Accounts Receivable Financing: Exporting to Africa

Several agencies of the US government support departments that have mandates to help you increase your export sales and minimize risks with regard to the sales of products and services to Africa. These departments exist within US agencies such as the Export-Import Bank of the United States, the Department of Commerce, and the Overseas Private Investment Corporation. All are supported by a relatively recent law called: The African Growth and Opportunity Act. The African Growth and Opportunity Act (AGOA) was signed into law by President Bush on May 18, 2000 as Title 1 of The Trade and Development Act of 2000. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets.

The African Growth and Opportunity Act (AGOA) has been modified three times to increase exports to Africa. 

In the first modification, AGOA was changed in to substantially expand preferential access for imports from beneficiary Sub-Sarahan African countries in several ways: 1) The term “fabric” was previously interpreted by U.S. Customs as excluding components that are “knit-to-shape” (i.e. components that take their shape in the knitting process, rather than being cut from a bolt of cloth); now knit-to-shape apparel will qualify for AGOA benefits. 2) The definition of hybrid cutting was broadened to include cutting of fabric in the U.S. and/or AGOA countries. 3) The volume cap on duty-free treatment for apparel made from fabric made in AGOA regions or, for lesser developed beneficiary countries from fabric made anywhere was doubled. 4) Botswana and Nambia were specially designated as less developed countries.

In the second modification, AGOA’s periods for preferential treatment for African imports to the US were expanded. 

In the third modification, known as AGOA “1V” was expanded and liberalized again. In essence, US laws were created to increase US exports to Africa and imports from Africa to the US. 

Pursuant to AGOA the US organized a U.S.-Sub-Saharan Africa Trade and Economic Forum hosted by the Secretaries of State, Commerce, Treasury, and the U.S. Trade Representative. The Forum serves as the vehicle for regular dialogue between the United States and African countries on issues of economics, trade, and investment. This fosters a unique cooperation between US agencies, African countries, and US businesses that desire to increase export sales to Africa with minimal risk.

How does this work? It involves the Export Assistance Centers of the US Department of Commerce to assist you with your marketing and sales efforts to Africa and financial support from the Export-Import Bank of the United States to Banks that participate in and finance the export of goods and services to Africa in a variety of programs. 

The Export Assistance Centers are part of the U.S. Commercial Services which is the trade promotion of the International Trade Administration (a part of the US Department of Commerce). Their mission is to provide 1) market research in the form of country specific commercial guides; 2) industry sector analysis; and 3) internal market insight reports. They provide trade counsel and advocacy through every step of the export process. They sponsor trade events that promote your product or services to qualified African buyers. They provide introductions to qualified buyers and distributors. They will help settle disputes and negotiate tariff issues. Once described as “glorified matchmakers” they will go as far as possible to help you export safely to Africa- even to the US Ambassador to facilitate these objectives, if appropriate. 

And they help with the nuts and bolts of exporting to Africa such as setting up meetings for you with up to 5 prospective buyers per day, selecting drivers, translators and hotels. When you go to Africa to sell your goods or services you will not be making a cold call; you will be meeting with pre-qualified people when you participate in this program- all at a nominal cost to cover the agency’s expenses. 

It is necessary for you to actually travel to Africa and meet face to face to successfully export to Africa. This is a cultural necessity. African businesses do not operate like American businesses where we trust negotiations conducted over the telephone and internet, and often transact without ever meeting the buyer or seller.

What exports are needed in Africa? You can read the research reports to find out specifically what is in demand. At the top of the list you will see products that purify water. Africa has a huge water infrastructure need. There is also a great interest in security related devices such as high tech devices to prevent theft of vehicles and increase recovery of stolen vehicles. Textile manufacturing equipment and telecommunications equipment also head the lists. Certain medical devices are also in demand. 

What are some of the challenges regarding creating or increasing your export sales to Africa? It is difficult to qualify buyers; there are limited credit reporting facilities in Africa; African companies’ auditing and accounting systems are not “world class”. And it is difficult to ascertain who will actually pay as promised in you negotiations. To minimize these risks it is prudent to work with the Export-Import Bank and their correspondent banks and insurance brokers for international trade transactions to Africa. 

