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As well as being a niche industry, the funding companies in the cash flow industry could be referred to as “boutique funders”…Another difference between them and the banks.

With traditional sources you usually get a “Commercial” or “Business Banking Department” for business or commercial banking. In the cash flow industry, the funders are much more specialized than this.

For instance, with factoring, for example, there are funders that specialize in construction as opposed to medical receivables factoring. Two seperate industries, right, with their own particular differences in terminology, daily activities, transactions and ebb and flow of work? So, the cash flow industry has funders who are experts in each of the industries they are involved with. This industry does not operate under the philosophy that one size fits all, as we all know that, in fact, one size definitely does NOT fit all.

From my experience, I have seen banks attempting factoring but, generally, shying away from it because they realize that their one commercial or business banking scenario does not work well for this specialized type of funding.   They do realize however, that there is a need for the funding offered in the cash flow industry and Wells Fargo Bank has, in fact, recently purchased one of our larger factoring companies!  I have also seen banks branching out and opening a whole new section just to specialize in factoring of accounts receivable. 

 And, I say “larger” because not only do we have funders who specialize in particular industries (i.e. construction, medical, transportation, etc.), they break it down even further sometime into small, medium or larger transactions.  For instance, with factoring there are usually small ($50 on up to $100,000/per month), medium ($100,000 to $1M per month) and larger ($1M and above/per month) factoring companies.  Different from the banking industry, huh?

Don’t get me wrong, it is always a business’ objective to use banks BUT there are definitely times when the cash flow industry fills a need and quite often gives businesses the life’s blood they need to survive.

I use the analogy that the cash flow industry is sort of like the convenience stores, you can pull in and get what you need right away, without hassle and you may pay a little more for it.  But, you have what you need when you need it. 

We may all want to shop at the large discount stores like Wal-Mart, Target etc. to get the best value for our dollar but oftentimes the crowd or other things just make it easier and more advantageous for us to use the convenience store.  We have to make the decision of which best suits our needs at that time. 

Same thing with the cash flow industry and bank.

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