Factoring Financing Articles

The number of companies looking for business financing has increased as a result of the current economic environment. Unfortunately, the number of institutions that are willing to provide business loans has decreased substantially. This has created a surplus of companies who need but can’t access to funding in their time of greatest need.

One of the biggest reasons companies need funding is because they have cash flow problems. These can stem from lowered sales and slow paying clients. As a matter of fact, slow paying clients represent a major challenge for business owners. Accustomed to paying invoices in 30 to 60 days, it’s hard to ask clients to pay invoices faster. Especially when they can take their business to competitors elsewhere at any time.

If your biggest challenge is that you can’t afford to wait for your clients to pay, and your business is otherwise doing well, invoice financing may be the right solution for you. When used correctly, invoice financing can provide the needed funding to help your business.

To use invoice financing you need to work with a funding company that acts as an financial intermediary between your client and your business. Once you invoice your client, you sell the invoice to the funding company, who pays for it immediately. This gives you the funds you need to pay expenses and grow the business. The invoice financing company, who now holds the invoice, settles the transaction once your client pays in full.

One major advantage of invoice financing is that the funding company main interest is in buying quality invoices. That means that clients with few assets other than invoices from solid clients can usually qualify for this type of funding. Also, the funding is tied to your sales, and therefore is dynamic. It will grow with your sales volume.

Invoice financing is a solution that works well for companies whose main problem is that they can’t afford to wait up to 60 days to get paid by clients.

For many years, companies have relied on venture capital financing to grow and expand their businesses. Recently, most venture funds have been reduced in scope and size to deal with the current economic environment. Unfortunately, this has had a substantial effect in the broader economy by limiting entrepreneurship and innovation – key component of economic success.

Without venture capital, many business owners try to finance their companies by looking for a business loan from a lending institution. However, business loans are only given to companies that have strong collateral and can show profitable operations. Companies will also need to provide financial statements that will be rigorously reviewed to ensure that they meet institutional criteria. Because of this, this type of business financing is out of the reach of many business owners, especially at this time.

There is are alternative ways to finance your company. They can help you expand your company organically without generating any new debt. And more importantly, without having to give any equity in the business to someone else. Remember that when you use venture funding, you are selling a piece of your company to someone else. They will want a say on how things are done. Many times this is good, since venture capitalists usually have seasoned executives that can help you. However, it will take some of your independence away.

There are two alternatives that can help you, depending on your situation and line of business. One if factoring financing. Factoring bridges the 30 to 60 day gap between invoicing a commercial customer and actually receiving a payment. This advance payment enhances your cash flow, providing you with funds to pay current expenses and grow the business. The other alternative is to use purchase order financing. PO Financing only helps product resellers who have a large order and don’t have the funds to buy the product from their supplier. In both factoring and purchase order financing, the transaction is settled once the customer pays the invoice. And as opposed to other types of financing, the most important collateral if your customers credit rating. Thus, you can leverage your clients credit rating to fund operation expenses and growth. This makes factoring and purchase order financing an ideal solution for many businesses.

Finding financing has always been relatively easy for established companies, provided that they have a track record of success. Most companies that have sales in the range of a million dollars per month can find financing from either their local bank or from other institutions. It’s a different story if your company is smaller though.

Everyone agrees that having the right capital structure with the right sources of financing is critical for the success of a company. The problem is that few institutions are willing to make a business loan or offer any type of business financing to small companies. Large institutions don’t like to lend to small businesses because they find them risky. In part they are right, small businesses have a high failure rate. On the other hand, a small business has a very low chance of succeeding unless they find appropriate funding.

Most business owners will try conventional sources of financing at first. And some will actually succeed in getting business loans or similar financing from their local institutions. But like all small business owners, they will need to show an established track record of success and will need to have substantial assets to back up the financing request. However, if conventional sources fail, few business owners know where else to go for financing.

One possible alternative is to use invoice factoring. One common challenge for small companies is working with commercial and government clients that pay in 30 to 60 days. This practice of offering terms usually ends up tying the company’s capital, restricting their ability to pay vendors or employees. This also restricts their ability to pursue new clients, since they lack the capital to service those accounts. Factoring invoices eliminates this problem by advancing you funds against your invoices. Instead of waiting for your client to pay – you can have the factoring company advance you the funds (less a discount). These funds can be used to pay existing obligations or be invested in new projects or clients.

