Small Business Funding Alternatives

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HOW DID YOU LEARN ABOUT ALL THE DIFFERENT FUNDING OPTIONS AVAILABLE TO PEOPLE EVEN AFTER BANKS TURN THEM DOWN FOR A LOAN?
 
Through hours of study and a training course with the American Cash Flow Association as well as working with a Mentor for the first two years. 

And, it’s been interesting for me to learn that MBA graduates and students and others in the financial services realm you would think would be very knowledgeable about the options available in the cash flow industry for the funding needs of small businesses are not aware of these tools at all (or very little).  Or, they do not give enough import to these options (if they are aware of them) which are so desperately needed by small businesses.  The tools of the cash flow industry seem to be glossed over and not really acknowledged as the option they are. 

For instance, I met with an MBA student (Electrical engineer) who was in her last semester before getting her MBA and she happened to have a class on our funding options that semester and a homework assignment on them the same weekend we met and talked.  So, she told me, “thank you very much!” and took my literature and flyers I brought to our meeting and used to complete her homework assignment!
 
WHO ARE YOUR CLIENTS?

Almost any business that has a piece of paper to leverage.  Construction is sometimes difficult because of retainage fees but it can be done too – by companies that specialize in construction. 

Some examples, though, are:

Medical facilities of all sorts
Manufacturing
Service industries of all types – staffing agencies, trucking, fabricating, engineering, printing, import, export and the list goes on and on…
  
IN YOUR YEARS OF EXPERIENCE, WHAT OBSERVATIONS CAN YOU MAKE ABOUT SMALL BUSINESSES ON THE THRESHOLD OF GROWTH?

I would say that I have observed that oftentimes they are afraid to go for the larger clients and faster growth because of fear of the resultant cash flow issues.  But – that need not be the case! 

Now, the small business owner can do just that and know that the tools offered in the cash flow industry can assist them in accomplishing faster, more rapid growth!  It all goes back to educating and making people “aware” of the options available to them. 

But this, too, is one of the many reasons I love this business I have found!  I like being able to help people and when I can do that and myself in the process, I call that a win/win situation!

WHAT IS THE CASH FLOW INDUSTRY ALL ABOUT AND HOW CAN IT HELP?
 
In a nutshell, it’s about leveraging a businesses “liquid” assets to  self-finance it’s own growth and expansion without incurring debt or giving up equity in the business.  It looks good on the balance sheet  because it is not a “loan” per se but a “sale” of a liquid asset of the business.

The asset-based lending industry is what I call a close cousin to the cash flow industry in that it is more often an actual loan with liquid assets as collateral.
 
WHAT IS THE MOST IMPORTANT PIECE OF ADVICE YOU WOULD LIKE TO GIVE OUR LISTENERS? 
 
Well, at the risk of sounding like I’m promoting myself –  but I think if your listeners agree about cash flow being such an important issue for small business owners – my most important piece of advice would be…..
 
If you have cash flow issues and your traditional funding sources haven’t  been able to help, check with a cash flow consultant — whether that be me or some other cash flow consultant. 

And, I don’t say a funding company that does the actual funding (for example, factoring of accounts receivable), but a “cash flow consultant”, in particular, because there are soooooo many different funding niches/sources in the cash flow industry that a business owner can get lost in it  as easily as in the traditional funding arena.  The cash flow industry  is very, very niche  oriented and that is where a cash flow consultant’s expertise comes into  play — to assess the business owners needs and direct them to the  appropriate funder and save them time and effort and let them do what they  do best…..run their business without worrying about cash flow issues!

So, whether it be me or some other cash flow professional, be sure to check out the funding tools in our industry to supplement the fulfillment of your funding and cash flow needs!
 

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Tags: cash, cash flow, factoring, funding, interest, small business

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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   

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Tags: accounts receivable signs of need, small business, working capital

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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.

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Tags: private mortgages, small business

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We have plenty of business, but what we really need is cash to run our business!”

Have you ever heard a frustrated business owner utter this remark? Or thought it yourself?

What would you say if I told you I could help you or that other frustrated business owner get that cash to keep that cash flowing in your business — keep your business up and going and running smoothly so that you can do what you do best — run your business?

Okay….got your attention?

Well, let me introduce you to a fast-growing source of cash for growth-oriented and cash-hungry small businesses — factoring of accounts receivable.

“So, what exactly IS factoring of accounts receivable?” you ask.

Factoring is the conversion of a company’s commercial accounts receivable into immediate cash by selling those accounts at a discount. With factoring you can get 70 to 80% of an invoice’s face value wire transferred into your account within 24 to 48 hours of the invoice being issued and approved. Pretty, useful, huh?

Better yet - 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) for an agreed-upon “fee” to obtain a more liquid asset (cash) thus self-financing it’s own growth with debt-free funding. It’s equivalent to when you sell your vehicle (an asset) to someone — the two of you agree upon a price and the transaction is done!

Since factoring is not a “loan,” funding is not based on a company’s ability to repay the amount advanced. Rather, funding is based on the ability of the company’s customers to pay what is owed the company for the purchase of the company’s goods or services.

Unlike traditional funding sources which require all the assets a business has available for collateral on a credit line, factoring is, in essence, a Receivables-Based Credit Line, which needs no other collateral. It is available to be drawn on when and as needed. In fact, a business can conceivably have a credit line with its bank with its other assets as collateral and a second credit line with a factoring company with the receivables ONLY as collateral! Interesting…?

With factoring, you can have cash on demand to meet seasonal demands, accommodate new and larger clients who may demand longer terms or use up any excess working capital you have on hand. Factoring, in essence, gives you the option of offering terms to your customers thereby helping you to increase your customer base.

Prior to the 1980’s, factoring was used primarily in the garment, textile and furniture industries and was only otherwise available to “big business”. At that time (as with many things), the terms and prices were much different than what they are today.

Due to the increased competition and visibility of this very viable financial tool, however, these have changed for the better. The terms and prices we see today make factoring a quick and viable alternative funding tool for small businesses nationwide so that they, too, can take advantage of this proven, debt-free and flexible method to effectively multiply working capital.

SOME HIGHLIGHTS/ADVANTAGES TO FACTORING:

• No financials required — MUCH less paperwork than traditional sources (oftentimes this can be done by fax or email and no personal “appearance” is required by the business owner);

• Quick account setup - usually 5 business days (sometimes faster);

• Usually can have 70 to 80% of invoice amount wire transferred to your account within 48 hours after approved;

• No long-term contracts, you factor as much or little as needed;

 

Why don’t YOU make this a year of growth and increased profits by using this financial tool to enhance your business!

Please contact me for a free, no-obligation consultation at 225-247-4370 or dmaples@yourcashflowconnection.com. Please also see additional information on my website: www.yourcashflowconnection.com.

 

 

 

 

 

 

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Tags: cash hungry, cash poor, growth-oriented, receivables based credit line, small business

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