Factoring Finance Blog

An Optimistic Future for Small Business

Recent economic reports have indicated that we may pull through the current economic crisis reasonably soon. Many economists believe that the economy is beginning to show signs of recovery.

However, the fact remains that any rebound from the current recession may be muted and difficult see in real terms. Even if economists see recovery, it is still too far off to have any positive effect on small business. A concrete example of this slow road to recovery is the average bank.

Most banks are still not lending to small business nearly as much as they once were. Even in the wake of positive economic reports, these lenders are still tightly holding onto their funds. So it seems, for small business, the economy has not yet begun to stir. With more and more businesses seeking out the necessary funds to drive their business out of this recession, it’s clear that traditional lending is not meeting this need.

Those that are seeking some form traditional bank financing are currently better off looking for private asset-based funding. During troubled times like these, asset-based financing (such as invoice factoring) has come to the aid of businesses many times by providing the necessary financing that traditional lenders are unable to consider.

While banks continue to recover, more business owners are discovering the benefits of a lending alternative like asset-based financing (invoice factoring). With the funds they need, businesses can continue to operate and eventually grow once the recession ended.

While economic optimism is contagious, it may not truly reflect the current conditions and address the needs of businesses today. The truth: The outlook for the economy remains uncertain, but there is light at the end of the tunnel.

Small Business

December 7, 2009

Leave a comment

In Tough Times, Innovation Can Fuel Small Businesses Growth

Small businesses need an abundance of innovative ideas in order to succeed in this difficult economy. It’s all too easy to blame the economy, but there are many ways small businesses can succeed through customer focused innovation.

The good news is: Periods of economic stress are usually followed by new innovative ideas, especially in small business. This stems from a basic business need to retain and attract customers with what the customer perceives as value. Small businesses understand this and are able to fare better in an economic downturn because they think fast. They are in a better position to move very quickly in terms of how they align their resources and address customer needs. That’s just the way they’re used to doing it, in good times and bad. It all stems from the passion they have for their business and their customers.

Innovation does not come without cost. In these times, small businesses must focus on the customer, costs and cash flow. To fuel innovation, small businesses need to re-evaluate their priorities, and their business model, in order to pinpoint problems and goals to provide innovations to products and service offerings. A Cash flow crunch can sneak up on a business if they are not prepared. It can adversely affect a company experiencing a slowdown as well as one that is rapidly expanding.

In order to stem cash flow, businesses should be sure to have cash reserves or arrange backup financing. Lines of credit, equity financing, or Invoice Factoring (also known as Accounts Receivable Financing) can provide a boost to cash flow that can fuel the innovations necessary to succeed.

Now is the time for business owners to innovate and make an investment in their business. To build up a customer base that can support their efforts in an economic downturn. What may matter most is the commitment to innovative change, the tolerance for taking risks, a sharp eye on cash flow, and management’s ability to lead smart.

Small Business

December 7, 2009

Leave a comment

Finance Growth without a Loan

Small to mid-size businesses are continually faced with waiting 30 to 60 days to get paid on their invoices, which really puts a strain on their cash flow.

Where large companies can usually afford to wait it out, small and mid-size businesses can’t. This can have a serious affect on managements’ ability to pay the company bill or meet payroll. A cash flow shortfall can also affect the business’ ability to fulfill orders because the cash is tied up in unpaid invoices.

How can you get business cash without a loan?

Invoice factoring, also known as accounts receivable factoring, is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. This form of financing is a valuable mechanism to turn your invoices into immediate cash, enabling you to fund your business operations. It is not very well known, but invoices from strong credit worthy commercial clients are excellent collateral, especially for factors. Most banks will not accept accounts receivable as collateral, but invoice factoring firms are more than willing to provide you with financing based on them. In most cases, a factoring provider can provide funds when a commercial bank cannot.

Why use Invoice Factoring?

The reason many businesses make this move is to ensure the continuous flow of cash to the business without sacrificing equity or incurring debt. Essentially, businesses that use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.
In today’s struggling economy, freeing up working capital through factoring can prove to be vital. Access to immediate cash can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

Business Finance

December 7, 2009

Leave a comment

Sales Down? Stop Blaming the Economy and Increase Profits

Given the current conditions, it’s easy to blame the economy when sales stagnate. However, the economy may be only partly to blame.

