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Factoring, also referred to as accounts receivable financing, is the process by which a company sells its outstanding invoices or accounts at a discount to a finance company which then assumes the risk associated with the accounts in exchange for immediate cash. In this instance, companies are essentially trading future earnings potential for the ability to immediately obtain cash to finance separate projects or cover different expenses.

The particulars of the financial agreement vary depending on the nature of the account and on the nature of the financing institutions personal policies and guidelines. In most instances, the financing company will charge a 5% fee associated with the proceedings, which, may or may not be less then other comparable financing options. Additionally, every account has a value assigned to it on an individual basis. Basically, the lending institution will assign a higher base value to an account relative to how recently the account has been opened. For many small businesses, financing of this form offers several benefits.

Manage Collections.

Many small businesses lack the resources necessary to properly pursue and manage collections. This form of financing allows companies to continue normal business operations while only suffering a minor loss on specific accounts. Though factoring companies are often uninterested in purchasing accounts greater than 90 days past due, most accounts will qualify for financing.

Free Up Capital.

For companies involved in the production process, a majority of their working capital is connected directly to their inventory levels. In the event that a customer wishes a delayed payment schedule, smaller operations are often left facing extended downtime between the completion of an order and payment collection. Factoring allows companies to minimize downtime while maximizing capital liquidity levels.

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It is not unusual for small business owners to encounter issues with cash flow. In today’s economy, the business owners customers are often in a slow-pay cycle and are often paying invoices much later and this can cause a cash-crunch for the small business owner.

Banks that were making micro-loans for payroll, taxes, supplies, equipment, etc, to the business clients are now declining loan requests due to the economy, which further constricts business cash flow.

With banks now declining loan requests and even capping credit lines and with customers in a slow-pay status, many small business owners are seeking alternative financing solutions for their business cash flow situations.

A solution that business owners are embracing more often now is Invoice Factoring. Invoice factoring or receivables financing, has been around for literally hundreds of years, but not known by many small business owners. The reason that they are not familiar with Invoice Factoring is that their banker does not reach out to them and offer this solution and educate them as to the viability in relieving cash flow problems. Many banks do not offer Invoice Factoring at all. The banks that do offer factoring are only offering it as a solution to their very largest business clients that are factoring hundreds of thousands of dollars of invoices every month, week or even every day. With smaller billing volumes, most small business owners do not qualify for their bank’s factoring program (if offered at all by the bank). As such, no one from the banking community is calling on the small business owner to educate them about the benefits of Invoice Factoring.

However, the good news is that there are alternative Invoice Factoring companies (called Factors), that specialize in factoring for the small business owner. They actively factor invoices for small business owners all across the country. Some factors specialize in small monthly dollar volumes in the $10,000 to $15,000 range. Others seek volumes with minimum billings in the $25,000 to $100,000+ per month. All small factors can/will syndicate with other larger factors if the business client grows their billing volume beyond their funding parameters.

Invoice factoring will help grow the business… and then provide more cash as the business grows. The more invoices proffered, the more cash available in as little as two working days.

The valuable benefits of Invoice Factoring are …

1. The factoring decision is based on the credit history of the business owner’s clients, not the business owner.
2. Factoring is off-balance-sheet financing and does not add debt to the business financials.
3. Factoring will improve the business credit rating of the company.
4. Factors can often assist companies that are in a work-out situation.
5. Factors can often assist companies that have tax liens if the taxing agency will subordinate behind the factor.
6. Factoring provides cash-in-hand that the business owner can use to get cash discounts, and volume discounts from suppliers. These cash and volume discounts will often offset all or part of the factoring costs.
7. Factors often work with Purchase Order finance companies to facilitate large orders that the business owner would otherwise not be able to bid on.
8. Factoring offers an opportunity for the small business owner to compete for larger deals where the customer demands payment terms.
9. Once approved by the factoring company, business owners can accelerate their cash flow as often as they like simply by submitting invoices for processing.
10. The initial approval process takes 7-10 days, not 2-3 months like a bank… and funds in 24 hours as needed.

