Posts Tagged ‘Older Invoices – Factoring Can Help!!’
Thursday, December 22nd, 2011
With the ongoing financial challenges of the current economic climate, it is fairly obvious that entrepreneurs need to be financially savvy as well as creative in how they drive their businesses. The banking industry is tightening up their credit score standards and alternatives once available to the small business owner are no longer viable options.
Due to increased regulatory pressures, as well as an increasing number of foreclosures and related banking woes, fewer banks are in a position to assist small business owners in their quest for financial options to keep the cash flowing for the business owner. There is help in the form of accounts receivable financing for the small to medium sized business.
Accounts receivable financing, and other alternative financing options, are available through American Funding Solutions. We are a factoring business and we differ from a bank in many respects. A banker extends credit based on the financial condition and cash flow of the borrower. The borrower is expected to keep up with regular (usually monthly) payments to the bank… whether business is good or slow. Therefore, it is often required that the borrower meet certain financial requirements, including, but not limited to, a long, successful history of business with an acceptable cash flow history. These requirements are difficult for start-ups and certainly may prove difficult during the recent economic challenges we have been facing.
On the other hand, a factoring company does not require the client to demonstrate a proven history of profitability. As a rule, factoring companies are more interested in the credit history/financial strength of the client’s customers. If those that the client provides goods or services for are financially strong, then the factor can offer financing in the form of accounts receivable purchasing.
In other words, the factoring company views an invoice as an asset. The goods/services are delivered to the customer, the invoice is verified, and the advance is funded. Often times the transaction can be completed in a couple of days and the business owner can have the necessary cash to meet payroll, purchase supplies, pay rent, whatever is needed to keep the business’ cash flowing.
Factors often work hand in hand with banks. A business may have a working relationship with a banking institution and find that they suddenly have a need for additional working capital. Whether it is due to the sudden onset of the need or the fact that the client has a need that exceeds an existing line of credit, the banker can put the client in touch with a factor that can assist with a type of bridge financing that alleviates the crisis.
Factoring receivables is a great financing tool often utilized by small businesses. It provides a flexible, readily available financial tool to increase liquidity. We at American Funding Solutions are in business to provide working capital to growing businesses and we would like to help you sustain your business’ growth.
Tags: Factoring, Grow your business, Older Invoices - Factoring Can Help!!, small business, Success in small business, sucess in small businesses, without debt
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Monday, August 29th, 2011
When considering if factoring is right for your business, a question that often arises is if there is a specific criteria for determining invoices that are eligible for purchase from the factoring provider. That is a pretty easy question to answer… common sense is a good guide for this one. If the goods were delivered to/received by your customer and/or the services were performed, then those invoices are eligible for purchase.
There is one additional proviso and that is simply, your customers must be creditworthy. There is some due diligence on our part in determining this last stipulation, but presumably, you would not be doing business with customers that could not pay you.
Tags: alternate financial products, bootstrap your business to success, cash is king, debt-free, Factoring, Grow your business, Older Invoices - Factoring Can Help!!, small business, Success in small business, without debt
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Friday, August 26th, 2011
Since this is a blog dedicated to factoring, I thought it might be helpful if I tackled some of the frequently asked questions that we encounter in our day to day business. I believe the basis of a lot of questions that arise are due in large part to the fact that factoring is a little understood business financial tool. Probably the most popular question has to do with whether or not factoring is a good fit for a client’s business.
Let me first reassure you that factoring is an excellent fit for most businesses. I don’t know of a business in operation that does not have a need for working capital. The problems arise when a business does not have working relationship with a bank… or for any number of reasons, cannot qualify for a bank loan or line of credit. It is a fact that it is easiest to get credit when you don’t need it. First let me set the record straight, in the factoring relationship, you are not a borrower, and we are not a lender. We purchase your accounts receivables, that is called factoring. We purchase receivables for goods delivered or services rendered.
Once our business relationship is established you, our client, simply deliver your invoices to us. We offer as much or as little support in the billing process as you are in need of. Normally, you will have your advance within 24 hours. Then, once your customer remits payment we pay you the received amount less your advance and our fee. It is a very simple process and one that provides the working capital necessary to grow your business.
Please feel free to comment or ask questions. We are eager to assist you with your business financial needs.
Tags: alternate financial products, bootstrap your business to success, cash is king, Factoring, Grow your business, Older Invoices - Factoring Can Help!!, Success in small business, without debt
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Monday, August 15th, 2011
As you recall we talked about staying on top of your accounts receivable. It is just as important to maintain control of your debt.
Many businesses fail because they take on a huge burden of debt in the early days of their start-up. Once that tone is set, they often continue to struggle to make ends meet.
Keep everything as lean as possible in the early days of your business. Keep an eye on unnecessary costs and ensure that you are moving money back into your business, rather than racking up debts. Many business advisers suggest start-ups look to family and friends for start-up capital, or resources to keep you afloat during lean times. If these resources are not available to you, then you may consider bootstrapping your business. Our firm also offers financial alternatives and we would be happy to visit with you about your options.
