Small Business Financing Alternatives — No comments
08
Sep 11

Bernard Linney – SBA Loans vs Invoice Factoring

One of the benefits of accounts receivable factoring is that it’s not a loan and won’t appear as a liability on a company’s balance sheet. This makes it a viable option to small businesses looking for affordable capital to finance their business. While interest rates on loans and credit lines are at historic lows, a company’s cost of money is forever tied to the time it takes their customers to pay their invoices. In a good economy these times are quick and the company’s financing costs are typically low. However, in difficult times a customer’s payment may be delayed. The longer it takes customers to pay, the more expensive the company’s daily cost of money becomes. Therefore, even during low interest rates periods small businesses are still burdened by high financing costs. So what can small businesses expect from using accounts receivable factoring as an alternative?

Accounts receivable financing helps put an end to a company’s high financing costs. Consider it yet another tool in a company’s arsenal. It works by assigning a value to the company’s outstanding receivables based on their age, their value and who owes on the invoices. A financing company then provides an advance based on the aforementioned factors. Next, they collect on the invoice and reimburse the company the difference between the initial amount and the customer’s final payment, minus a fee. To accommodate different risk tolerances, financing companies offer services that allow for higher upfront payments and more liability, or lower upfront payments and lower liability. It’s yet another option on an increasingly popular financing method for today’s businesses.

A number of companies assume that receivables factoring is a new practice. Nothing could be further from the truth! Receivables factoring has been around for thousands of years and has a rich and storied history for North American businesses. It’s a viable alternative to the cyclical nature of small business credit lines and loans. In fact, a number of businesses use both loans and accounts receivable factoring to ensure that cash flow is less of a concern.

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31
Jul 11

Bernard Linney on Accounts Receivable Financing Options 2011

Bernard Linney on Accounts Receivable Financing Options 2011

Today’s businesses find themselves mired in lagging economic recovery nobody seems to believe is actually taking hold. The consequences are severe and made worse by a financial system still reluctant lend money to many kinds of businesses. Unfortunately, this has a cascading effect throughout the economy as a lack of business credit forces one late bill payment after another. In response, companies stretch out payments in the hopes of extending credit with vendors and creditors. The end result is a negative cash flow position and the uncertainty that accompanies it. However, accounts receivable financing has become a solution for those enterprises tired of dealing with business as usual. For these companies, receivables financing empowers them to take charge of their cash flow.

Receivables financing allows companies to forgo the waiting game of customers who often take too long to pay their invoices. Outstanding invoices force companies to cover each and every day an invoice goes unpaid. A solution to this problem is receivables financing. It allows companies to use their receivables to secure the working capital so essential to improving their cash flow. Financing companies purchase the right to collect on the company’s receivables. In return, they advance the company cash based on the age of the receivable, its total value and the customer’s ability to pay. Once the customer pays the financing company, they reimburse the company the difference between what was collected and what was initially provided as a cash advance  minus a small financing fee.

The benefit for companies is that they are able to protect their gross profit margins by foregoing the added expense of financing their customer’s business. The cash can be used in any way the company sees fit. They can lower expenses by pursuing prompt payment initiatives with vendors & creditors, or simply use the money to cover operating expenses. Account receivable financing empowers the business owner to control their companies cash flow.

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12
Jun 11

Factoring Companies Can Improve Cash Flow

Today’s companies no longer have to accept cash flow management as a going concern. They don’t have to continually struggle to meet their day-to-day operating expenses. They don’t have to accept the status quo, or accept that cash flow management will always be a source of frustration. Most importantly, they don’t have to finance their account debtors business anymore. Instead, they can rely upon invoice factoring to secure an immediate source of working capital and finally put an end to the issues of managing cash flow. So, what exactly is factoring and how can factoring companies help businesses better manage their finances and finally end their concerns about cash flow management? Continue reading →

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11
Jun 11

Changing Your Small Business Financing Perspective

What must small businesses do to better manage their finances? Should they tighten their account debtors credit limits and be more forceful in collections, or should they change their perspective and be open to pursuing alternative financing options? Well, tightening customer credit limits and becoming more forceful in collections, isn’t a viable option given the importance of maintaining strong customer relationships. After all, the intention is to grow business and not actively pursue initiatives that reduce sales. The best option is to be open to alternate financing options like invoice factoring. What is invoice factoring and how can it help small businesses better manage their day-to-day operating expenses? Continue reading →