There are specific Export-Import Bank standards for short-term and medium term credit; these may be located on their website at exim.gov. Financing guarantees and insurance are available for short term financing in 44 Sub-Sarahan African countries. They facilitate more competitive terms for African buyers. After the US correspondent bank has reviewed and approved you for financing, you can use these guarantees and insurance to minimize your accounts receivable financing risk when extending credit to African buyers. This applies to transactions wherein you have successfully delivered your products or services to African purchasers. 

Unfortunately, there presently is no way to insure against contract frustration, also known as transactional risk. In other words, you take the risk of default if a prospective African buyer cancels the transaction before it is completed. You are at risk regarding disputes such as delivery or product specifications until they are resolved. And you cannot avoid devaluation of currency as a political risk either. 

On the other hand, commercial risks such as insolvency, bankruptcy and protracted default are covered risks utilizing these programs; also covered are political risks such as war, revolution and insurrection.

The bottom line: you can use accounts receivable financing to export to Africa to increase your sales, minimize risks, and increase your working capital when you work with the appropriate US agencies, their correspondent banks and insurance brokers.

Copyright © 2007 Gregg Financial Services

Sell Your Home in a Slow Real Estate Market

Inventories of homes for sale are up and sales have slowed. Selling a home in today's market requires effective strategies.

Below are several strategies that can make help to differentiate your property from others on the market and make the difference between having a property 'For Sale' and getting it 'SOLD.'

Price Your Property to Sell - Pricing your property realistically is crucial. The current market and market conditions determine the value. In a slow market, buyers are reluctant to even take a look at properties that are overpriced. A property attracts the most attention, excitement and interest from potential buyers when it is first listed on the market. Overpricing at the initial listing misses out on this peak period and may result on your property 'sitting' on the market.

Offer Incentives to the Buyer - Follow the lead of home builders by offering incentives to the buyer. Make the offer appealing to the buyer - '$10,000 Design Credit at Closing,' or 'We'll make your first four mortgage payments' are two examples of incentives that will catch the eye of prospective buyers.

Consider Owner Financing - Many home owners have built up considerable equity in their homes over the past several years. Offering attractive owner-financing may entice investors and other buyers to consider a property that they may not otherwise consider.

Cultivate Curb Appeal - Some of the best buyers in a slow market are the most impatient because they need to make a decision fast. Your home has only one chance to make a great impression with a potential buyer. If the view from the front of the house turns them off, they might not look any further.

Cleanliness - One of the most important factors is cleanliness. The idea is to present a clean, clutter-free environment. Make you property sparkle with cleanliness to avoid being instantly eliminated by buyers.

Hire a Full-Time Realtor® With A Strong Internet Presence - A slow market requires an aggressive, full-time Realtor®. Find an agent that specializes in your area and has a track record of getting properties SOLD. Make sure your Realtor® has a detailed marketing plan for the property and has a strong Internet presence. Eighty percent of today's home buyers begin their search on the Internet. A quick search of GOOGLE, YAHOO or MSN for 'your area or neighborhood' + 'real estate or homes' will reveal those agents in your area that have the most Internet exposure.

About the Author

John Allen a Realtor and broker of Allen Real Estate Services, Inc. He specializes in fine Sarasota real estateincluding luxury homes and condominiums.

Accounts Receivable Financing- Bueno!

According to Wordreference.com English to Spanish dictionary, the Spanish word “bueno” has about seven meanings: good, kind, well, nice, considerable as in a considerable amount of money, gorgeous and real. As used in this article bueno is used to suggest that if you are in the import or export business, Mexico is a good country to consider with special opportunities for U.S. traders and financing available in the form of accounts receivable financing. Your business can make a considerable amount of money in Mexico.

