices is a great way to accelerate capital to allow digital businesses to scale their growth.
Grow Easy by Factoring Digital Media Receivables
Financing digital media receivables allows businesses to grow by helping them match their income and expenses. Publishers have to pay for promotion now, but don’t get paid on ad revenue until later. Intermediaries, to be competitive, have to pay their publishers on favorable terms, but get paid on less favorable terms by their demand partners. Ad agencies may have to expend resources in order to take on a new client, but wait to get paid by companies for sometimes up to 120 days. By factoring digital media receivables, publishers, intermediaries, and agencies can free up cash flow in order to promote, pay out publishers, or take on new ad projects for big clients.
The Benefits of Financing Digital Marketplace Revenues
The benefits of factoring digital media receivables are many, in particular the flexibility. Here is a quick run down of the benefits:
No-strings-attached – invoice factoring should be non-recourse factoring, meaning the factoring company assumes the risk that your customer goes belly-up and doesn’t pay.
Flexible funding – sell whatever invoices you want, whenever you want, and get charged on a daily (not a monthly) basis.
Fast funding – the total turn around time to get set-up with a factoring facility can happen in as fast as 3 days. After that, you will get funded within 24 hours of submitting your invoices.
Cheaper than Equity – selling equity to solve a short-term cash crunch is the costliest decision you can make. Instead of selling equity and giving up a fixed % of profits for life, you can factor invoices for as low as 2% per month.
Revenue Recycling (for apps) – the ability to immediately reinvest your outstanding revenue into winning content promotion or paid user acquisition channels.
A capital partner who “gets its” – our factoring companies truly understand digital media and will tailor their financing to fit your needs.
How Funding Digital Media Invoices Works
The process is fairly simple and includes four basic steps. Once we connect you with the factoring company, they will look at your A/R schedule and then assess the creditworthiness of your customer-demand partners. Then they’ll verify your advertising invoices by integrating directly into the dashboards or human contact. Provided ownership structure is clear and there are no red flags during due diligence (i.e. discovery of a pending bankruptcy), they will set a funding date and wire you funds. The turn around time is usually 3 business days. Afterward, you can expect the process to be as follows:
- Submit invoices as you issue them at the end of each month for funding approval;
- The factoring company will approve or deny each invoice. Reasons for denial may be a newly discovered bad credit mark on your customer or the factoring company has hit its internal limit with funding invoices from that customer;
- They’ll advance you the 80% same or next day;
- The factoring company will lockbox any receivables not purchased and release them to you as they come in, within 24 hours.
The beauty of invoice factoring is the flexibility. You don’t have to sell all of your receivables to the factoring company, and the ones you do sell can be sold any time prior top payment. Additionally the factoring fee is prorated on a daily basis. Therefore you don’t pay a fee for the full month.