The fact of the matter is that the holes in the sales process are hidden when the economy is good. Whether the economy is up or down shouldn’t matter as much as how your sales team adjusts to the slowdown.

When organizations encounter a sales slowdown, they should adjust their game plan accordingly and not get trapped into doing more of whatever activity is not working. Management should be willing to make an investment to change their approach faster than their industry changes in order to avoid a more severe downturn.

There are no guarantees that your business will never face a sales slump, but there are things you can do to ensure your sales team has a better chance of success.

Change is Good
Change can be hard for a lot of people. However, your sales team must learn to love change as a part of your sales culture.

“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
- John F. Kennedy

Try to view change as an opportunity to try something new and to adapt new ideas to the current circumstances. Encourage change by challenging your sales staff to be creative with sales techniques and reward successful new ideas. If something doesn’t work, encourage them to learn from the mistakes and keep the new ideas flowing.

Take Risks
If you want to be remembered, do something that makes you stand out from the pack. Although a giant purple inflatable gorilla may not fit with your company image, it is an excellent example of an “attention getter”. Remember, when you’re average, you’re just as close to the bottom as you are to the top.

Training and Education
Encourage a passion for learning an foster an environment of self-improvement. Your sales team has talent, or else you would not have hired them. Augment your current sales program with access to self-improvement opportunities, giving your sales team the ability to become more talented than the competition.

Lead by Example
Business owners and sales managers need to approach the sales effort with the mindset that they have an obligation to continually demonstrate the kind of sales behavior, attitude, and philosophy that they want their team to employ. They should also demonstrate the principles of creativity and respect, and encourage an open and fun work environment.

Now is the time to make an investment in your sales effort. To build up your sales team that can produce in an economic downturn. What may matter most is the commitment to initiating change, the tolerance for taking risks, dedication to employee training, and management’s ability to lead smart.

Small Business

December 7, 2009

Leave a comment

Improving Cash Flow in Tough Times

A common challenge for many small businesses is the feast-or-famine nature of managing cash flow. Poor cash flow can mean certain doom of an otherwise healthy business.

Beware, a cash flow crunch can sneak up on you if you aren’t prepared. It can affect a company experiencing a slowdown or one that is rapidly expanding.

Here’s a list of a few simple ways to improve your cash flow position:

Accept Responsibility For Minding Your Company’s Cash Flow – Even if you hire an accountant to help keep the books, don’t expect them to tell you everything you need to know. Stay informed and educate yourself on how best to manage your business finances.

Bill Promptly and Accurately – Billing right away for your products or services will only help to facilitate a prompt payment. Also, avoiding billing errors and mistakes will not only increase payment turnaround, but will help to build trust with your customer. There’s nothing like regular billing errors to strain a business relationship.

Actively Monitor Your Cash Flow – You should always know the financial status of your business (monthly sales, expenses for the month, how quickly clients are paying, etc.).

Avoid Slow Pay/No Pay Customers – Don’t be shy about checking credit references or even paying for a credit check if the client is significant enough.

Regularly Analyze Your Finances and Adjust Your Strategy Accordingly – Actively monitoring your cash flow helps catch small problems before they become unmanageable. If something is off, start asking questions until you get answers. The answers will help to define your business strategy.

Organize Backup Financing or Cash Reserves – Factoring, lines of credit or even equity financing can help get you through a cash flow crunch.

Lease Instead of Purchase – Although leasing costs more in the long run, buying on an installment basis means less cash up front and can be a boon to your cash flow.

Control Spending – Look over your expenses and see where you can trim the fat without causing the business to suffer. Add employees slowly and cautiously. Watch inventory and be careful not to over stock (this can easily bleed your company of cash).

Accelerate Receivables – Don’t be shy about asking customers for advance payments and reward early payers with a discount. Just putting out friendly reminder calls (“Did you get my bill, when can I expect payment?”) can significantly augment your cash flow.

