Small Business Funding Alternatives

With Purchase Order funding, there is a need for additional funding “before” you get to the invoice phase. I think of Factoring as the alternative financial tool of choice ONCE you have a completed service or product for which you are to the invoicing stage and Purchase Order funding as the tool of choice to help you get TO the invoicing stage.For instance, have you seen the Citi Bank commercials on TV lately?The one where the manager goes to the operations supervisor nervous and upset because they have just received a huge order for which they will need significantly more employees and materials to deliver?  The manager is upset because he doesn’t have a clue how they will have the needed resources to fill the order! Purchase Order funding would be happy to step in here as an off-balance sheet way of filling this order as opposed to more traditional debt models.Should a business hold back its sales efforts for fear of actually getting a larger order?Absolutely not!  Unfortunately, though, many business owners are unaware of the tools in this industry to help them leverage “Other People’s Money” to help self-finance their business growth and expansion.  The Citi commercial is a prime example.Fred Schmedt of The Samuel Noble Foundation says, “The use of other people’s money, called ‘leverage,’ is a tool that agricultural producers can and should use to harvest increased profits.”  The cash flow industry says not just agricultural producers should take advantage of this time-tested concept.Purchase Order funding is short-term funding used to finance the purchase or manufacture of specific goods that have been pre-sold by you to a creditworthy end customer. The cash advanced under PO funding is used to pay for the upfront materials and labor necessary to fulfill the order from a quality customer.  Once you produce, ship, and send an invoice for the goods - the funder will have a Factoring company buyout it’s interest.  The transaction then continues as a normal A/R factoring program. 
 
Contract funding is pretty much the same as PO funding but it is for a service as opposed to goods and there are many funders who specialize in this type funding as well.

Basically, though, they each (PO and/or contract funding) allow clients to accomplish the following:

Modern-Day Factoring – How it Works

The Vendor submits a particular customer for pre-approval of the factoring of their invoices. 

 Once pre-approved: 

• The Vendor performs a service or delivers a product and has issued the invoice to its client (account debtor) which has signed off on the invoice.

•  A copy of the invoice is faxed to factoring company and the original is overnighted so that the factoring company can begin working right away.

• Upon receipt of the signed original, the factoring company will wire transfer 70 to 80% of the face amount of the invoice into the Vendor’s bank account — generally within 24 to 48 hours.  (70% for construction and 80% for most others.)

•  The factoring company will send the original invoice and an Authorization Letter to the Vendor’s customer advising them that the invoice payment should simply be redirected to the address given.

•  When payment is received by the factoring company, the Vendor is sent the remaining 20 or 30% balance less the factoring fee which is based on the amount of time the invoice takes to pay and was previously agreed upon and acknowledged by the factoring company and Vendor.

 What Modern-Day Factoring does NOT do: 

• It does NOT change the payment terms of the Vendor with its customer.  The Vendor’s Customer does not need to pay any faster and the name on the check stays the same.  The address to which the payment is mailed is all that changes.
• It does NOT change the day-to-day contact between the Vendor and its customer

• It does NOT work as a collection agent.  Even though the Vendor’s customer will be sending payment to the factoring company, the factoring company will not be calling it to collect payment.  If payment is not remitted for some reason, the factoring company will work with the Vendor to reclaim the funds.

 General Advantages: 

• No long-term contracts
• No financials required
• Flexible
• Access to prompt funding
• Fuel for the fast-growing Company 

Now let’s look at an example:

From Bibby Financial:

“Staffing Firm Employs The Right Solution

Founded in 1993, Prime Staff is a fast growing staffing consultancy that provides temporary staff for the construction, industrial, engineering and commercial sectors.

Prime Staff found that the inherent challenges experienced by the staffing industry are often exaggerated by the banks’ inflexibility to provide the higher levels of funding required by firms operating in the high value temporary market.