Tags: alternate financial products, bootstrap your business to success, cash is king, Grow your business, Older Invoices - Factoring Can Help!!, Success in small business
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Tuesday, June 7th, 2011
In a recent article that appeared in the June, 2011, Costco Connection, Don Sadler provided some terrific information on the factoring industry. He cited a Washington Monthly article in which Jeffrey Leonard, CEO of the Global Environment Fund, stated that, “Typically, small businesses lead the way out of recession…” Mr Leonard explained that the reason we are not seeing that this time is due to the fact that small businesses are experiencing cash flow problems.
“Many large companies today have simply announced that as a matter of policy they will be paying their bills late – sometimes as much as four months late,” Leonard noted. This policy results in small businesses essentially making “free loans” to their customers – rendering their working capital unavailable.
Mr. Sadler cited a couple of options that are available to the small business owner: optimizing cash flow and factoring. Sadler quoted Tracy Eden, national marketing director for the Commercial Finance Group, “Factoring is a creative financing solution for businesses that don’t qualify for traditional bank loans but need a financial boost to help manage their cash-flow cycle.”
Factoring allows businesses to sell their outstanding invoices to a finance company, known as the factor, at a discount. According to Ryan, “Instead of waiting up to 90 days or longer to get paid, the business receives most of the cash – typically 70 – 90 percent of the receivable – when the invoice is generated.” When the factor collects the invoice the small business will receive the balance, less the discount.
This scenario is a win – win situation in that the small business can maintain cash flow, allowing them to make payroll, purchase supplies, or whatever they need to focus their working capital on as well as keeping their customers happy and maintaining a positive relationship.
If you would like additional information you can contact our office to see how factoring might be a great option for you to keep your cash flowing during these unsettled economic times.
Tags: alternate financial products, bootstrap your business to success, cash is king, Factoring, Older Invoices - Factoring Can Help!!, small business, Success in small business, without debt
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Thursday, January 20th, 2011
As I have mentioned in past post CASH IS KING!! If you intend to drive your business to success you have to take charge of your cash flow and ensure that it is ‘flowing’. The issue of cash flow is a multi-faceted gem that needs to constantly be monitored and ‘polished’. You cannot realize business success without hopping in the driver’s seat and driving your cash flow. This is evidenced by the ever increasing number of business that are not thriving… and the number of “going out of business” notices that we are seeing. Yes, we are experiencing economic challenges in both the professional and personal sector, but we do not have to take a wait and see approach.
1. Get busy recognizing where your cash flow challenges are. Are you allowing those that buy your goods or services to adopt a slow pay policy? Whether it is a slow leak or a fast leak, slow payments are an increase in your cost of doing business. Put your customers on notice that they need to pay in a timely fashion. Whether you choose to adopt a policy where you require payment at time of providing goods/services or allow your customers to pay you within a certain time frame you need to maintain control of the process. I recommend the pay as you go option, but realize that may be something you will work with as your comfort level allows. Be aware that, if you allow customers to pay within a certain time frame it is essential that you don’t allow them to ‘forget’ about you. Follow up in the form of a statement – 15 to 30 days after payment was due. You might then try a follow up phone call or letter. It is a good idea to have a plan “B” in place, in the event the slow pay drags on beyond 60 or 90 days; either in-house collector or a collection agency. The phone calls don’t have to be threatening. We find that making calls as a courtesy, “We wanted to ensure you received the invoice and that there is not a problem with the services you received,” is often all it takes.
2. Funding – A revolving line of credit with your lender is a good tool to establish in your business arsenal. A revolving line of credit can open up funds to allow you to take advantage of cash payments to your vendors, when they offer specials, and a plethora of advantages to keeping “cash on hand”. In the event that a revolving line of credit is unavailable to you in your business (often the case with new startups or those that might be extended beyond what the lender feels is a good risk) there are some wonderful alternate funding options open. Factoring is a great option to the traditional lender and is a great way for a business to improve cash flow without incurring additional debt.
3. There is a lot to be said for the tried and true art of putting something away for a rainy day. We all know that in business, as in life, there are ebbs and flows. If you have a program set up with your lending institution where they take out a certain percentage of your deposits, off the top before they even hit your business account, you will find that it is easier to implement a savings program. If you can establish this practice in the good times, then when times are lean, you may have set aside enough to fall back on.
Please contact our office and we can discuss some of our alternate funding options to help improve your cash flow. Or you can email me directly at Kim@Funding4You.com.
Tags: alternate financial products, bootstrap your business to success, cash is king, cash on demand, debt-free, Factoring, Older Invoices - Factoring Can Help!!, success, sucess in small businesses, without debt
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Friday, January 14th, 2011
As we discussed yesterday, it is imperative to identify challenges within your company, in order to establish some best practices for your business model. But, what do you do with those policies once you have identified them?
Execute:
If you simply take stock of the issues you will not see much of an improvement. While knowledge is power, you have to implement that knowledge into real action. Turn your ideas into policies, and formalize them. Make a big deal out of introducing them to your employees and explain the rationale behind them. Best practices are intended to improve your company’s financial bottom line. Ideally, this will translate into a positive outcome for everyone. During the meeting to discuss the new policies make certain to emphasize the constructive nature of the changes. You may also want to put the policies in writing and have them available at the meeting.