General Factoring is done for all types of manufacturing and service companies. There are also specialized factoring companies that will factor Medical and Construction Receivables.

Summary …
Is Invoice Factoring a solution for your company? If your company is providing goods and services to other businesses or to government entities such as municipal, county, state or federal agencies, your business is a good candidate for invoice factoring. So, if you are faced with cash flow needs, you can relieve that problem by accelerating cash flow with invoice factoring. Invoice factoring will also allow you to extend credit terms to your best customers in these trying economic times and thereby continue to grow your business.

Robert Jacobs is an Account Executive with Compound Profit. Mr. Jacobs helps small to medium size business owners get capital for growth and cash for operating expenses… when the bank has to say no. Visit his web site at http://www.cprofitrj.com/ for more information. He can also be reached at (877) 386-3716, ext 134 to learn more about Compound Profit’s SMART CAPITAL ADVANCE™ Invoice Factoring solution for business owners and for bankers.

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If you have tried to apply for a bank loan but your application was rejected, you aren’t alone: a study that was conducted a few months ago shows that only half of the loan requests are accepted – and these are collateral-based loans, where the companies use real estate, expensive equipment, etc to guarantee the loan! I can only imagine the acceptance rate for small business owners, who can’t afford to use any collateral most of the time, or they’ve just started up their activity, so they don’t have a long standing, positive business credit history.

There’s some good news at the horizon, though: through invoice factoring, your company can get access to a viable source of funding, even if your loan request was rejected by the bank. In fact, almost any company can use invoice factoring services, regardless of their credit history, number of years in business, current profit, inventory, and so on.

But how does invoice factoring work? The factor will buy out your invoices at a discount, paying you a big, upfront advance from the value of your accounts receivable. It’s a win-win situation: you get the needed cash right away, without having to wait for 1... 3 months in order to see it in your account, and the invoice factoring company gets a small service fee that’s usually in the 1... 3% range, depending on the receivables’ value, your clients’ credit-worthiness (the amount of risk taken by the factoring company), and so on.

Once you set up the system, the money for your invoices can hit your bank account in a single day (and sometimes even faster!) thus allowing you to have access to the cash you’ve already earned when you actually need it, and not when the clients finally decide to pay you. Most factoring companies will advance you about 80... 90% from the invoice value as an upfront payment, and then send you the rest of the money (minus their service fee) as soon as they are paid by your customers.

If you need to increase your company’s working capital, need payroll money, tax money, want to increase your inventory, get better prices from your suppliers, etc, invoice factoring is a business financing solution you’re going to love for sure. Contact us to discover how invoice factoring can help your company grow.

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Almost any business owner dreams at having contracts with the government; nevertheless, these dreams can often turn into nightmares, because those high ticket clients are used to paying their invoices in 60 days, and sometimes even more. So you end up being happy because you’ve won a big contract and you know that your customers will pay the invoices in the end, but at the same time you know that you have to manage the company finances with extra care until they do that.

Sadly, it’s not only about your company: your suppliers demand payment for the goods and services they’ve provided, your employees demand their salaries, you need to pay the taxes, and let’s not forget that your family’s needs must be met as well. And as all of these things start to pressure you, the intial dream looks more and more like a nightmare.

Most small and even medium sized companies go through this struggle, because most of them are unable to get a business loan under good terms. And even if they manage to get a loan that covers their immediate needs, they can’t apply for fresh loans again and again, as their company gets more and more profit-producing orders from the big clients.

Factoring the account receivables is definitely the perfect solution for all the companies that have slow paying customers, no matter if they have just started their activity or if they are well established businesses. With accounts receivables financing you can regain peace of mind, so the future will look bright again.

