Past Tense

Posts Tagged ‘Commercial Line of Credit’

Perhaps one of the few good things that have come from our recession is the dropping of lending fees. The cost of borrowing has gone down for many Commercial Lenders and a great place for you to trim some fat off your Profit and Loss statement is in reducing your Working Capital Lending costs.

Whether you are using a traditional Business Line of Credit or Discount Factoring, with the reduction in rates across North America, should your business be looking at renegotiating your Working Capital Line?

Absolutely Many companies are locked into an agreement and even with termination fees that may arise; the net result will often be to switch from your current provider to a new Low Cost Factoring facility.

There are many places to find AR Factoring, but the best place is the internet. You will be able to research the Best Factoring Company for your business.

One word of caution though the shear number of Commercial lenders out there will seem like a myriad of options for you and which one to choose is very difficult to determine unless you are up on all the newest trends and you know which Commercial Factoring Company specializes in what. Many businesses are turning to Commercial Finance Brokers to assist in this task of screening through the various lenders.

Your best bet is to not deal directly with Factoring lenders for the simple reason that unless you are up on who does what type of Factoring and which ones they specialize in, you are setting yourself up for many applications and several hours going through the various lenders out there. The Professional Finance Broker will know which Funder will be best for your company. To find these Commercial Finance Brokers it is as easy as going to your computer and search ?AR Factor Quote? in Google and you will find several great sources.

Your business may not even be using Factoring right now, but it would not be a bad idea to take a look. Many banks are calling their Operating Lines of Credit now forcing companies to look into other options very quickly. Perhaps it is not a bad idea to take a look at your options. After all, Commercial Factoring has taken on a whole new look since President Obama is now heading up a Factoring division in the US Government by buying up all the outstanding Invoices from the auto suppliers to the Auto Manufacturers in the Detroit area. Factoring is now more accepted and accessible than ever.

Another term for Accounts Receivable Factoring is Invoice Factoring, the terms are essentially interchangeable.

When you evaluate the statistics of the number of days your invoices are waiting to be paid and how many are over due. This is simply data about the likelihood of collections. It has nothing to do with sales and how to increase sales.

Do you consider a large Accounts Receivable as a bad thing? Most people do. To determine if this is a bad thing, or good, it will depend on how the Accounts Receivable is made up. Here is an example.

If you have an abundance of Inventory and you are nearing the end of your season for a particular type of goods. You will have to pay for warehouse space for the next several months until the season comes back. You can have an opportunity to sell a large portion of your goods at a discount and clear out your warehouse. What would you do?

If it is a new customer and you have never dealt with them before, you will review their credit. You come to the expectation that it will take a few months to collect your invoice. Will you accept the order from the client?

If you look at the opportunity strictly from a credit perspective, you would likely not take the order.

However if you consider the cost of the goods sitting until next year, you may think otherwise. To make the deal even better, use Invoice Factoring so you can clean out your warehouse and collect on the payment within 48 hours. True the financing will cost you a few points, but in the end, what would you have otherwise? Either goods sitting in the warehouse costing money or cash in your hand using Invoice FactoringWhich do you prefer?

This is just some brief comments based on an Invoice Factoring System. In many ways it is considered the latest revolution in the management of credit and collection and would certainly assist many companies that are facing Working Capital constraints.

Besides the facts that this can stimulate new sales, you can also help out your current customer base to grow this opportunity. As you are aware, it is much more costly to originate new clients than it is to keep existing relationships in tact. Not only will Invoice Factoring help you with this, but it will off set Cashflow constraints when invoices do get a bit extended. Speak to your Commercial Finance Broker about the programs that best fit your business.