Prime Staff’s Managing Director, Danny McIntyre explains, “Cash flow is always a major strategic challenge for staffing companies. We pay our temporary workers weekly and also invoice our customers weekly. However, we often have to wait 30 days for payment, so cash flow problems are inevitable.

“We looked at a number of finance options before our accountants recommended receivables funding. Bibby Financial Services impressed us with their commercial awareness and understanding of our industry and we opted for a receivables funding facility. This facility releases up to 85 per cent of the value of our invoices as they are raised, giving us an ongoing supply of cash linked to our sales. They then chase up the outstanding amounts from our customers, paying us the balance of the invoice less their service fee.” 

The benefits of receivables funding within the staffing industry are profound. It has allowed Prime Staff to take on a greater number of contracts with more staff placed because it enables them to pay their temporary staff. The collection service allows the company to focus on its core skill of placing people in jobs while Bibby ensures that payment is received.

Danny adds, “Receivables funding is now incorporated into Prime Staff’s long-term business strategy. Our relationship with Bibby Financial Services has allowed us to develop plans for the future which include the launch of three new offices, and to double turnover in the next three years. Bibby Financial Services are fully supportive of our plans to expand and we are on target to meet our goals.” 

Share This

No Comments »

funding option - Factoring?

What about —– A Receivables-Based Credit Line!

You already know that if you can get a line of credit at the bank, they will usually lien your businesses assets (furniture, etc.) as well as your accounts receivable.

In the cash flow industry, we offer a line of credit based solely on your accounts receivable!  If you happen to have a line of credit with your bank, too, but still need cash flow assistance, usually banks will work with us and release your receivables from their lienhold so that you can then leverage them further in the cash flow industry.

But basically — factoring is the conversion of a company’s commercial accounts receivable into immediate cash by selling those accounts at a discount. Factoring is not a loan. With factoring there is no interest to pay, nor principal to repay. No liability will appear on a company’s balance sheet due to its factoring. A Company simply sells one of its assets (accounts receivable) to obtain a more liquid asset (cash).

Since factoring is not a loan, funding is not based on the company which is factoring and its ability to repay the amount advanced. Rather, funding is based on the ability of the company’s customers (account debtor) to pay what is owed the company for the purchase of the company’s goods or services.

Factoring is, in essence, a Receivables-Based Credit Line, which needs no other collateral which is available to be drawn on when needed.   Contrary to bank lines of credit, facotring lines of credit grow as your receivables do!

 ADVANTAGES TO FACTORING:

Ø      Your Credit Line grows as your business grows

Ø      No restriction or control by the factoring company on the use of funds

Ø      No new debt is created

Ø      You are always in control of your CASH FLOW! 

In addition, factoring provides a company services other than just improved cash flow. By factoring, a company is in essence outsourcing all or a portion of its credit, collection, accounting, and monthly reporting. Factoring companies perform these services for hundreds of companies, and are experts at it. By supplying these services for their Clients, and giving their Clients the cash flow needed to grow, factoring Clients are free to do what they do best – run their business and increase sales. 

With over $60 billion of receivables being factored in the United States annually (and that figure is increasing rapidly), factoring is a quick and viable way for companies to finance their growth. 

 Fortune 500 companies such as IBM, Georgia-Pacific, and Shell Oil use this financial tool.  And now, it is available to small businesses (under $100 million/year) nationwide so that they, too, can take advantage of this proven, debt-free, and flexible method to effectively multiply working capital.

 Signs that a business could benefit from factoring include:

• LATE PAYROLL DEPOSITS
• IN BUSINESS FOR 3 YEARS OR LESS
• EXPERIENCING HEAVY GROWTH
• ALWAYS CHASING CUSTOMERS FOR PAYMENTS
• HEAVY SEASONAL SALES
• POOR RECORD OF INSURANCE PAYMENTS
• TAX PROBLEMS
• CONSISTENT HIGH BACK-LOG OF ORDERS
• LOSS OF SIGNIFICANT CUSTOMER

 WHAT ARE THE OVERALL ADVANTAGES TO  FACTORING? 