Forbes.com Article Endorses Factoring

Solutions for Small Business Bankers

Small Business Optimism

Survival Instincts: American Small Businesses Doing What It Takes

Business Finance

December 7, 2009

Leave a comment

Forbes.com Article Endorses Factoring

A recent Forbes.com article has some excellent tips for
small businesses about managing cash flow through factoring.

URL:

http://www.forbes.com/2009/01/29/finance-factoring-debt-entrepreneurs-finance_0129_finance_print.html

The article concedes that factoring is a great way for some businesses to get immediate cash without going into debt. What most concerns factors is the credit worthiness of the end customer, not the business or its owners.

The reason many businesses make this move is to ensure the continuous flow of cash to the business. Essentially, businesses who use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

It’s even more important for small businesses to free up working capital through factoring. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

Business Finance

December 7, 2009

Leave a comment

Survey: 2009 Expected to be Rough For Entrepreneurs

According to a recent survey by the National Association for the Self-Employed (NASE), small businesses and many entrepreneurs are generally pessimistic about 2009.

In the survey, half of the respondents are already feeling the effects of the slow economy, and 43% indicated that this is the worst downturn that they’ve experienced.

Most of those surveyed indicated that they would use their personal savings to shore up their business, scale back the purchase of inventory or equipment, lower prices, or cut pay.

“Cash is king,” as they say. Since quick access to cash is critical for small business, and access to credit is scarce at best, many business owners feel that cutting back or tapping into personal savings will provide a much needed boost to cash flow.

While most of American small and mid-sized businesses continue to struggle with the current economic environment, there is a silver lining. As we noted in a previous article “Factoring: The Small Business Loan Alternative“, business owners have a little known alternative choice to a traditional bank loan, line of credit or any of the cash flow boosting mechanisms listed above.

Experts agree that, despite the economic slowdown, entrepreneurs can start and even grow their business with the right tools (See “Small Businesses Can Face Economic Downturns With Confidence“).

While there is no crystal ball that accurately predicts the future, small business owners can take steps that will help their enterprises endure the worst of times, and position them for success when conditions inevitably improve.

Small Business

December 7, 2009

Leave a comment

Press Release: Houston Firm Offers Loan Alternative for Small Business Bankers

Charter Capital ( http://www.chartercapitalusa.com), a Houston based specialty financial services company, announced today that in light of the capital constraints faced by many lenders today it is doubling its capacity to provide accounts receivable funding to small businesses.

Houston, TX October 24, 2008 — Overextended on credit lines that often were based on home equity, small businesses are increasingly hard-pressed to service debt in an atmosphere of slowing sales. “On top of limiting loans in order to maintain capital requirements, small business bankers have been pressed to tighten credit standards due to general uncertainties associated with a slowing economy” says Joel Rosenthal, Managing Director. “Many small businesses saw the handwriting on the wall months ago and were quick to warm up to the concept of obtaining funding from alternative sources such as Charter Capital.” Mr. Rosenthal suggests that bankers appreciate the synergies gained by referring “difficult to qualify” borrowers to Charter Capital for funding and related factoring services. “While Charter Capital is charged with providing funding to the business through its factoring services, incentives are given to the business referral to maintain its checking and depository business at the referring bank”.

Charter Capital is not a bank or depository. Rather, it is a specialized finance company structured to provide funding and accounts receivable management services to its clients via a process commonly referred to as factoring. Charter Capital’s FactorLine services are geared to accommodate small businesses that have difficulty qualifying for conventional commercial bank loans. FactorLine services are intended to be complementary to traditional commercial banking services, leaving the bank free to concentrate on satisfying other relationship-driven services demanded by small businesses, services such as checking, payroll, and personal banking.

Headquartered in Houston, Texas, Charter Capital ( http://www.chartercapitalusa.com), provides working capital funding via a process commonly referred to as “factoring of accounts receivable”, asset-based lending, and cash flow solutions for businesses nation-wide including: freight delivery and transportation, repair, maintenance and inspection service providers, consulting firms, most other service providers, staffing firms, distributors, wholesalers and manufacturers. Charter Capital also serves business in Dallas, TX; San Antonio, TX; Austin, TX; Atlanta, GA; Albuquerque, NM; Phoenix, AZ; Nashville, TN; Indianapolis, IN; Oklahoma City, OK; and cities nationwide.