A major advantage of a using accounts receivable factoring is that most company owners can obtain it relatively easily. To qualify, companies need to have a solid roster of commercial or government customers. Companies also need to be free of major issues – or if they have problems – they need to have a turnaround plan in place.

The reason accounts receivable factoring is easier to obtain than other sources of financing is that they look at your invoices from customers as their main collateral. This allows companies that have a solid base of clients to use that as leverage to fund operations and growth.

The number of troubled businesses has increased dramatically as a result of the current economic environment. Usually, the problems start when clients start delaying payments. This has a negative impact on cash flow, and if your company does not have a working capital reserve, it can create major problems. The first reaction for most owners tends to be to delay vendor payments as well. That seldom works as a long term solution unfortunately. Before long, like falling dominos, other payments start getting delay and the company gets into deeper trouble.

Most company owners look for business financing – hoping to implement a stop gap solution to the working capital problem. Unfortunately, getting a business loan is very hard for companies that are not in pristine financial condition. The catch 22 is that if the company where in pristine financial condition, it would probably not need a business loan. Most of time times, this situation can be fixed with the right financing. Otherwise, the company risks going out of business.

There is a solution that can help companies who face slow paying clients and who are not in the best financial shape. It solves this particular problem at its source – the slow client payments. The solution is called invoice factoring.

Factoring provides you with a funding advance for your slow paying invoices. It provides you the capital you need to pay suppliers, vendors and employees – on time. The fact is that while your clients are paying invoices more slowly, most of them are still good solid clients. Factoring companies can provide you an advance on your invoices because they consider them to be your best collateral – something most institutional lenders don’t always do. Because of this, invoice factoring can be a good solution for a troubled company that still has a solid roster of clients.

Another advantage of factoring is that is a dynamic form of financing that grows with your business. Since financing is tied to your invoices, it can be used to grow your business and restore its financial health.

There is something interesting about recessions. Although nobody likes them, many times they provide growth opportunities to businesses. Through careful planning and solid execution, many business owners are able to increase their market share and grow their companies. The catch is that more often than not – they need business financing.

Getting a business loan, or any type of business financing, has been a challenge in the current economic client. Institutions are not lending, either because they lack the funds themselves or because they don’t trust their client’s collateral. Institutions themselves must also follow tough guidelines regarding what they can finance or not. Does that mean that you are out of options? Not really, it just means that you need to know where to look.

One business financing option that has been overlooked in the past few years is invoice factoring. Invoice factoring is a bit different than other forms of financing. It helps companies that have commercial or government clients and that have to wait 30 to 60 days to get paid for their invoices. While many companies can afford to wait to get paid, few realize the true cost of waiting, also called the opportunity cost.

Factoring invoices provides working capital, using the soon-to-be-paid invoices as collateral. Invoices from large or medium sized companies tend to be good collateral that can be financed, and that is where factoring comes in.

What makes factoring financing appealing to companies is that is relatively easy to obtain. The most important requirement is that you do business with solid customers. This product is usually offered by private finance companies called factoring companies, though some banks offer it as well.

Factoring is a tool that can be used to grow your business when other types of financing are hard to obtain or out of reach. It has the added advantage that it grows with your sales, providing your company with a dynamic form of financing.

As a result of the current credit environment, finding the necessary business financing to grow their companies has become the full time job of many CEO’s, CFO’s and company owners. For example, venture capital has become increasingly difficult to get – and understandably so. Some venture capitalists are being extremely cautious, while others just have their own financial problems and are not in a position to finance other companies. Other institutions are not too helpful either. For example, getting a business loan has become increasingly more difficult, and in some instances, impossible to obtain. Many institutions require audited financial statements, proof of hard assets, excellent credit among other things before issuing a business loan. Unfortunately, this puts business loans out of the reach of many businesses – especially those that don’t have collateral in the traditional sense of the word. There is a possible solution though.