Mexico has a population of over 103 million people. In January, 2007 U.S. exports to Mexico were over $10.7 billion dollars and imports from Mexico to the U.S. were over $15.3 billion dollars. Products traded included food, beverages, tobacco, lubricants, manufactured goods and machinery. Many U.S. companies have production and assembly operation in Mexico to meet the challenges of global competition with Mexico’s lower labor, utility and overhead costs. Compared to China, Mexico presents less geographic logistical problems with our common border and relative proximity. Mexico has a highly skilled and hard working labor force. The Mexican legal system, however, is quite different from U.S. law where we have a Uniform Commercial Code which has been adopted by all of the U.S. States to regulate commercial finance transactions. Enforcing agreements in Mexico can be problematic. Litigation can drag on for years and judgments are difficult to enforce. 

Mexico has a highly evolved and organized legal system. It was originally based on Greek, Roman and French legal systems; today it more resembles a Latin American country’s legal system than the U.S. legal system. Mexico has vast layers of administrative law and a limited body of case law, or “jurisprudencia definida”. Mexican law now recognizes a variety of security devices which allows commercial finance lenders to offer accounts receivable financing with reasonable certainty. To participate in Mexico’s marketplace, it is wise to have a Mexican legal counsel as a part of your team.

One unique Mexican program is the Maquiladora concept and its privileged status. Maquila operations involve the importation of foreign merchandise into Mexico on a temporary basis, where it is assembled, manufactured or repaired and then exported back to the U.S. or to other countries. The advantages of maquila operations are savings in operational costs, waiver of import duties, opportunities to sell goods in Mexico and other legal and tax advantages that are beyond the scope of this article. Mexico’s maquila industry is a multi-billion dollar industry in the U.S. - Mexican border. These laws are business friendly and many small and medium sized firms have increased their profit margins by manufacturing in U.S.-Mexico border cities.

One example is a fine furniture and wrought iron fabricator based in California that was having financial difficulties because of high labor costs and increasing worker’s compensation premiums. These costs were cut in half by moving production to a maquiladora. Their exponential growth from 30 to 100 employees more than tripled their production and profits. Their sales contracts specified net 60-day credit terms but actual payments collections were closer to 90 days. Accounts receivable financing facilitated the company’s rapid growth by providing liquidity from the purchase of the receivables by a commercial finance company at a discounted rate. Without this cash flow, the company could not have taken advantage of their sales opportunities or produced their products fast enough. 

The Mexico factoring financing process is similar to accounts receivable financing in the U.S. A finance company advances about 80% of the face value of the receivable to business owner. This cash is used to pay for materials, labor and overhead. When the invoice is paid to the commercial finance company, their fees are deducted and the balance is returned to the business. In general, a 25% profit on the merchandise is necessary for the financing to make sense.

The bottom line: for U.S. importers and exporters Mexico offers many opportunities for successful business operations. Accounts receivable financing and maquiladoras may enhance their profits. Bueno! Business in Mexico is good. 

Copyright © Gregg Financial Services
www.greggfinancialservices.com 

7 Ways to Get Financing For Your Home Business

Thinking about starting a home business? Do you already own a home business but need cash? Perhaps you can qualify for a small business loan. 

However, before you attempt to borrow any money, you first have to figure out how much money you need. The easiest way to do this is by putting together a business plan. A good business plan is critical to your business success. 

It can be a simple one page outline or it can be many pages, but it should spell out exactly how much money is needed and what it will be used for; your potential market and customers and potential for growth; what makes your business unique from others; and a rational and conservative projection of your business's cash flow. 

Your plan will also help you set business goals and define the steps necessary to help you reach those goals. It is a guide for you to refer to on a regular basis to help evaluate your business progress and help keep you focused on your priorities. 