With factoring, you can have cash on demand to fund business growth internally, meet seasonal demands, and accommodate new and larger clients who may demand longer terms. 

IMMEDIATE ADVANTAGES:

• FAST & EASY!  Once a client has been set up, moeny can be wire-transferred to their bank account within 24-48 hours!
• NO FINANCIAL STATEMENTS needed in most instances.
• NO LONG-TERM CONTRACTS are required and you choose and pick which invoices to sell.
• Once an invoice is purchased, the factor assumes full responsibility for its collection (unless another option is chosen by you.).
• NO ADDITIONAL “DEBT” IS BEING ACQUIRED - AN ASSET IS BEING SOLD! 
• IMPROVES CASH FLOW to help grow your business which, in turn, makes your business more attractive to conventional financing - it helps establish your business!

DAILY ADVANTAGES: 

•  Custom-tailored program to fit your needs.
• Get cash for operating expenses - when needed - and when you can’t get it anywhere else!ØInterested in your Customers’ credit history - not yours
• Continuous source of Operating Cash
• Provides Credit Services (Screening & Monitoring, Early Detection of Customer Service Problems)
• Get instant credit reports on prospective customers and continuous monitoring of the credit status of all present customers
• Provides detailed Management Reports
• Faster Payments!
• No debt creation - no monthly payments or balloon
• No personal guarantees
• No geographical limitations
• Reduces internal administration so you can focus on growing your business - greater operating efficiency
• Reduces bad debt
• Avoids repayment of debt at inopportune time
• Avoids giving up equity or control, as in “traditional financing”
• Able to meet increasing sales demands
• Off-balance sheet financing
• Protects and improves credit rating
• Professional collections
• Greater Operating efficiency
• “Time Value of Money”
• Able to take advantage of volume, trade and other spur-of-the moment discounts by having cash available   

Share This

No Comments »

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.

Share This

No Comments »

So they can go fishing and catch an 844 pound shark!

No, seriously, they sell them for 3 reasons:

• 1. Access to their cash!
  • Sometimes there is a serious need (i.e. pay off credit cards, medical bills, or for a divorce settlement or retirement). 
  • Other times, there is simply a desire to .. purchase a dream home, take a vacation, buy a new car, start a business or put money into someone else’s venture.
  • And, then, in other instances people just want access to their cash for peace of mind. They don’t want to worry about liquidity issues, collection worries, or the finances of the person who owes them the debt.
• 2. Yield/Interest
  • People also sell because they know that with cash in hand today, they can start earning interest or yield. They will oftentimes even sell their income stream for less than face value so that they can begin earning a yield.
• 3. Inflation
  • Lastly, people realize that over time, the payments they receive today will drop in real value.

So, on the other hand, Why do people BUY income streams?

Buying future payments is a very profitable form of investing.

When investors buy future income streams, they do not pay face value and this equates to a high yield on their investment. Also, a nice perk with this type of investment is that they (usually) know in advance EXACTLY what that yield will be (provided the payments come in on time or are not contingency-based).  If they are contingency-based, as in the Cubs example below, this would be factored into the offer by the investor.

Buying income streams is very attractive to investors because it gives them the opportunity to invest their money profitably and relatively securely.

Check out the story on the sale of the Boston Cubs and the income stream their owner is selling.  Here’s a short excerpt:

“Whether Wrigley Field will be sold with the Cubs or separately is unknown. The neighborhood park with its ivy-covered walls is as much part of Cubs tradition as any player in the team’s history.

Donald Levin, the owner of the successful Chicago Wolves minor league hockey team, ticked off the questions surrounding the ballpark.

‘Do you own the field? Do you have to be out in case they renovate? Where are you going to play? What happens to all the income?’ said Levin, who is expected to make a bid for the Cubs. ‘These are more important evaluation questions than the contracts.’

Howard, the Oregon business professor, said an owner typically wants to control the venue where their team plays.