Some businesses may be able to use accounts receivable factoring to fund their growth. One of the biggest challenges for companies that have commercial sales is having to wait 30 to 60 days to get paid. This also applies to government contractors and suppliers who must also wait to get paid. Many companies would not need a business loan or venture capital to finance their growth, if their clients paid quickly. You can achieve this using accounts receivable factoring. This form of financing has a number of advantages over other forms of financing. By factoring receivables you can get working capital for your company without while minimizing the problems – and hassles – of waiting 30 to 60 days to get paid.

Getting a receivables factoring financing line is fairly simple, since the main qualification criteria is that you do business with credit worthy clients. But more importantly, accounts receivable factoring is dynamic, and grows (almost automatically) with your sales. This makes it an ideal solution for companies that are growing and have solid prospect – but are having challenges finding a financial partner to back their business.

Funding a business in the current environment has been a challenge for company owners. The business financing environment has not been friendly business owners, in part because many funding companies had problems of their own. Because of this, they have tightened their commitment requirements.

Some companies have tried a different approach and opted to look for business loans. Unfortunately, trying to get a business loan in the current environment is also very difficult. Most institutions are being very cautious and only lending money to companies that meet very strict criteria. For example, you may need to show that they have been profitable for a number of years, have seasoned managers, include audited financial statements and have other assets. This puts business loans out of the reach of most businesses, at least at this time. So, is there an alternative? In fact, there is.

If your company has commercial or government clients, you may want to consider accounts receivable factoring. Most companies with commercial or government clients share the common problem of having to wait up to 60 days to get their invoices paid. Waiting this long will certainly impact your cash flow, especially if your company does not have substantial cash reserves. Factoring your invoices provides you with a solution to this problem. It provides capital to cover your business expenses without having to wait for your customers to pay you. It also enables you to take on new clients, as you no longer have to worry about net 30 or net 60 day payments.

There are several advantages to using accounts receivable factoring. The most important one is that it is easy to obtain, since the most important qualification criteria is that you have solid customers. Aside from that, it offers a dynamic form of financing. Dynamic financing lines adapt to your sales volume, and increase as your sales increase. This makes receivable factoring a great solution for growing companies that need different levels of financing as their business grows.

Accounts receivable financing can be a great alternative way to finance your company, especially in a tough credit environment.

This has to be one of the toughest times to get any type of business financing in recent history. Although the credit markets are improving and some institutions are starting to lend money, few startups are getting loans as institutions prefer to focus on businesses that have a track record. But even existing businesses are having a hard time obtaining financing. For the most part, institutions will ask for two years worth of financial records, including tax returns. And unless your business can show profitability and excellent growth prospects, chances are that your business loan may get delayed or denied. And if your records show any blemishes – your chances of getting a small business loan will be very low. Basically, institutions are only making business loans to their most promising prospects. But that leaves many businesses that have good potential out of the picture. Fortunately, there are some alternatives.

If your company sells to commercial to government clients, you are probably familiar with having to sell on terms or net 30 days. Basically, it means that you deliver your product or service today but have to wait 30 to 60 days to get paid for it. In the meantime, you still have to cover operating expenses and must continue to pay suppliers and employees until you get paid. This creates a problem for many companies for two reasons. Few companies have enough capital to wait two months to get paid. But more importantly, many companies are rejecting large orders or projects simply because they can’t afford to pay everyone else while waiting to get paid. One solutions to this problem is to use invoice financing.

Invoice financing provides a simple approach to financing your business. It eliminates waiting 30 to 60 days to get paid by providing you with an advance against your invoice. This provides you with capital to operate your business, while you wait for your customer to pay. Once your customer pays, the transaction is settled. As opposed to conventional business loans, invoice financing programs can be approved quickly and put in place in days. Invoice financing is also dynamic since your funding grows as your sales grow. This makes is an ideal solution for certain types of businesses.

We live in a credit environment that is tough. Most businesses, even those that were deemed very credit worthy not too long ago, are having a tough time getting any kind of business financing. Most banks and institutions have been hit by the financial turmoil and either lack the capital – or lack the will – to make business loans until the capital markets settle down. That is part of the problem however, since many businesses in the USA and Canada depend on business credit to function. Without it, they run into problems. This has lead to a vicious cycle, where the lack of small business loans is furthering the problem.