But how does account receivable financing work? This financing instrument, also known as factoring, regards your invoices as precious assets – which they actually are! The factor will give you money in return for your invoices right away, and then it will wait until the slow paying customers take the time to pay them. Accounts receivable factoring allows you to exchange your slow paying invoices for cash, with a service fee rate that’s usually a few percentages from the invoice value, and can go even below 1% for low-risk invoices.

If you are interested in running and growing your business, accounts receivable financing (factoring) is definitely a good solution, especially if your customers have a good business credit record. Contact us for a complimentary consultation and we will help you choose the best financing options for your company.

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If you need to finance your business but the bank has turned you down, learn how you can use accounts receivable factoring to finance your company.

I’m sure you know what I’m talking about: you’ve got several important, and yet slow paying customers. You would definitely want to make them pay your invoices faster, but at the same time you are afraid that you might lose them by putting pressure on them. Sadly, these slow paying customers aren’t a recent invention; in fact, because of the poor economy, most clients will pay their bills after a month (and sometimes even after 3 months!). And at the same time, the payroll can’t wait. The rent can’t wait. And your suppliers don’t even want to hear about waiting that much in order to get their money.

Some of the business owners will go to the bank for a loan and a few of them will manage to get it, because they have a long, great, established business history record. The majority will fail to get a loan from the bank, though, and it’s clear that if you’re barely recovering from the crisis or if you’re new in business, your chances to get a loan from a banking institution are virtually zero.

Fortunately, there is a solution to this problem: accounts receivable factoring. If you can’t wait for up to 3 months in order to get paid by your clients (and who can wait that much time?) you can use factoring, which can provide the needed financing for your suppliers, rent, payroll, and so on. The process is very straightforward:

- You invoice your customers and send a copy of your invoice to the factoring company;

- The factor will give you a big upfront payment that can go up to 90% from the value written on the invoice. The money can be in your account in less than 24 hours;

- As soon as your clients pay the invoice, the factoring company gives you the rest of the money, keeping a small service fee that’s usually less than 4% for its services.

Invoice factoring allows you to have quick access to cash, giving you the funds that will permit you to sustain and grow your company. With factoring, your business credit history really doesn’t matter –your customers’ credit history is important. If you work with slow paying clients that have a good business history record or with the government, invoice factoring is definitely an option you should consider.

Compound Profit offers invoice factoring with rates that start at only 0.75%, so contact us today.

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Many small business owners have experienced this: you go to the bank hoping to get a loan for your business, and after they look through your paperwork you get a polite “sorry, we can’t help you”. While some of the entrepreneurs might take it personally, this is just the bank’s way of saying “you pose a great risk, so we are afraid that we might lose our precious money”.

Things change dramatically when you use an invoice factoring company, though. The factor isn’t interested in your paperwork, but in your customers’ financial strength; if they are solid, you won’t have any problem getting upfront money for your invoices. It’s true, the bank sees your accounts receivable as being financial assets as well, but it doesn’t want to use them as a guarantee because of the long waiting terms that can sometimes go up to even 4 months; however, the factor is ready to purchase your invoices and wait until it cashes the money.

Now why would the invoice factoring company take on a higher risk? To begin with, the risk isn’t that big, especially if your customers are in a good shape from a financial point of view. It’s all common sense, you would say, but try and tell that to your banker! And then, the factoring company wants to stay in business, while the banks appear to have lost their desire to work with the small business owners. I would also add the fact that the factors are used to dealing with some of the toughest clients, so they have much greater chances to collect the money from them than you do.

Defaulting on a bank loan can make you lose your business; the consequences are much less dramatic even with recourse factoring, and even if your customer didn’t pay the invoices to the factoring company. It’s clear that we are still going through troubled economical times this year; fortunately, the constantly evolving business environment offers great opportunities for the entrepreneurs that can adapt their business financing strategies to the actual parameters of the economy.

Invoice factoring is a business that exceeds one trillion dollars across the U.S.A., being used by hundreds of thousands of companies, regardless of their size. Compound Profit offers invoice factoring services with rates that start at only 0.75% from the value written on your invoices, so contact us for a free consultation.