Besides, a business plan is almost always required when applying for a bank loan. If you need assistance in writing a business plan, your local library should have several 
books on the subject. You can also try Amazon.com. In addition, you should be able to get help on writing a business plan from one or more of the sources listed below: 

1. The Small Business Administration (SBA) offers numerous loan programs to assist small businesses. It is important to note, however, that the SBA is primarily a guarantor of loans made by private and other institutions. 

http://www.sba.gov  


2. The Service Corps of Retired Executives (SCORE) is a volunteer management assistance program of the SBA that provides one-on-one counseling, workshops, and seminars. SCORE has chapters throughout the country. Many work in conjunction with local Chambers of Commerce. SCORE and Visa have also joined forces to help home-based and small business owners. Contact your SBA office, local Chamber of commerce, or the following websites for more information: 

http://www.score.org  

http://www.visa.com/smallbiz  


3. Talk to your local bank. Find out what they require for a business loan application and also if they are participants in the SBA loan programs. Be diligent and shop around for the best loan packages, and make sure you fully understand the terms. 

4. You may be able to borrow from insurance policies, IRAs, 401k, stocks and securities, etc. Check with your insurance agent. Also, investigate what the policies are regarding borrowing from your mutual funds or retirement account. Before borrowing, make sure you fully understand the pay-back terms and any potential penalties. 

5. Apply for a home equity loan. Borrowing against the equity on your home is permitted in all states except Texas. Just make sure you're diligent about paying back the loan or you could end up losing your home. 

6. If you're a woman, you may be eligible for a Specialty Loan. These types of loans are now being offered by local banks. Who knows? Filling out a one-page application just might get you an unsecured credit line or loan ranging from $2500 to $50,000. 

7. Try borrowing from family members and/or relatives. If you have a good relationship with your family, perhaps you can make a persuasive argument for them to loan you money for your home business. Just remember, borrowing from family or relatives shouldn't be treated any differently than borrowing from a bank. It's just as important to pay them back on time as well.

Accounts Receivable Financing- Secrets

The Merriam-Webster Online Dictionary defines “secret” as:

“1 a: kept from knowledge or view : hidden b: marked by the habit of discretion : closemouthed c: working with hidden aims or methods : undercover d: not acknowledged : unavowed e: conducted in secret 2: remote from human frequentation or notice : 3: revealed only to the initiated : esoteric 4: designed to elude observation or detection 5: containing information whose unauthorized disclosure could endanger national security".

As used in this article, secret means: revealed only to the initiated; kept from knowledge or view; and designed to elude observation or detection. 

The first secret- “revealed only to the initiated” relates to the fact that most schools, even business schools, do not teach the subject of factoring or purchase order financing; most banks do not offer these financing facilities as products. Therefore, it is not surprising that many businesses are unaware of the cash potential that lays dormant in their business invoices.

Let’s suppose you own a small to medium business and you depend on customers paying invoices within a 45-60 day period for your working capital. In essence, you are extending credit like a bank to your customers. For that period of time your cash is tied up in your invoices- your accounts receivable. This limits growth and may create problems regarding meeting payroll and paying your suppliers. Accounts receivable financing is the process of selling your invoices for cash as soon as they are issued which allows you to make more effective use of your assets. Purchase order financing is the process of obtaining a third party commitment to pay your suppliers as soon as products are received by your clients (in advance of payment by you or your client), based on the surety of an accounts receivable financing arrangement.

All businesses are limited in their growth and profits by the amount of capital and cash flow available to take advantage of business opportunities. The availability of virtually unlimited cash creates a powerful paradigm for potential growth. It also can expand your thinking about what business is possible and how you might go out and develop new business.

The second secret- “kept from knowledge or view” relates to the practice of non-notification factoring. Some business people are concerned that working with a factor, an accounts receivable financing company, may not be viewed favorably by their customers. In many cases it is possible to structure a transaction legally so that the accounts receivable financing is transparent to the ultimate customer. 

The third secret- “designed to elude observation or detection” has to do with your business plan and how the way you think about the world can affect your success. In 2006 Prime Time Productions produced a film and a book called “The Secret”. The film dramatically describes the “Law of Attraction” which asserts that people’s feelings and thoughts attract real events in the world into their lives. Can your feelings and thoughts attract more business and success? Is the visualization of what you want an aid for manifesting your business goals? Is The Secret “just a new spin on the very old (and decidedly not secret” The Power of Positive Thinking (a book by Norman Vincent Peal written in 1952) wedded to ‘ask and you shall receive’ -as opined by Karin Klein, editorial writer for the Los Angeles Times? Did The Secret fail to discover the real roots of powerful thinking?

