Small Business Factoring and it companion Asset Based Lending will be in vogue, as companies look for working capital to sustain revenue growth going forward.
Our cable news media continually report on the stimulus plan, tax credits and other initiatives to incubate the economy; however the fact remains commercial banks are still a bit stingy with handing out new loans to small business owners even though recent reports show Big Banks loan approvals are up.
The Future of Small Business Factoring here again, and will again prove to be ta viable interim solution to combat the traditional banking and credit markets. The time tested practice of factoring will promote top line revenue growth when traditional bank financing does not fit. frequently unavailable.
So what is Factoring?
Factoring is when a company sells its invoices and/or accounts receivables at a discount to a Funding Company for immediate cash. Unlike a traditional bank that will take your accounts receivables, inventory and other assets as collateral and lend against these assets, an accounts receivable factoring company will purchase the invoices out-right. To the business owner, the end result is the same, but from the outside looking in there are some advantages and disadvantages to both invoice factoring and traditional bank financing.
Invoice Factoring – Pros and Cons
Factors will pay immediately on approved invoices.
Business Owners incur no debt to be repaid. Selling your invoice for cash is the same as offering your customer a discount to pay early. You’re trading a quick payment discount for the convenience to have your cash now.
Factoring companies will encourage growth by providing additional working capital to grow. Unlike a traditional bank that will require a business to re-apply for every lending increase.
Flexibility – as a business owner – it is your choice to factor or not factor specific invoices.
When compared solely on cost. Factoring is a more expensive form of working capital than Commercial Banks.
Small business factoring has been and always will be a stepping stone or bridge to traditional bank financing. Through periods of rapid growth – invoice factoring and asset based lending are proven alternatives to improve cash flow and return on equity. What is rapid growth? In the life-cycle of every business there are periods where a company’s growth rate exceeds its earnings – resulting in insufficient cash flow to manage the business.
When working with a traditional bank, earnings is a key component to any funding covenants agreement. Get the ratio out of balance and your bank will restrict or worse revoke lending privileges. Banks focus on the net value of the assets pledged to repay the loan and assign ratios that must be met. Factoring companies and asset based lenders fund solely on cash flow and the strength of a company’s customer base.
In light of today’s economic uncertainty, many factoring companies have resurfaced as a preferred and viable funding alternative. Factoring will again provide businesses a viable working capital cash gap solution. It will remain to be seen how long it will take for traditional funding sources loosen the purse strings, however until that time accounts receivable factoring and asset based lending will provide business owners funding to support growth.
In summary, no one truly knows how long it will be before we see traditional banks lending again, but in the meantime commerce must continue to move forward.
Darren Grady has over 30 years of private business and funding experience, and has utilized Accounts Receivable Factoring and Asset Based Lending to grow two businesses in the initial start up phase. For more information on Accounts Receivable Factoring, Asset Based Financing, as well as other funding companies and resources go to www.TroonFunding.com.
The question of the day is all about using online investment services. In other words; Should You or Shouldn’t You? Naturally, as you might well expect with this sort of question, there is no one size fits all answer here. You see, for some people, using an online investment service is a no-brainer, whereas for other people not so much.
Heads up, you know darned well that you have to do something with your money. Something besides enjoying your weekends and getting your hands on the latest electronic gadget. That something, as you have probably already figured out is about getting up close and personal with the world of investments.
The short answer is YES; of course it takes money to make money. To make money in the stock market, you must have money to make the initial stock purchases. Starting a business requires money to buy inventory, marketing materials, office space and equipment. Even lottery winners had to have the seed money required to buy the ticket. The only exceptions that come to mind are inheriting, stealing or finding money.
Millennial! Another of those media driven buzzwords, used to label those between the ages of 18 and 34, while the term Gen Xers define those between 35 and 50 years of age. Boomers, the group to which I belong, are those 51 through 69. This post covers 8 key pieces of advice I proffer to this generation.
There is a common trait that shows up on the road to building your wealth. This trait shows up as you continue to add to your investment portfolio. You do have an investment portfolio don’t you? And don’t even start the blame game when this trait is revealed in just a moment.
Something most rags-to riches stories have in common is that a good budget is always needed to help anyone achieve financial security. If you want to significantly improve your credit, you have to learn how to pace your spending and increase your savings. No matter how much money you have, there will always be something you can spend it all on and become dead broke again.
Do you run out of money before you run out of month? Many do, but it doesn’t have to be that way! Wealth is the result of widening the gap between what you earn and what you spend. Most of us make the mistake of ramping up our spending as our disposable incomes rise. This is self-defeating. If you do not develop a respect for money, it will always elude you.
Who Else Wants to Know How to Increase Sales, Secure Working Capital and Improve their Bottom Line?
The answer of course is Everyone…
I want to thank you for visiting my website, and I would like to take a moment to introduce myself. Within this site, my goal is to provide you with the most up to date and relevant information to both increase your sales as well as provide information on non traditional banking solutions to secure working capital for growth.
I have been a small business owner for over 25 years, and the majority of that time was spent overseeing my U.S. based manufacturing company that I founded in 1990 and sold in 2006. Our business model was to service the largest furniture retailers in the nation, and over time we achieved our goal. Collectively our customers generated retail sales of over 3.2 billion dollars annually. As a result, we experienced rapid growth, and raising working capital as well as securing adequate financing to insure a constant and positive cash flow was always high on my priority list.
From the time of founding the company many changes took place. However without question two changes during this time have changed the world and more so how we will all do business going forward. First was the birth of Google and second was China entering the WTO, World Trade Organization, in 2001. Why? In short, Google has changed the way we get our information and China changed where we purchase products.
Think about it, where do you go to get information on a new product or service, The Yellow Pages, The Newspaper, or do you go to Google… Let’s face it, Google and new technologies are flattening long time established business models.
Since founding Troon Funding Services, I have had the opportunity to speak with business owners from many different industries providing an array of products and services. The common thread concerning every business leader is how can I get my message out to reach my target audience. I must admit, When founding Troon Funding Services I had the same concern.
I recognized traditional marketing methods such as trade publications, newspapers, and the yellow pages were no longer effective and they were very expensive. In addition, it was evident any successful marketing campaign had to harness new technologies to reach new customers and to stay connected with existing customers.
Mastering these online marketing principles have opened new doors for both my myself and many of my clients. The purpose of this website is to share the tools used everyday by top online marketing companies. Again, my goal is to provide relevant resources to help small business owners grow by eliminating the hype and separating the fact from fiction. Time is something we don’t get back when wasted, and the tools and websites provided within have been filtered to save you both time and money.
In Summary, from my experience every business wants the same thing… To make and keep more money. Sounds simple, but as a funding source to small businesses many companies today are truly struggling to reach new customers through out dated traditional advertising. I hope you find the information on this site helpful and it results in additional sales growth for your business.
For additional information on alternative funding sources please visit www.WorkingCapitalForGrowth.com