What can you do if your business needs financing but you can’t get a business loan? You have no other options than to look for alternatives. One of these alternatives is invoice financing, commonly known as factoring. Invoice financing can help your if your company sells to commercial or government clients (rather than retail clients) that pay their invoices in 30 to 60 days. As a matter of fact – most businesses would not have cash flow issues or need a loan if their clients paid immediately.

Of course, asking clients for an immediate payment will never work because they expect and demand, net 30 payment terms. Using invoice financing enables you to get an advance on that invoice, and provides the necessary capital to run your business. Invoice factoring enables small businesses who may not have substantial assets – aside from good customers – to get financing even in tough financing environments.

Invoice financing is simple to use. You first need to establish an account with a financing company. Once you have an account, you can start sending invoices for financing. The financing company with give you the first advance on your invoice – usually about 80%. You get the second advance, which is 20% less the financing fee, once your customer pays the actual invoice.

Credit decisions are based on your customer’s ability to pay an invoice. This enables you to leverage their credit. But more importantly, invoice financing is dynamic, and your financing line grows as your business grows.

Looking for a business loan but can’t find one? Or worse, has your loan request been rejected? One of the toughest jobs for business owners is trying to secure business financing. Unfortunately, getting a business loan isn’t always easy. Although most banks want to lend money, they have strict underwriting criteria that they must follow. This commonly includes asking for your company’s financial history and looking for assets. However – not all small businesses have long track records or tangible assets. Does this mean that you can get business financing? No – it just means that business loans may not be the best alternative for your company.

Does your company give its clients 30 to 45 days to pay invoices? Most companies that offer payment terms usually run into cash flow problems. This is because few businesses have the required cash cushion to wait 45 days to get paid. That forces owners to either juggle vendor payments – or worse – turn away opportunities. There is a solution for this problem. It’s called invoice factoring.

Suppose that instead of waiting 45 days to get paid, you were able to get 80% immediately and the remaining 20% in after 45 days. Would that work better for you? Of course it would. And you can achieve this by factoring your invoices. The biggest advantage of factoring is that you get an immediate advance on your invoices. This gives you funds you need to pay suppliers and employees. It also enables you to take advantage of new sales opportunities without having to worry about juggling vendor payments.

An accounts receivable factoring transaction works as follows. Once you deliver your product (or service) you invoice your client. At that point you also finance the invoice through the factoring company. The factoring company advances you 80% immediately. You get the remaining 20%, less a small factoring fee, once your client pays the invoice in full.

One advantage of working with factoring companies is that they look at businesses in a different way than banks do. They consider your invoices from solid paying clients to be your biggest asset. And as such, they are willing to advance money against them. Of course, factoring companies also look at other criteria. But the main criteria are to have good invoices.

Factoring can be used in many industries and has a number of sub-specialties. Freight bill factoring is a form of factoring that is common in the transportation industry. Construction factoring and medical factoring are used in the construction and medical industries respectively. Factoring financing is a flexible solution that can be used across many industries and can help position your company for growth.

Wondering whether you’ll be able to get a loan for your business? Getting a business loan is one of the toughest tasks to accomplish for a company owner. Although banks represent a very cost effective source of funds, they are very selective about the customers they take. This is especially true nowadays were commercial credit at banks is very tight. Most banks will only provide business loans to companies that have a solid track record and substantial assets. But, what if your company does not meet the banks criteria? What is you are a startup or if your company does not have traditional assets such as real estate? One business financing alternative that has been recently gaining traction could be the right solution for you. It’s called accounts receivable financing.

Accounts receivable financing, commonly called factoring, is a type of financing that helps companies that need to wait 30 to 60 days to get their invoices paid. It provides funds to pay employees and suppliers while you wait to get paid by your commercial clients. Accounts receivable factoring is different than a business loan because the factoring company does not lend you money. Rather, the factoring company advances you money based on your open invoices and gets paid once your customer pays.

A typical transaction would work as follows. Once you deliver your product and send the invoice to the client, you submit a copy of the invoice for financing. Within one to two business days, the factoring company advances you about 80% of the invoice. Once your client submits the payment in full for the invoice, you get the remaining 20% less a small fee charged for the service. Costs are usually determined based on the size of the financing line and can go from 2% to 5% for 30 days depending on the specific details of the transaction.

