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Posts Tagged ‘Small Business Factoring’

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.

Recently I had a client contact me looking to take out a Factoring Loan. It has been some time since I had heard it referred to as this, but what he was referring to was Accounts Receivable Factoring.

Technically, Factoring is not a real loan; it is an advance on money that your company is already owned. While the accounting guidelines can be argued one way or another, the fact is, when a Factoring Loan is done, the Receivables are verified with the party that owes the money and further verifies that they are going to pay the invoices.

Like this, the company that raised the invoice has confirmed the money is owed by the end customer and the Factor merely advances the payment to bridge the gap.

Some of the other terms Accounts Receivable Factoring is referred to as are Invoice Factoring, Receivables Factoring or Invoice Discounting amount many others. Likely the most common term to substitute for Accounts Receivable Factoring is Accounts Receivable Financing.

On big plus for the Factoring Industry is the fact that the US Government has decided that it is going to start Factoring the Invoices issued to the Auto maker by the Automotive Suppliers in Detroit Michigan. Not that Invoice Discounting was an unheard of financing method before, but now that President Obama is now endorsing it, many companies that may have passed on this finance opportunity will now take advantage of it.

It has been a long hard road for many manufacturing companies over the last few years and the cash flow which is available to them to make payroll, pay suppliers and cover other operating expenses does not come too soon.

Unfortunately several companies in the manufacturing industry have not been able to make it through our recession, many of which were generational family businesses and they suffered to the point of closing down. I know of one such company that was started in 1937 by the Great Great Grandfather of the owner that had to close the doors of the family business due to cashflow problems.

You can call it a Factor Loan, Invoice Discounting, Invoice Factoring what ever you like. It is a method to help with you cashflow. Be sure to speak with a Commercial Lending Broker in regards to your Business Financing needs as they have the expertise to know where to go with your application to get you the best deal in the best time frame and it will not cost you a thing for the Broker as they are generally paid by the lender so put one to work for you it truly is the best way to find the best program for you.

Export documents facilitate the easy access of goods from other countries and enable exporter to trade their own. Exporters need to know all the features of their products and importers must also be sure of what they are buying. Export documents are used to avoid misunderstandings between these two parties.

Some of export documents are used for commercial purposes like bills, notes and weight packing. There are also documents to guarantee the quality of what is being exported. Insurance documents certify what is covered by insurance. Bills of lading are examples of transport documents.

Let us now talk about some benefits and purposes of export documents.

Documentary credit forms are export documents that permit the seller to deliver the merchandise with the guarantee that the importer will give the payment at the arrival port, meeting certain criteria.

Export documents are generally irrevocable and confirmed, which means that they cannot be modified but with the consent of the parts involved. Additionally, these documents relieve the exporter from any worry about nonpayment.

We are now going to mention some information for you to get familiar with the different kinds of export documents: revocable, irrevocable, notified and confirmed.

Revocable. The banker may revoke its appointment before shipment of goods. The exporter retains a risk until it has shipped its goods.

Irrevocable on the other hand, are the opposite from revocable documents. The exporter is guaranteed the transfer of the funds and any modifications to the contract must be approved by all parties.

Notified: the banker of the importer is the only one to be held responsible. The exporter is then hedged against the risk, but it is not protected in the event of political risk, catastrophic or non-transfer.

Confirmed, where the commitment of the banker of the importer is supported by a banker in the country of the exporter. The exporter must fully respect its obligations and it is guaranteed to be paid.

Some of the risks that exporters face are related to three issues: commerce, countries, and exchange rates. Most exporters are vulnerable to importers no paying. Additionally, when they go into another country they do not know the situation of that country is a risk in the political and natural areas. An exporter may also lose its money due to the changes in currency. Export documents provide tools for this not to happen.

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.