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Liquidity.  Such a key component to success. It is not enough to provide a great product or service at an attractive price.  To grow and prosper you have to have cash, and even your best customers probably won’t turn it loose to you quickly enough.  That is where factoring comes in.  Use your own cash!  Just because someone else is holding it shouldn’t stop you!

By factoring with Compound Profit, you get immediate access to your cash which happens to be in a customer’s bank account (or maybe your customer’s customer’s bank account!).  Factoring is the tool whereby Compound Profit will purchase your qualifying receivables at a small discount, remitting most of the funds to you NOW, so you can use it.  Buy more inventory.  Get better terms or a discount on what you buy by paying cash.  Bid on that big job, which is profitable but you know the customer pays slowly.  Don’t let the lack of working capital hold you back.

Factoring can also be used to dig you out of a hole. You already had a line with the bank, and then things slowed down.  You are in default, and if you only had some cash, you could grow again, pay the bank, and start to make money again.  But since you are in default, NOBODY will loan you money.  Use factoring and the experience of a Compound Profit advisor to escape.  Your profit advisor can work with the bank to establish a payment schedule for the loan, to be remitted directly to the bank from the factoring proceeds.  That will give the bank comfort and your business the liquidity it needs to grow.

So, don’t go to the bank for cash.  Use YOUR OWN  cash to grow and prosper! Not sure about this?  Contact us today and learn more.

Reynolds Dods, rdods@cprofit.com, 877-386-3716 x240

Compound Profit Eastern Pennsylvania / Southern New Jersey

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Working Capital Factoring can Solve Small Businesses’ Problems

It’s sad but true: many business owners are having a hard time growing their small businesses to their true potential. In fact, I have just closed a browser window that was listing several successful online businesses for sale, some of them bringing their owners at least a few thousand dollars per month! And what is the main reason for all these turnkey business sales, despite their profitability? The lack of funds, according to most of the owners.

So here we are, looking at a strange picture: the owners plan to kill the goose that lays the golden eggs, hoping that they’ll get enough money to buy a regular ostrich and turn it into a gold-producing ostrich. Let me rewind that a bit: we’ve got a website that produces (let’s say) 1,000 dollars per month, and you are trying to sell it for 5,000 dollars or so. If you have a house that can be rented for $1,000 / month over an indefinite period of time, will you sell it for $5000? I don’t think so...

So now that we’ve seen what the problem is, do we have a solution for it? Enter working capital factoring. Some of my colleagues have sold their own businesses for good amounts of money, but now regret it because working capital factoring would have helped them keep their businesses and make a much bigger profit. Sadly, they didn’t know that working capital factoring existed back then.

Getting working capital through factoring is a simple process: you sell your receivables to a factor such as Compound Profit and they give you a big advance payment (up to 90%) from their value right away. Then, when the factor gets paid for your invoice, you get the remainder, minus a small service fee that’s usually in the range of 1-3%, depending on the amount of money on your invoices, the amount of risk taken by the factor, and so on.

You might have heard about the small business lending plan, but trust me: it’s very hard to get loans from the banks these days. The feds are putting tighter and tighter strings on the banks, and the banks themselves are much more cautious now. Have you just started your business or don’t have enough collateral? Then don’t even bother to go to the bank – they’ll refuse you for sure. Is your credit score less than optimal? Then you’ve got very few chances to get your loan request accepted by a bank.

Factoring works in a totally different way: your credit score, collateral, or the number of years you’ve been in business simply don’t matter! The factor will only check the payer, trying to make sure that it will be able to get cash for your invoices. And what is the best news of all? It doesn’t matter what sort of business you run; as an example, Compound Profit can provide working capital factoring even for a restaurant that has opened its gates this morning.

So there you have it: through working capital factoring, you don’t have to kill the goose that lays the golden eggs; instead, you get powerful nutrients that allow you to grow it, eliminating the risks and turning it into a gold-producing ostrich – Your ostrich!