One of the major benefits of receivables factoring is the flexibility that it provides. Your maximum financing line is determined by the invoices you submit and is tied directly to your monthly sales. This means that your financing line increases dynamically, as your business grows. This provides the liquidity you need to stay current on your obligations and enables you to maximize sales opportunities.
Another benefit of factoring invoices is that it’s relatively easy to obtain. The biggest requirement is that you do business with reliable companies (or government agencies) that pay in 30 to 60 days. This is critical because your invoice is the collateral, for lack of a better term, that the factoring company is financing. Aside from that, your business needs to be properly organized and well managed.

Invoice factoring has been around for quite a while and has been gaining traction in recent times as a flexible solution to finance business growth. Due to its structure it’s the ideal source of financing for startup and growing companies alike.

Building a company in a tough credit environment is not an easy task. And many companies run into financial problems not necessarily because they lack opportunity – but rather because they lack business credit.

Obtaining any form of business financing during troubled times, especially a business loan is very difficult. During hard times, most institutions tend to tighten their credit standards making business loans inaccessible to all but the most credit worthy businesses. And in part, that is how many medium and smaller sized businesses run into trouble. Without easy access to financing, they become vulnerable.

There are some forms of business financing that are available to businesses – even businesses that have problems. For example, let’s examine a recurring situation in commercial transactions. Commonly, companies extend business credit to their clients and wait around 45 days after the sales to get paid for their products/services. By doing this, you are providing your client with a short term loan. Unfortunately, you don’t have an alternative. Most clients demand payment terms as a cost of doing business with them. This is a problem because few companies can afford to wait 45 days to get paid on their invoices.

There is a solution to this issue, which may work better that a small business loan. It’s called invoice factoring. An invoice factoring arrangement provides you with an advance, secured by your invoice. Basically you get about 80% of its face value as a first installment, which enables provides liquidity to cover business expenses. The remainder 20%, less a service fee, is given to your company as soon as the invoice is paid for.

Most companies use factoring to cover cash flow shortfalls, at least initially. However, factoring’s potential comes from how it can help your firm grow. It’s a simple proposition. If you had clients that could pay their invoices in two days, how many would you take? Most owners would take as many as they can get. And that – quick payments – is what factoring financing really delivers.

The cost of invoice factoring varies based on how much funding you need, for how long, and the payment quality of your clients. Generally speaking fees can range from 1.5% to 3.5% for 30 days, but they vary broadly based on many parameters.

Factoring does not work for everyone though – it only works for commercial sales. Specifically, it works for companies that sell on terms to other businesses and who can’t afford to wait to get paid.

Obtaining business financing has always been a challenging task for business owners. But if it’s hard to get financing in good times, it’s nearly impossible to do so in the tough economic environment that we live in. Banks are being especially cautious before making business loans. They are asking owners to provide a lot of information about their business. Usually, they’ll ask for two or three year’s worth of financial statements, sample invoices and orders, a business plan and usually personal financial statements form major stake holders. Unless these are perfect, you won’t get the business loan. It’s unfortunate that when businesses need it the most – when their financial statements look bad – business financing is not available for them. However, there are business financing options for companies that can’t get a conventional bank loan.

For example, many businesses get into trouble because their commercial clients pay their invoices in 30 to 60 days. While this is typical in most commercial sales, it can also be very damaging to companies that don’t have a strong cash position. They may be forced to delay payments to key suppliers, employees and even turn projects down. Calling the client and asking for a quick payment seldom helps, especially if the client is a large company. Waiting to get paid is the rule of the game.
One alternative is to try and get funds from friends or private investors to help through these tough times. These two sources, while available, have problems. Mixing friends and money often causes more problems than it solves. And the only way to get investors to provide funds is to give them a piece of your company, many times at a discount.

However, you can eliminate (or at least mitigate) this problem by using invoice factoring instead. Invoice factoring provides you with an advance on your invoices from credit worthy clients. It gives you funds to pay suppliers, employees and other businesses expenses while waiting to get paid. And as opposed to many institutions, factoring companies base most of their decisions on the buying power of your clients. So, if you have solid clients, your chances of qualifying are good.

Although accounts receivable factoring is not a cure-all, it is a solution that is available during tough times, when banks and institutions don’t make small business loans, and when business owners need them the most.