‘If you are paying that kind of money you want to be able to claim and control all income streams it will throw off,’ he said.” (Emphasis added.)

Perhaps the Cubs owner is tired of all the hassles that goes with running a major league club and, as noted above, would prefer to take a vacation and relax.  Sure, he will make a lot of money on the sale, but I imagine it will be far less than what he could make from the various income streams, tax credits and other benefits he would receive as the owner.

Suffice it to say, there will always be income streams available for purchase and investors will always be ready and willing to purchase them and hopefully I have been able to fill in some of the picture as to why that is so.

Until next post….Be Safe.. Debra

Share This

No Comments »

The first method of finance that led to the emergence of the cash flow industry was owner financing.

In an owner-financed sale, a real estate seller accepts a promissory note as a portion of the purchase price. The note is then secured by placing a mortgage on the real estate being sold.  Homeowners and commercial real estate investors in this country have used owner financing as a method of buying property since the early 1900’s.  However, it wasn’t until much later that it became popular.

During the high interest rate periods of the Seventies and Eighties, home buyers found it difficult to obtain affordable financing from banks. Interest rates and inflation had skyrocketed to double digits, making it almost impossible for people to sell their real estate. If a real estate seller was willing to take a down payment from the buyer and hold a mortgage note for the remaining balance, the transaction was much more feasible for the buyer–and certainly more convenient.

By the time inflation drifted back down, thousands of individuals were holding private mortgage notes. Individual investors and investment companies recognized a tremendous profit opportunity in those notes, and they began to buy them directly from sellers.

These privately held mortgage notes have turned into a commonplace investment nationwide. Today, privately held mortgage notes are even securitized and traded on Wall Street.

The second method of finance that impacted the development of the industry is factoring, also called the sale of a business’ accounts receivables.

Factoring has a long, rich tradition dating back some 4,000 years to Mesopotamia (which some think of as the cradle of civilization).  In addition to many other things, the Mesopotamians first developed writing, put structure into business code and government regulation, and came up with the idea of factoring.  Mesopotamia and its citizens eventually became extinct but the concept of factoring definitely did not.  Indeed, almost every civilization which valued commerce has practiced some form of factoring, including the Romans.

The first documented use of factoring occurred in the American colonies before the revolution. With the advent of the Industrial Revolution, factoring became more focused on the issue of credit, although the basic premise remained the same. By assisting clients in determining the creditworthiness of their customers and setting credit limits, factors could actually guarantee payment for approved customers.

Prior to the 1930’s, factoring in this country occurred primarily in the textile and garment industries, as the industries were direct descendants of the colonial economy that used factoring so specifically. After the war years, factors saw the potential to bring factoring to other forms of invoice-based businesses and the expansion began.

Today, factors exist in all shapes and sizes: as divisions of large financial institutions or, in larger numbers, as individually owned and operated entreprenurial endeavors.

Many of these private factors sprung up in record numbers as interest rates rose to new heights in the 60’s and 70’s. This trend intensified in the 80’s, primarily due to the increasing impact of interest rates and changes in the banking industry. With banks becoming too expensive and too inflexible due to heavy regulation, the small businessperson was forced to find other sources of financing for expansion and growth. As more and more banks stopped being a funding source for the small businessperson, factoring has increasingly become an option used by the small business owner.

This year alone thousands of businesses will sell billions of dollars in accounts receivable, and they are doing it for profit, growth, and survival.

Prior to the 1980’s, factoring was used primarily in the garment, textile and furniture industries and was only otherwise available to “big business”. So, with the banking industry upheaval of the 80’s and the rise of the independent broker network in the 90’s factoring of accounts receivable has taken its place as an acknowledged financial tool that can assist many businesses - both large and small.

Clearly, the concept of selling an income stream has been a part of the financial services industry for “many” years. However, until the last decade, cash flow transactions were essentially limited to private mortgages and invoices.

