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Invoice factoring is a form of financing where a business will essentially “sell” an invoice to a financing company for a slightly discounted rate, usually between 75 and 90 percent of the overall value of the account. The financing company than assumes full responsibility for the collection of the accounts payable, while the selling company receives a cash payment for the sale of the account. For many businesses, this is an ideal short-term solution to several issues.

Account Collection.

In the event of a delinquent or soon to be delinquent account, most businesses are not equipped to handle account collection through in-house channels. This necessitates the use of agencies and services designed to assist in the collection process. In the case of small businesses or start-up businesses, the loss of liquidity and time costs associated with the use of these services can be devastating. Invoice factoring allows troublesome accounts to be handled quickly and efficiently.

Growth Support.

Many new businesses are constrained, at least during the early stages of development, by the availability of capital to fund new projects. Invoice factoring ensures that growth and development is limited only by the overall volume and relative size of the projects being completed. Essentially, invoice factoring allows new business to grow at a rate directly proportional to production levels.

Time Sensitivity.

Financial investments are often defined significantly by the time sensitive nature of the specific investment. Invoice factoring allows business to take advantage of sudden and potentially profitable investment opportunities as they present themselves, regardless of current levels of liquidity.

Financial Records.

Unlike alternative forms of financing, invoice financing does not take into account the credit history or current financial status of the borrowing institution or business. When determining the terms and conditions of a specific account the finance company evaluates the value of the invoice account itself. This allows companies that may not have an extensive credit history, or even some amount of negative factors on their credit account, to obtain lines of credit. Additionally, the accounts can be evaluated much more quickly than a company wide evaluation can be conducted, speeding-up the overall process.

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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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I know it’s surprising, but invoice factoring is actually a very old activity; some experts date it as early as the 13th century. It all started with trade financing, which was financed by factors, but the entire process was refined during the following centuries. In the early stages of factoring, the factor would simply buy (and often resell) goods, giving the producer a cash advance in exchange for them.

Factoring has grown fast in the U.S.A. during the last century, mostly due to the fact that the textile industry has developed extremely fast and the American banks were reluctant to lend their money to the business owners (not that this has changed since then). In fact, the textile industry continues to play a very important role when it comes to invoice factoring, but other industries such as trucking, manufacturing, etc have become more and more important during the last decades.

Today’s ideal candidates for factoring are the small companies who need quick funds because they are growing fast and / or have contracts with big corporations or the government, but lack the needed working capital.

The invoice factoring companies act as an interface between the small business owners and their customers most of the time. The factor will offer financing only if the customers have a good credit history; this will ensure the factor that it will be able to get its money back. On the other hand, the small business owner doesn’t need to have perfect credit records; the factor doesn’t take that into account.

In addition to its intrinsic value, invoice factoring helps the small business owners minimize the overall risk, because the factor will check the creditworthiness of their customers, and thus will practically eliminate the small business owners’ risk. And as an added bonus, many factoring companies will offer their clients free advice on how to repair their credit, cut their losses and maximize their profits.

So how do you prepare for the future? Make sure to choose an invoice factoring company that really cares about its customers, doesn’t make use of hidden fees and has highly trained personnel that is familiar with your industry. Compound Profit has a great team of Profit Advisors who offer customized factoring solutions for each customer. Contact us today for your complimentary consultation and you will discover why we set the standards when it comes to invoice factoring.

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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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A client (let’s call him John B.) had a small, and yet successful business; however, even though he was making a decent amount of profit each year, he was thinking to shut down his company for good. If you are asking why he wanted to do that, the answer is quite simple: John didn’t have enough working capital.

John’s business was profitable indeed; he only had a few employees, but since the quality of his products were very high and his prices were very good, his customer list included many high profile companies and even a few government agencies. And I’m sure that you know it: those agencies were buying stuff in large quantities from John.

It all sounded good in theory, but he soon realized that something wrong was happening: at some point, he didn’t have enough money in the bank, so he had to delay a payment to one of his suppliers. A few months later, he had to bring some of his own money from home, in order to take care of the payroll. Finally, he chose not to bid for a major government contract because he wasn’t sure that he will be able to fulfill it. He was still making a lot of sales, but something was preventing him from having enough money in his bank account.

John was a “real” entrepreneur, so it didn’t take him too much time to figure out what the problem was: his clients were paying the invoices in 30 days or more, while his suppliers were asking for their money in 5 to 10 days. In addition to that, John had to pay his employees twice a month, and this was denting his bank account quite a bit, preventing him from getting more business.