In the book, “The Diamond Cutter”, Geshe Michael Roach examines The Budda on Managing your Business and your Life. Roach graduated from Princeton University with honors, studied the ancient wisdom of Tibet and traveled to the Tibetan Lamas at the seat of His Holiness, the Dalai Lama. In 1983 he took the vows of a Buddhist monk.

His teacher encouraged him to enter the world of business. Mr. Roach choose the diamond business. He hid the fact that he was a monk and maintained a façade of a normal American businessman on the outside. The business developed from nothing to a one hundred million dollar per year business. 

The original book, “The Diamond Cutter” is the “oldest dated book in the world that was printed rather than being written out by hand. The British Museum holds a copy that is dated A.D 868.” It is a written record of Buddha teachings from over 2,500 years ago. In brief, the central principles are: 1) business should be successful and make money in a clean and honest way; 2) you should enjoy the money and stay in good health; and 3) you should be able to look back ay your business and say your years of doing business had some meaning leaving some good marks in the world. I highly recommend “The Diamond Cutter” vs. “The Secret”. 

The bottom line: accounts receivable financing and purchase order financing may be the secrets to your business’ financial success. If you read and follow the principles of “The Diamond Cutter” you can expand your opportunities for exponential growth based on the 2500 year old teachings of Buddha, as explained by Mr. Roach.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com  

Accounts Receivable Financing- The India Connection

India is one of the oldest civilizations in the world. Their history goes back over 10,000 years. India is the largest democracy in the world. As of July, 2007, the Central Intelligence Agency for the United States Government estimated that the population of India is over one billion, one hundred twenty nine million people. In contrast, the population of the United States is estimated to be a little over three hundred two million people. That’s 129,000,000 versus 302,000,000 people; India has over four times the population of the U.S. in a geographic area lightly more than one-third the size of the U.S. 

India has the third largest economy and the second fastest growing economy in Asia. It has a vast pool of professional talent and an enormous reservoir of intellectual capital with a growing middle class. 

India’s dense population creates economic opportunities and pressing internal social problems such as overcrowding, environmental degradation, poverty and social unrest. The economy and society are in a state of rapid transition. There are pressing environmental issues because of overpopulation such as air pollution from industrial effluents and vehicle emissions, water pollution from poor sanitary conditions and soil erosion. 

According to the World Bank, about 380 million people in India live in poverty on less than $1 a day; this is about one-third of the population. Nevertheless, middle and upper class Indians have created immense wealth in an economy bursting with opportunities. India’s business climate is changing rapidly. 

This social paradox is in some ways similar to the controversy in the U.S. over big box stores and their effect on smaller retailers. The same issue is debated in India regarding Western style supermarkets versus mom and pop stores. India has a child labor problem; the U.S. has a problem with illegal immigrants who tend to take the lowest paid jobs in the U.S., performing jobs that most legal Americans do not want to do. We live in a world of conflict, change and opportunities.

There are 14 official languages in India. Hindi is the national language. English is a secondary language used for national, political and commercial communication. India is the largest English speaking nation in the world. India’s legal system is based on English common law. 

India’s economy is growing over 10% per year with a labor force of more than 500 million people. The Indian retail sector is growing at a rate of 47% per year. Manufacturing is expanding. There are large numbers of well educated people skilled in the English language. Today India is a major exporter of software services and software workers. Other major industries include textiles, chemicals, food processing, steel, transportation equipment, cement, mining and machinery. 

In 2006 India exported over $123 billion dollars of textile goods, gems and jewelry, engineering goods, chemicals, leather items; only 17% were exported to U.S. partners. Imports the same year were $184 billion dollars; less than 6% of this import business originated with U.S. partners. 

