Just a quick note to let you know how I can help a business owner you may refer to me…
A temporary staffing company did not have enough money to meet its payroll and was at risk of going out of business. The owner's close friend had me call the owner who was in a panic as their main customer was over 60 days late in its payments. The owner had already contacted a bankruptcy attorney in anticipation he couldn’t raise the money.
Within 24 hours of speaking to the owner, I presented three options and a lender quickly funded the loan. Not only was the cash flow problem solved, but the ecstatic owner avoided a costly bankruptcy and is now focusing his energy on growing his business.
If you know a business owner with cash flow problems, please have them call me today at 310-371-4011.
Click here to read "Matchmaking for Business Loans"
Related Tags: staffing, receivables, factoring, business loan, bankruptcy, turnaround, financing, small business
Thursday, June 29, 2006
Tuesday, June 27, 2006
Benefits of Factoring
The benefits of factoring (also known as accounts receivable purchasing) are many and include the following:
- Accelerate your cash flow by receiving funding in as little as 24 hours once approved
- Faster receipt of cash enables you to more quickly pay your suppliers, take advantage of vendor discounts and improve your credit history
- Funding does not appear as debt on your balance sheet
- Access to capital without diluting your ownership position
- Can reduce overhead in collections and administration of accounts
- Based upon your customer’s credit – a big advantage if you’re a startup or experienced financial difficulties
- Your access to funding grows in parallel with your sales
- Advance credit screening of your customers can result in lower bad debt expense
- Can provide unlimited access to increased funding without lengthy approval processes required to increase a normal bank line of credit
- Expands your geographic reach – many factors can fund both domestic and international receivables
Click here to read "Matchmaking for Business Loans"
Related Tags: small business, bank loans, factoring, accounts receivable, p.o. financing, purchase order financing, equipment leasing, working capital, cash flow
Guidelines for Factoring
Here's a few thoughts to consider when evaluating the use of factoring or accounts receivable financing as a way to improve your cash flow:
1. With some exceptions, typically only accounts receivable for sales to commercial customers can be factored.
2. Are there any existing liens against your company’s receivables? This would include loans, lines of credit, tax liens, judgments as well as pending litigation.
3. Even though the factor extends cash based on the credit of your customers, the factor will also run credit on your company. Your company’s credit is not nearly as important as your customer’s, but it is sometimes a consideration.
4. On your initial funding of existing invoices, the factor may or may not agree to purchase accounts that are already more than 30 days old.
5. Before factoring your invoices, your product or service must be completed, delivered, and accepted by that customer. The factor will be concerned with anything that might diminish the value and the strength of the accounts receivable. What are the specific details of your return policy? Do you owe any money to your customers which could be treated as an “offset” to the monies owed your company?
6. Factoring involves the sale of your company’s receivable. Depending on the terms of the factoring program, the factor may require notification of your customers and verification that the product or service has been completed, delivered and accepted by that customer.
7. Factoring fees are negotiable and depend upon, among other things, the following:
The creditworthiness of the customer
The dollar amount you factor monthly
The average size of the invoice
The number of days the client takes to pay the invoice
Click here to read "Matchmaking for Business Loans"
Related Tags: bank loans, small business, business loan, factoring, accounts receivable, p.o. financing, working capital, cash flow
1. With some exceptions, typically only accounts receivable for sales to commercial customers can be factored.
2. Are there any existing liens against your company’s receivables? This would include loans, lines of credit, tax liens, judgments as well as pending litigation.
3. Even though the factor extends cash based on the credit of your customers, the factor will also run credit on your company. Your company’s credit is not nearly as important as your customer’s, but it is sometimes a consideration.
4. On your initial funding of existing invoices, the factor may or may not agree to purchase accounts that are already more than 30 days old.
5. Before factoring your invoices, your product or service must be completed, delivered, and accepted by that customer. The factor will be concerned with anything that might diminish the value and the strength of the accounts receivable. What are the specific details of your return policy? Do you owe any money to your customers which could be treated as an “offset” to the monies owed your company?
6. Factoring involves the sale of your company’s receivable. Depending on the terms of the factoring program, the factor may require notification of your customers and verification that the product or service has been completed, delivered and accepted by that customer.
7. Factoring fees are negotiable and depend upon, among other things, the following:
The creditworthiness of the customer
The dollar amount you factor monthly
The average size of the invoice
The number of days the client takes to pay the invoice
Click here to read "Matchmaking for Business Loans"
Related Tags: bank loans, small business, business loan, factoring, accounts receivable, p.o. financing, working capital, cash flow
Tuesday, June 13, 2006
Higher Sales and Improved Margins through Vendor Financing
“We would be out of business without vendor financing” according to the president of a distributor of commercial strength and cardio equipment. Almost 65 percent of this company’s revenues are generated utilizing a vendor financing program implemented over ten years ago.