Fortunately, the solution to John’s problems was very simple: invoice factoring. Through factoring, John is now able to cash his invoices in less than 24 hours, so he is able to pay all his suppliers and meet the payroll in time. The process is very simple: whenever John sends out an invoice to one of his clients, he faxes a copy of it to the factoring company, which gives him up to 90% from the invoice value right away. The invoice factoring company then waits until John’s client pays the invoice and then sends him the remainder, keeping a small fee for its services.

This story has a happy end: John’s company is now thriving. He was able to confidently bid and win a huge government contract, knowing that through factoring, he will always have quick access to the needed cash. If you are facing similar problems, Compound Profit’s Advisors have created customized solutions for each business owner, so make sure to contact us for your free consultation.

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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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If you’re even a little bit connected with the business financing industry, you know that the process of getting a loan can take quite a bit of time because of the needed paperwork. And while these documents are really needed because they help protect the lenders’ interests, the business owners would surely like to get access to the needed capital in a matter of days, if possible. As you know, there are financing options such as invoice factoring that can give you access to the needed funds in only 24 hours or even less; nevertheless, other financing options require more preparation and more paperwork.

This isn’t such great news for the business owners: they would need the money as quickly as possible because they plan to open a new shop, launch a new product or buy that expensive piece of equipment that would double their productivity. So what can an entrepreneur do in order to streamline the process? Is there any way to reduce the waiting time?

The first thing to consider is your business credit score. Having a great score will help you get a good loan with a very low interest; nevertheless, there are several business financing options (based on either secured or unsecured funding) that would work fine even if your business credit isn’t that great. Then, try to evaluate the amount of profit your business is making each year; this will help the lenders estimate how easy it will be for you to repay the loan.

How much time would you need in order to pay back the money to the lender? That’s another important question, and it can’t be answered that easy; the financing company will help you with that by taking into account the amount of debt you’ve got, the monthly expenses, the payroll, etc, trying to come up with a realistic figure that will allow you to repay the loan without too much effort.

As a conclusion, knowing how much money you need and how you’re going to give it back will definitely help the lender find the best financing option for your business; you might also need a few bank statements and so on, but having all these papers ready will definitely speed up the financing process a lot. Compound Profit offers business financing for companies of any size; contact us for your free consultation.

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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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The internet is filled with lots of great business ideas that don’t require too much capital. And since the Americans didn’t lose their entrepreneur-like mindset, it’s not a surprise that more and more people are interested in starting their own small businesses. The initial costs are quite small indeed, but the lack of cash flow can discourage almost anyone – who would want to use his / her own savings on the long run, in order to support the company, when it was supposed to happen the other way around?

Nevertheless, there are quite a few companies that don’t appear to have any cash-flow related problems; you would imagine that they’ve stashed huge piles of cash, but why would the entrepreneurs do this, when they can reinvest as much money as possible, and thus get even more profit out of their companies? The secret is simple: more and more people have learned about factoring and are using it successfully, cashing their invoices in as little as 24 hours.

The problem is well known: some of the clients delay the invoice payments with up to 120 days, using your company’s hard earned financial resources as a line of credit with 0% interest. This is true especially with the big corporations, who can afford to treat the smaller companies like this, setting payment terms of 30, 60 or even 90 days. So how can you produce more products and services if your money is tied up in your accounts receivable? Many business owners were forced to give away equity just because of this; it’s true that they have got access to capital, but they have lost the full control over their company during the process.

 The lack of capital will definitely threaten your business; sadly, this can happen even if the market is rising! Since getting the needed funds is out of question 9 times out of 10, invoice factoring is the only reasonable alternative that can fix the lack of capital / the cash flow-related problems. Now why is it so difficult to get the needed financing from the bank? First of all, this is a time consuming process: you will need to build a perfect balance sheet, and this takes quite a bit of time and sometimes is even impossible. Then, you will have to demonstrate that your company will continue to be very profitable on the long run, thus assuring the bank that its cash is in good hands.

Unfortunately, by the time your bank is convinced about this, you’ve lost 10 major contracts and with the constant pressure due to payroll, rent, suppliers, etc you can consider yourself lucky if you didn’t shut down your business for good. The invoice factoring companies take over your risk, giving you an upfront payment of about 80-90% from the value written on your invoices in 24 hours (sometimes even faster!). Then, when your clients pay the invoices, the factor will give you the remainder, keeping a small service fee (1... 4%) for itself.

Compound Profit offers invoice factoring with service rates that start at only 0.75%. Contact us for a complimentary 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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