Here are some examples of best practices that other businesses have implemented.
Invoice for goods and/or services at the time they are provided.
Set a specific time interval to deal with collections, ideally once a week.
Estimate your income tax obligation monthly, not just quarterly. When payments come due, there won’t be any major surprises.
Provide cross training for employees where practical. That way you won’t have downtime if someone is ill or out for a period of time.
Utilize technology where you can (i.e. set us a merchant account to receive payments).
If possible, have employees who incur billable time use a timer. A few minutes lost here and there can add up, and this can be a big ‘leak’ that needs to be plugged.
Review your pricing structure. Ensure that you are building in enough to cover overhead and still realize enough profit to not only sustain but grow your business.
Run inventory reports regularly. This will allow you to keep close tabs on your inventory and not have any surprises. This may also allow you to shop for the items you need at a lower price rather than having to replace something last minute and potentially having to pay a premium.
This is not a difficult process. You simply need to utilize the publicized practices of the most successful businesses and adapt them to your business situation. Also keep in mind that you can network with other business owners that you know to see how they have approached implementing best practices. If cash flow is hampering some of your best practices, such as maintaining your inventory numbers, then please contact us for a solution.
Tags: alternate financial products, bootstrap your business to success, Factoring, Older Invoices - Factoring Can Help!!, small business, success, sucess in small businesses
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Friday, January 7th, 2011
As I posted yesterday, Factoring is a great short term solution to cash flow challenges that sometimes face business owners. There are a number of other products that we offer. Following you will find a brief outline of some other options. If you or someone you know is considering cash flow assistance for their business please feel free to contact our offices and we can discuss your alternatives.
Purchase Order Funding – funding to small businesses to fill their orders before an invoice is created.
Bridge Loans – short term loans of 6 – 8 months that provide time to secure long term financing options.
Vendor Assurance – helping small businesses qualify for credit terms from their vendors by paying their vendors directly; used in conjunction with factoring.
Start-up Loans – unsecured loans specifically for start-up businesses based on personal credit.
Tags: alternate financial products, bootstrap your business to success, cash is king, Factoring, Older Invoices - Factoring Can Help!!, small business, sucess in small businesses, without debt
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Wednesday, January 5th, 2011
As reported, by the New York based Capital Access Network, entrepreneurs are facing a near crisis when it comes to obtaining financing to maintain or expand their business. In recent years, small businesses have been credited with jump-starting the economic recovery and improving unemployment. Unfortunately these same businesses are under-capitalized and as many as 90% run the risk of failure during the first five years.
The research highlighted that businesses have a low awareness of alternative funding options and and often benefit from these funding options. The survey asked small business owners to identify the funding methods they find appealing and sources of capital they had applied for in the past. The results stated that 90% found traditional bank loans to be appealing, yet only one in four actually applied, despite their need for capital. Of those surveyed 55% felt that loans from family and friends were not appealing and 45% did not want to “cash out” the equity in their home to finance their business. The survey found that most small business owners were only aware of traditional options; bank loans, SBA programs, and home equity options.
The survey pinpointed a lack of awareness of funding options available such as merchant cash advances, factoring, and purchase order funding. At least 73% of respondents were unaware they can sell receivables, including their future credit card sales, in exchange for access to immediate working capital. Most respondents were amazed to discover the application process was very simple and that funding can occur very quickly. An overwhelming 92% responded that they would find it appealing to have access to such financial products.
If you, or someone you know, could benefit from alternate financial products we would love to discuss some available options. Please contact us or email Kim@funding4you.com to discuss some options.
Tags: alternate financial products, cash is king, Factoring, Grow your business, Older Invoices - Factoring Can Help!!, small business, sucess in small businesses
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Tuesday, January 4th, 2011
How was 2010 for you? Though we are just getting into 2011 now is the best time to start anew: fresh slate.
January always brings excitement for the new year and anticipation of great things to come. With the start of every new year we often set goals and make plans. No doubt, you have made a few New Year’s Resolutions for yourself and your business.
I recently read that over half of New Year’s resolutions are forgotten before the end of January – which is very discouraging. The author of the article suggested that we should break our resolutions into smaller, more attainable monthly goals.
For example, if your goal is to add 24 new clients this year, he suggests setting a monthly goal of adding 2 new clients each month. The idea is that smaller, more manageable goals, will, hopefully, help us stay focused and, eventually, help us reach our long-term goal.
In closing, the author also shared a few tips to help you keep your resolutions:
* Write your goals down.
* Set attainable and measurable goals.
* Set a date for each goal.
* Celebrate your success!
If cash flow is a concern in attaining some of your goals then we may be able to help. Please feel free to contact us if we can help you with your goals.
May 2011 bring you health, happiness, and prosperity!
Tags: bootstrap your business to success, Factoring, Older Invoices - Factoring Can Help!!, small business, sucess in small businesses
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