Vendor financing programs provide manufacturers, distributors and dealers from a wide variety of industries the capability to offer customers a convenient way to acquire their products at the point of sale. A few of the key benefits vendor financing provides include:
· Improved vendor cash flow through pre-funding, or financing of the down payment, and reduced receivables through collection of the balance upon delivery of the product
· Improved margins and higher sales by focusing the customer on monthly payments instead of price reductions
· A faster selling cycle – fewer worries about whether your customer has the money in its capital budget or if they can (or will try to) find financing on their own
· Transfer of the financing risk to a third party through non-recourse programs
· The ability to open up new markets including selling your products outside the United States
With programs that can provide financing in amounts as little as $5 thousand, vendor financing can be implemented to cover most asset types and a variety of customer credit profiles including start-ups and early stage companies. For amounts up to $100 thousand (and higher), many financings can be approved in as little as four hours after your customer completes a one page application. For larger transactions, approvals can be obtained as quickly as two business days following the submission of financial statements and tax returns. Lease terms can extend to 84 months for equipment with long useful lives sold to qualifying credits.
According to a southeastern manufacturer of equipment, the flexibility, creativity and extraordinary support it enjoys through its vendor financing program provides it with a competitive advantage. Its vice president of sales firmly believes that choosing the right programs and leasing company can be the difference in winning a sales competition. A few questions to ask in selecting the best leasing company for your business include:
· Flexibility – Can the financier fund my A, B & C credits? Can soft costs be included in the financing amount? Will all credits be financed without recourse to the vendor?
· Minimums and maximums – How small and how large of a deal can the financier fund? Any limitations on how much credit it can extend to any given buyer? Any overall minimum or maximum volume requirements to create a program for your company?
· Creativity – How many different programs structures and end user offerings can the financier provide? Will the financier create unique programs to meet the special needs of certain customers?
· Service – What levels of support do you require for sales, marketing, administration and deal structuring? Do your customers require a personal touch or will a highly automated system be a better fit with your sales methods?
If you can visualize your company as a one-stop solution provider to your customer’s needs through having the ability to offer fast and easy equipment financing, then vendor financing may provide you with new and profitable opportunities.
Related Tags: bank loans, small business, business loan, equipment leasing, vendor financing
Purchase Order Financing - A Tool for Explosive Growth
The phone rings with the call for which you’ve been hoping. You’ve just landed that big sales order that will catapult you to the next level. Deliver the goods on schedule and your customer has told you they will commit to volumes that will significantly increase your revenues and profits for the next twelve months and beyond.
Just before you pop open the bubbly, you realize that you don’t have the cash to buy the raw materials, hire the extra needed workers or pay for the shipping of sub-assemblies. You’ve exhausted your own capital base. Your bank has reached its limits on how much it will lend you. Finding another bank loan might take weeks. Finding an equity partner will likely take even longer and you’ll also have to give them a piece of your company.
Your dreams of success and glory fade as you now visualize a missed immediate opportunity and lost future sales. Of equal if not greater concern are the potential negative ramifications once other customers or your competitors find out you have reached your limits!
Where can you get the cash?
Purchase order financing can be the right tool for your company to take advantage of a variety of sales opportunities in situations resulting from high growth to seasonal increases in business. Plus, it’s not just for growth companies as it is also available for startups and even turnaround candidates.
Companies from a wide variety of both manufacturing and services industries (with the exception of the construction industry) have utilized purchase order financing for both finished goods and non finished goods. This tool for explosive growth can be used to meet your sales goals in purely domestic as well as import and export situations.
If you have gross margins of at least 18 percent on the sale of your product, purchase order financing can enable you to drive your sales skyward. Like any financing, the cost of utilizing purchase order financing can vary. As a rule of thumb, the purchase order financier will charge a transaction fee in the range of 4 to 7 percent of the gross amount funded. The fees may be higher if the amount of time to deliver the product or service exceeds 30 days. The financier will fund a maximum of 100 percent of the costs to produce your product or service which can include deposits, raw materials, components, sub-assemblies, overhead, labor costs, shipping charges and letters of credit.
Upon completion of the product and shipment to your customer, you’ll be expected to re-pay the purchase order financier. This is often accomplished by taking the receivable generated upon shipment of the goods and financing it with a factor or other lender (possibly your existing bank). A factoring or other financing fee may also apply adding another 3 to 6 percent to your total cost of this financing to complete this sale. Advance rates on the receivable financing can approach 85 percent of the invoice amount allowing you to fully repay the purchase order financing.
It’s all about the collateral
Each purchase order financier will have its own documentation requirements with the purpose of determining if you have a verifiable, non-cancelable order for your product with a creditworthy customer. Also, if your current lender has a blanket lien on your assets, the purchase order financier will ask for a release on the assets associated with the financing transaction.
So the next time the phone rings with a big order and you hear a loud, pounding noise - just relax! That’s not your heart exploding in fear. It’s opportunity knocking at your door!
Click here to read "Matchmaking for Business Loans"
Related Tags: factoring, accounts receivable, p.o. financing, purchase order financing, bank loans, small business, working capital, cash flow, business loan
Just before you pop open the bubbly, you realize that you don’t have the cash to buy the raw materials, hire the extra needed workers or pay for the shipping of sub-assemblies. You’ve exhausted your own capital base. Your bank has reached its limits on how much it will lend you. Finding another bank loan might take weeks. Finding an equity partner will likely take even longer and you’ll also have to give them a piece of your company.