Share This

1 Comment »

Since the formalization of the cash flow industry, approximately 14 years ago, its growth has steadily increased. 

Cash flow brokers are entering new markets and discovering new ways to provide cash flow services to businesses and individuals.  Also, new income streams are discovered and added to the never-finished list of pieces of paper which can be sold in the cash flow industry.

Many who start out as cash flow brokers go on to become Master Brokers or funding sources mentoring other brokers just getting started in the industry and/or purchasing income streams with their own funds.

But, the most significant reasons for continued growth of this industry include:

1.  The emergence of the cash flow broker (like myself) which helps to spread the word about the availability of these funding options to businesses previously unaware of same;

2.  The economy is increasingly operating based on debt (unfortunately);

3.  Cash Flow income streams provide an investment alternative for investors seeking large yields on their money;

4.  The cash flow industry is gaining visibility in the financial services marketplace.  In fact, Wells Fargo Bank recently purchased one of the leading government contract funders in this industry.

So, let’s look at these reasons in a little more depth.

1.  Emergence (and development) of the career of cash flow specialist/consultant. 

During the 1980’s, private mortgage investors operated in their own exclusive sphere — focusing on mortgage notes and, generally, not buying other income streams. They also usually bought notes only in their own geographic areas.

Additionally, private mortgage investors typically worked directly with private mortgage note sellers. On occasion, though, an investor would come across a note too large to buy and would broker it to one of the larger investment companies.

But, generally, for the most part, transactions were between buyers and sellers directly.

Over time, the income potential in brokering private mortgage notes was realized and the broker network grew. The availability of brokers, in turn, provided more investment opportunities for investors.

It was a winning situation for everyone. Rather than tracking down notes directly, investors could put up investment capital and rely on brokers to bring them transactions. In addition, investors could do business nationwide rather than just in their local neighborhoods. Today, most major private mortgage investors rely on brokers to bring them transactions.

The same process occurring in the private mortgage business occurred simultaneously in the factoring industry.

Traditionally, factoring had been provided by major factoring companies, often subsidiaries of large banks. It was available only to companies with annual sales in excess of $100 million a year (”big business). For smaller companies, factoring services were out of reach.

Soon, a small group of companies recognized an opportunity in providing factoring services to small and mid-size companies and emerged as factors, targeting businesses with annual sales below $100 million. Their activities, too, were focused on the geographic areas in which they functioned. And in most cases factors dealt directly with businesses, not with brokers.

Eventually, some companies began to examine factoring brokerage as a career possibility. As was the case with private mortgage brokering, training programs helped to popularize the factoring broker as an occupational category.

Today, many factoring companies which in the past dealt directly with businesses now depend exclusively — or at least significantly — on brokers (as with private mortgage investors).

Brokers specializing in private mortgages and brokers specializing in factoring were essentially doing the same thing — brokering future payments — which resulted in the foundation for what we now call the cash flow industry.

When the first cash flow brokers started looking for individuals and businesses with a need or desire for cash, they came across other types of income streams that offered similar opportunities for brokering. As a result, brokers started actively seeking new income streams to broker with funding sources  ready to purchase them.  At last count, there were some 60 income streams.

2.  The economy is increasingly operating based on debt.

A USA Today article on 8/27/05 entitled, “Experts warn that Heavy Debt Threatens American Economy, “ states:

“You owe $145,000. And the bill is rising every day.

That’s how much it would cost every American man, woman and child to pay the tab for the long-term promises the U.S. government has made to creditors, retirees, veterans and the poor.

And it’s not even taking into account credit card bills, mortgages — all the debt we’ve racked up personally. Savings? The average American puts away barely $1 of every $100 earned.

It’s not a rosy picture, I know. 

But, the cash flow industry — and/or its investors – is doing its part in helping to stimulate the economy by helping small businesses to leverage their “liquid assets” rather than acquiring “debt” and thereby self-financing their own growth and expansion. 