Feel free to contact us for a 100% free, no strings attached consultation. We look forward to helping you discover all the benefits offered by working capital factoring.

About the author: George Pirvu aka PsychoDude blends psychology and marketing, working as an internet marketing dude for Compound Profit.

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Working Capital Factoring – the basics

The banks don't give out loans as easy as they did in the past, so many small business owners try to get the working capital they need through various sources, including loans from relatives,  friends or even by getting personal credits and thus lowering their personal credit score.

Working capital factoring is fortunately one of the best solutions to the problem, even though few people really understand it. Working capital factoring provides instant access to money, allowing the business owner to secure the funds even if his / her business credit profile isn't optimal; in fact, through working capital factoring their business credit profile will become better and better, because each transaction will be reported to all the major credit bureaus.

But what is working capital factoring, you might ask? It's a system that allows the small business owner to sell the company's business to business invoices to a Factor, a company that pays the small business owner up to 90% of the invoice amount (sometimes even more!), and then cashes in the invoice and pays the reminder to the small business owner, keeping a small processing fee, usually in the range of 1...2%.

Unlike banking institutions, the Factor doesn't care about your business credit value, but about your customers' credit strength; you can thus get access to your funds immediately, purchasing the needed equipment and / or taking care of other business expenses. Contrary to what most business owners might think, working capital factoring isn't a tool for failing and / or desperate business owners, but a natural choice, especially for companies that are growing fast and don't have the time to wait for 30, 60 or even 90 days, until their clients pay their invoices, because they want to invest the money back into their business as quickly as possible.

Working capital factoring has a great potential to solve the problems for most small business owners, and yet few people know about it and use it. Nevertheless, if you have read this article, you are one step ahead of your competitors now :)

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Is the Small Business Lending Plan Really a Good Deal?

The recently rolled-out plan of the Obama Administration has the goal of encouraging greater lending to small business.  The approach is to make more money available to the smaller community banks - about $30 billion.  But will this succeed?  Is this program really a good deal when it comes to small business lending?

Many small businesses and banks don’t think so.  First of all, many of the targeted small banks have ample funds to lend. Capital is not the issue – risk is!  Even though the government is making the capital available, they will of course want it back someday, and if it goes out on a bad loan, well, the bank will still have to pay the piper!  Secondly, like any other government program, this one comes with strings.  The participating banks will have to pay a dividend back to the Treasury, based upon their loan portfolio. 

In concert with this, any government program comes with even greater oversight, additional record keeping and reporting.  Few banks really want any more of that.  And who knows what ‘add-ons’ will come later?  The banks are still smarting from the last bailout, when they were told how much they could pay executives, when they could pay dividends, etc.  So a firm “no thanks” is what most banks are saying now.

And who do these banks loan to?  Small businesses, of course! However, in my conversations with small businesses and bank loan officers alike, businesses don’t want loans now - they want customers!  Banks are seeing very low volumes of loan requests.  Businesses do not want to be extended until things pick-up.  They, too, have bad memories from the meltdown of credit lines being reduced or pulled.  So, businesses as well have no interest in creating debt which may come due much sooner than they expect!!

Still, businesses need access to capital to grow when the customers come knocking.  That is when the services of Compound Profit come into play.  By using Smart Capital Advance small businesses can get cash just when they need it.  And it doesn’t add any debt to the books!  Through monetizing their commercial accounts receivable to create liquidity and working capital, small businesses can raise the cash they need when they need it.  Now that IS a good deal!  No strings, no debt, no additional reporting.  In fact, through using Smart Capital Advance, a business can get RID of irksome tasks-like collecting on accounts receivable and credit checks!

For access to cash when you need it, contact a Compound Profit advisor to learn how our products can help you through these difficult times.

Reynolds Dods, rdods@cprofit.com

Compound Profit - New Jersey and eastern Pennsylvania.

Phone: 877-386-3716 ext. 240 / Cell: 609-289-6256

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