Your dreams of success and glory fade as you now visualize a missed immediate opportunity and lost future sales. Of equal if not greater concern are the potential negative ramifications once other customers or your competitors find out you have reached your limits!
Where can you get the cash?
Purchase order financing can be the right tool for your company to take advantage of a variety of sales opportunities in situations resulting from high growth to seasonal increases in business. Plus, it’s not just for growth companies as it is also available for startups and even turnaround candidates.
Companies from a wide variety of both manufacturing and services industries (with the exception of the construction industry) have utilized purchase order financing for both finished goods and non finished goods. This tool for explosive growth can be used to meet your sales goals in purely domestic as well as import and export situations.
If you have gross margins of at least 18 percent on the sale of your product, purchase order financing can enable you to drive your sales skyward. Like any financing, the cost of utilizing purchase order financing can vary. As a rule of thumb, the purchase order financier will charge a transaction fee in the range of 4 to 7 percent of the gross amount funded. The fees may be higher if the amount of time to deliver the product or service exceeds 30 days. The financier will fund a maximum of 100 percent of the costs to produce your product or service which can include deposits, raw materials, components, sub-assemblies, overhead, labor costs, shipping charges and letters of credit.
Upon completion of the product and shipment to your customer, you’ll be expected to re-pay the purchase order financier. This is often accomplished by taking the receivable generated upon shipment of the goods and financing it with a factor or other lender (possibly your existing bank). A factoring or other financing fee may also apply adding another 3 to 6 percent to your total cost of this financing to complete this sale. Advance rates on the receivable financing can approach 85 percent of the invoice amount allowing you to fully repay the purchase order financing.
It’s all about the collateral
Each purchase order financier will have its own documentation requirements with the purpose of determining if you have a verifiable, non-cancelable order for your product with a creditworthy customer. Also, if your current lender has a blanket lien on your assets, the purchase order financier will ask for a release on the assets associated with the financing transaction.
So the next time the phone rings with a big order and you hear a loud, pounding noise - just relax! That’s not your heart exploding in fear. It’s opportunity knocking at your door!
Click here to read "Matchmaking for Business Loans"
Related Tags: factoring, accounts receivable, p.o. financing, purchase order financing, bank loans, small business, working capital, cash flow, business loan
Am I Bankworthy
“You’re not a good fit with our bank. We wish you the best of luck in finding a financial institution who can meet your needs.”
How many times have you heard that from your friendly local banker? More times than you care to admit.
I recently spoke to a banker who put into perspective the difficult decisions made each day when evaluating new client lending relationships. “The bank can’t be wrong more than one out of every hundred dollars of loans.” In other words, if bad loans climb above one percent of total loans outstanding, the bank begins to lose its credibility as a safe haven for deposits which are their lifeblood.
That doesn’t leave much room for error.
Visit enough web sites with advice on how to borrow money from a bank and you can find about the “five C’s of credit” – capacity, capital, collateral, character and conditions. Once you’ve mastered these basic criteria, are there additional things you can do to improve your likelihood of gaining admission to that select group of bankworthy borrowers? The answer is YES!
Get a plan: Having a business plan including pro-forma projections is a must! Use your projections on at least a quarterly basis to gauge trends in your marketplace and understand variances in your operating results.
Cash is king: If you’re not collecting your cash in a timely manner, the bank will assume you won’t re-pay your loan in a timely manner. Revisit your credit, billing and collections policies and implement necessary changes to improve your cash flow. When you evaluate the profitability of a customer, consider how quickly you are able to collect your revenues. Selling to a “big” client isn’t typically the right move if they won’t pay you for 90 days.
Diversify your client base: When any customer exceeds 10 percent of your total sales on a regular basis, it’s time to find some new customers. If customer concentration levels exceed certain thresholds, the bank will deem you to be at greater risk to your customers’ bankruptcies or contract defaults and may reduce your borrowing base.
Know your collateral: Banks look for three sources of repayment – cash flow, company assets and assets of the owners. Know what you’ve got and how much it is worth.
Invest in people: First, make sure your business has more than one person capable of making big decisions. Second, assemble a diverse team of trusted outside advisors which meets regularly to make sure the business is on track and prepared for contingencies.
Build good systems: Information is power! The ability to provide accurate and timely reports on receivables, inventory, payroll, payables, fixed assets and other areas is critical to proving you have control over your operations.
Hire a good CPA: Hire a reputable accounting firm that represents clients that obtain the type of financing that you need. The more money you want to borrow, the higher the level of scrutiny your financial statements will receive.
Focus on relationship: Banks are not simply interested in loans – they want to provide you with a host of services. The more services you can utilize, the more valuable of a prospect you become.
Each of these bits of advice individually will not guarantee that by tomorrow you’ll become a bankworthy credit. But in combination with the 5 C’s, you will increase your chance of hearing the words, “you’re a great fit for our bank! Your loan has been approved!”
Click here to read "Matchmaking for Business Loans"
Related Tags: factoring, accounts receivable, small business, business loan, bank loans, prime rate, working capital, cash flow, five c's of credit
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