Press Releases

December 7, 2009

Leave a comment

Factoring: The Small Business Loan Alternative

It has always been a challenge for small business owners to obtain bank financing. It’s especially true in today’s economy that most small businesses just can’t qualify for conventional business loans. The requirements can be a significant barrier: the company must have sizable assets, years of profitability and audited financial statements.

A majority of business owners do not consider other forms of business financing because they don’t know that there are alternatives to a traditional bank loan or an SBA loan. Many times they give up any hope of obtaining financing when they get turned away. The truth is that many times those alternatives can work better that conventional financing.

The biggest challenge for nearly all companies is their Accounts Receivable – the 30 to 60 day wait until the invoice is paid. During this waiting period, the Accounts Payable becomes due, employees and suppliers need to be paid. This leads many businesses into a “cash flow crunch”. While this is fine for large, well capitalized, companies with adequate banking reserves, it is a significant challenge that many business owners face every day.

There are many ways to maintain a positive cash flow when growing your business and dealing with Accounts Receivable issues. One popular way to increase cash flow is Invoice
Factoring. Invoice Factoring (also known as Accounts Receivable Financing) is the practice of selling your accounts receivable (invoices) at a discount to another company. You get the money from the company that you sold your accounts receivable to and they become responsible for collecting on the invoices.

The reason many businesses make this move is to ensure the continuous flow of cash to the business. Essentially, businesses who use invoice factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

With small businesses, it is even more important to free up working capital through factoring. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

As you can see, invoice factoring provides the needed working capital to meet business expenses without worrying about when your client will pay. It’s the business loan alternative that provides businesses with predictable cash flow and positioning them for growth.

Business Finance

December 7, 2009

Leave a comment

Survival Instincts: American Small Businesses Doing What It Takes

For all businesses, being resourceful is essential when costs rise. With the current economic conditions, many companies are finding creative ways to deal with rising costs. At the top of this list is the cost of energy and fuel. In an April survey, American Express found that 86 percent of small-business owners are feeling the effects of higher energy and gas costs.

Many business owners are using this lull in the economy to closely assess their costs and cash flow. In lean times, savvy business owners make management improvements that they have thought about for years. Discipline and resourcefulness established in difficult periods can help give business owners the tools they need to maintain their business over in the long term. Simple, but meaningful, strategies can make a big difference to the bottom line: Reviewing/revising budgets, and sticking to them; Outsourcing (payroll, accounting, HR, IT); Getting receivables in line (Charter Capital can help with that); Cutting postage and overnight fees by sending document via email; Buying used equipment for non-critical tasks.

Since approximately fifty percent of every dollar in the economy is generated by cash-starved small businesses, their effects can be felt throughout the economy. If they are unprepared and their operating expenses go up, they may not be able to pass along these costs quickly enough to keep their cash flow positive. Without proper planning and some outside help, very few small businesses have large enough cash reserves to ride out a recession.

In an increasingly competitive global marketplace, small business owners shouldn’t take anything for granted. Entrepreneurs should always be looking at ways to stay lean and efficient. No matter the size of the company, it should be a part of the “corporate culture.”

Small Business

December 7, 2009

Leave a comment

Factoring Finance Blog

An Optimistic Future for Small Business

In Tough Times, Innovation Can Fuel Small Businesses Growth

Finance Growth without a Loan

Sales Down? Stop Blaming the Economy and Increase Profits

Improving Cash Flow in Tough Times

Forbes.com Article Endorses Factoring

Survey: 2009 Expected to be Rough For Entrepreneurs

Press Release: Houston Firm Offers Loan Alternative for Small Business Bankers

Factoring: The Small Business Loan Alternative

Survival Instincts: American Small Businesses Doing What It Takes

Archives

Blogroll

Meta

Follow “Factoring Finance Blog”