And this is no small contribution to the economy, as we know that the total of small business is larger than big business and is the backbone of this country.

3.  Cash Flow income streams provide an investment alternative for investors seeking large yields on their money and buying future income streams is not only a very profitable form of investing but also relatively secure.

When investors buy future income streams, they do not pay face value and this equates to a high yield on their investment. 

Also, with this type of investment they know, in advance, exactly what that yield will be (provided the payments come in on time).  If they have thoroughly researched the income stream they are purchasing, they will be fully aware of whether there is the possibility of default and will have factored this into the offering price for the income stream.

Investors who either fear a decline in the stock market or dislike the daily management of their investments can earn significant returns in the cash flow industry with very little management time.

4.  The cash flow industry is gaining “visibility” in the financial services marketplace.  As noted in an earlier post, the cash flow consulting profession is growing and with the increasing number of successful cash flow professionals, comes increased visibility to the industry. 

Cash flow professionals are out spreading the word one on one, giving presentations to business groups, networking with business owners and government so that the business community is beginning to see that the cash flow industry is, indeed, an extra “Resource” for the cash-hungry new and growing businesses. 

I am regularly allowed to have booths in the Resource section of business fairs.  In one, right after Katrina, I am directly across from the SBA and right in the middle of the Resource area along with the La. Economic Development, Manufacturer’s Extension Partnership of Louisiana and other resource booths.

Many of the referrals I get come from bankers and others located in these Resource areas.  It is a win/win situation for them to have someone to refer customers to who they have not been able to help.   The ultimate objective for all in the Resource category is to help the small business survive and if that means referring a client to another Resource then that is the best thing to do.  Previously, the options available in the cash flow industry were unavailable to the little guy but that is different now and I and other cash flow consultants like me are out there spreading the word.

With increased visibility, more businesses and consumers are becoming educated about their cash flow options. And the more people learn about their options, the more people will begin looking for brokers and buyers to turn their income streams into cash!

Be Safe!  Debra

Share This

No Comments »

Privately held income streams, like the one created by your daughter’s payments in the previous post, can be bought and sold in the secondary marketplace.  In this marketplace, individuals and businesses can get cash NOW for their “future” income streams. 

So, looking at our example where you financed the home purchase for your daughter, could you get cash in exchange for the future payments owed you at your local bank?  Most probably not.  But in the secondary marketplace, many investors would give you cash today in exchange for the right to collect the payments over time.

Another example would be, you delievered $10,000 worth of merchandise to a customer along with an invoice requesting payment within 30 days.  Although the customer owes you money within 30 days, that money is not yet available to pay your bills.

Now suppose a third party offtered to give you $9,000 in cash today in exchange for your $10,000 invoice.  Would you take it?  You would if you needed cash today in order to pay employees and buy supplies for new orders.  It would make it possible for you to stay in business and keep your customers happy.

Transactions like these occur every day.  Individuals and businesses collect future payments or income streams sooner, rather than later, by selling them to a third party. 

The third party pays cash today for the right to receive payments over time. The third parties that purchase these income streams can be either an individual investor or an investment company.  Either way, they are willing to pay cash today for the right to receive future payments.  And, since they are giving up cash today, they will need to earn a rate of return on this money which is the discounted amount they pay for the income streams they purchase. 

Just about any income stream, whether it is a mortgage to be paid over 20 years or an invoice to be paid in 30 days (factoring of accounts receivable), can be sold to a funding source in the cash flow industry/secondary market.

I am passionate about the Cash Flow Industry/Secondary Market because it helps SMALL businesses (or the little guy) by bringing financial tools that have been available only to BIG business in the past down to small business’ level. And since I am definitely a champion of the little guy or underdog…I like that!

Most of us have heard of or are familiar with home mortgages being bought and sold so that over a 30-year period a homeowner’s mortgage company may change hands 2 or 3 times. Well, this is an example of “paper” being bought and sold in the secondary market and previously it has been in vast amounts of dollars such as transactions with mortgages (usually in portfolios).

