Small Business Funding Alternatives

Specific Examples

These are some examples I am aware of first-hand, post-Katrina.

The asset-based lenders I work with also work in conjunction with an already established banking relationship. However, they are able to be much more responsive to the urgency of a business’ cash needs to take advantage of profit opportunities when they present themselves.

Right after Katrina, a purchase order funder in the asset-based lending industry was able to help a NY power company fulfill a $2.2M order from the USACE. The power company’s bank was not able to process their funding request fast enough and they were about to lose the order. The purchase order funder (in Dallas) took the application on Wednesday and the order was being shipped by Friday of the same week. The power company was able to fill that order and other future ones due to the speed with which they were able to get the funding they needed.

Another Katrina-related example..

Right after Katrina, I had a display in the “Resource” section of a contracting conference in Baton Rouge since my business (as is the cash flow industry) is a “Resource” for small business. Lots of my referrals come from bankers (also a Resource and positioned next to me at conferences) unable to help a struggling new business but realize that it is a viable business that just needs some help with cash flow issues for a while. The Cash Flow Industry is definitely a “niche” industry that fills a need. We help businesses before they have the financials required by banks but also in conjunction with a banking relationship as shown in the previous Example.

In any event, after this contracting conference, I received a call from a plumbing company who had received lots of government work but was having cash flow problems. To make a long store shorter, we ended up factoring $1,000,000 in FEMA receivables for them so that they got $800,000 almost immediately and were able to put it immediately to work for them to expand and grow their primary business and take advantage of other opportunities which presented themselves (as a result of Katrina) (i.e. added port-o-potties business and trash dumpster rental for construction/reconstruction). If they had not factored their receivables, they would definitely not have been able to do this because FEMA ended up taking 9 months to pay. Can you imagine what would have happened had they not been able to factor??

If you can’t imagine it, don’t worry!  I have another example of a similar situation with a security company I also worked with which clearly demonstrates what “could” have happened.

In this case, the security company was doing about $1.5M a month in receivables as a second tier under a prime contractor for FEMA. They, however, did not attend the seminar (where the plumbing company got my information) or otherwise find out about factoring and came to me from a banker referral 6 months after starting the FEMA work. At that time, they already had tax liens and shortly thereafter had to go into Bankruptcy for reorganization. We worked with them all this time and still could have helped them to pull out of their dilemma had all the parties been willing to work together but this was not the case and they ended up going out of business after delivering worthless payroll checks to their employees.

This example really shows why I am passionate about this industry which can (at times) literally make the difference in whether a business stays open or not!