But, now, with the development of the cash flow industry during the last 14 years or so, similar options are there for small business now. So much so that invoices as low as $50 (for a limousine service) can be factored. Now “that” is bringing it down to the level of the little guy!

So, two primary themes of the cash flow industry (which is trading paper in the secondary market), in my opinion, are:

1. Help for “small business” or the “underdog” by
2. “Leveraging” of available assets.

These are two themes that will be interspersed throughout this blog as they are in my life, business and beliefs (i.e. I am always hoping, helping and pulling for the little guy and believe that leveraging of their assets is a solid tool for the Little guy to use to his/her advantage).

Stay Well, Debra, YCFC

Share This

No Comments »

in the Cash Flow Industry is an option of which many people, unfortunately, are not aware.  The funding tools of the Cash Flow Industry have been available to “big” business for years but are only recently becoming available and known to the small business owner and I am excited to be able to be a part of that!

But what exactly is the Cash Flow Industry?

We can break it down and start by defining cash flow — which is the flow of cash through a business or household (i.e. depositing a paycheck and/or payment into your/the business account and paying the bills). 

In business, cash flow coming in is usually referred to as revenue and going out is referred to as expenses.  For an individual or household, cash flow is income coming in the front door in time to pay bills out the back door. 

But, it all boils down to money coming in and then going out equals cash flow.  And, every household and business manages cash flow on a daily basis.

So that, the Cash Flow Industry is a marketplace which helps businesses and individuals manage their daily cash flow needs.  Its primary goal is to get cash into the hands of those who want or need it by leveraging liquid assets they may have through the buying and selling of future “income streams” they may own.

An income stream is a “future” paymnent or series of payments (i.e. a financial obligation or debt that one party owes to another).  The financial obligation is reduced to writing in a legal document.  It is the “payment(s)” that make up the income stream being bought and sold but it is also commonly referred to as the debt instrument or cash flow instrument. 

I like to say it is any piece of paper which has a dollar value attached to it and some of the ones which are most easily recognizable to many are lottery winnings, contracts, invoices, leases and mortgages.

There are many more, however — at least 60 cash flow “income streams” (debt instruments) being bought and sold today in the cash flow industry – most of which are privately held (i.e. owed to a private individual or business rather than to a bank or other financial institution). 

For example, if you sold your home to your daughter and financed it for her, your daughter would then make her monthly mortgage payment to you rather than to a bank.  And, in this example, the income stream created by your daughter to you is “privately” held, because you are a private individual, not a bank or mortgage company.

We’ll discuss the 60 different income streams in much more detail later on but for the time being to perhaps help you remember some of them you might realize that they are basically business-based, collateral-based, insurance-based, contingency-based, government-based or consumer-based income streams.

I always welcome comments!

Thanks for stopping by; Debra, YCFC

Share This

No Comments »

Equipment Leasing – an Often Over-Looked Financial Tool for the Cash-Strapped, Small Business Owner…………….by Debra Maples

Cash Flow or preserving your Working Capital is the name of the game (wouldn’t you agree?) when it comes to “staying” in business!

Then, tell me WHY so many small business owners put out mega bucks on equipment and use up their valuable “cash” assets? Sure, you “own” it, but where does that get you in the long run?

Let’s explore some facts and benefits of equipment leasing vs. outright purchase of the equipment (usually via bank or other loan),

FACT: A lease is a simple agreement between the owner of equipment (Lessor) and the end-user (Lessee) providing for the exclusive use of the equipment for a monthly fee. Because leasing provides more benefits than ownership does, it is one more “financial” tool for the toolbox of the small business owner.

FACT: Leasing is the most widely used method of equipment financing in the United States, accounting for approximately one-third of all capital investments.

FACT: 80% of all small businesses lease some or all of their equipment.

BENEFITS OF EQUIPMENT LEASING VS. OUTRIGHT PURCHASE:

Aids in the Growth of Your Business