What does this all have to do with accounts receivable financing? The expertise of a commercial finance company can be invaluable with regard to helping you succeed in India’s enormous marketplace. If you want to export goods to India, a commercial finance company will check the credit of the business in India that you are selling to; this can facilitate capital for exponential growth to creditworthy customers. If you want to import goods from India, purchase order financing combined with accounts receivable financing can help you to achieve the same goal of increasing cash flow to grow your business.

Albert Einstein said: “We owe a lot to the Indians, who taught us how to count, without which no worthwhile scientific discovery could have been made”. Mark Twain said: “India is the cradle of the human race, the birthplace of human speech, the mother of history, the grandmother of legend, and the great grand mother of tradition. Our most valuable and most instructive materials in the history of man are treasured up in India only”.

The bottom line: India is a land of great problems and great opportunities. Accounts receivable financing combined with purchase order financing can help you succeed in this vast democratic, English speaking marketplace.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com  

Factoring Government Receivables- Checkmate

In the game of chess, the term checkmate, according to MS Encarta means:

1) winning chess position: in chess, a condition or position in which a player’s king cannot escape check and the other player wins the game.
2) Chess move that ends game: in chess, a move that produces checkmate, or a game that ends in checkmate.
3) Complete defeat: a situation of defeat or deadlock.

As used in this article the analogy of the game of chess is meant to convey two different ideas: A) the idea that the government, and the government contract you are competing for, is the king. You and your competitors are in a real life game to win the contract. A checkmate is a complete defeat of your competitors; and B) the word “mate” is commonly used to refer to a skilled person’s worker, friend, as a term to address somebody. The idea is if you want to win the government contract it is wise to check (mate) and recheck (mate) the government specifications, and last but not least, have the financing in place pay for the labor and material required to deliver the product or services required. 

Here is a real life example: The owner of a factory manufactured plastic and cloth protection cups for construction workers that were designed to protect elbows and knees from harm. The Federal Government announced a Request for Proposals for the manufacture of protective elbow pads and knee pads for the armed forces that were very similar to the owner’s product. With minor modifications to the design specifications for the pads the factory was capable of making the military products. 

There were two major problems. The quantity of pads required to meet the performance specifications would require the factory to triple production and run three shifts twenty four hours a day. Since the government would not pay for the product for 30 to 60 days after receipt and inspection, how could the owner have sufficient cash flow to pay for labor and materials immediately at a level three times above the current cash flow?

The solution was to factor the government receivables to a commercial finance company. Pursuant to the Assignment of Claims Act of 1986 companies can have access to unlimited capital by selling individual invoices based on the credit of the U.S. government. Factoring government invoices allowed the company to be paid in days rather than to wait months. The contract to factor government receivables to a commercial finance company helps your company win a government Request for Proposal because it substantiates the functional specification that the work will be performed on a timely basis. In other words, a commercial financing contract helps to prove that the manufacturer has the financial wherewithal to perform on a timely basis. This is the financial part of how to checkmate your competitors.

A typical finance company contract should state: ABC finance company agrees to purchase obligations of which are of the United States of America, including without limitation the General Services Administration, the Departments of Education, and the Obligor: is (a) the United States of America or an executive, legislative, judicial, regulatory or administrative agency, authority or instrumentality, Health and Human Services, Housing and Urban Development, and Transportation, or (b) a State, or (c) local government entity. 

Here are a few tips on how to check “mate” and make sure you get paid after you have won the contract. Pay close attention to administrative and billing instructions. Always submit your invoice to the stated paying government office and invoice promptly. If there are modifications, work with the commercial finance company for funding increases if necessary or if there are changes in payment instructions. Keep a log of all communications. Maintain complete records of the entire project. Use the governments order number for tracking for all parties, your company, the finance company and the ordering government agency. Be aware that the US government fiscal year is from October 1st through the end of September. 

The bottom line: if you want your business to grow exponentially and win in he game of government contracting it may be wise to factor government receivables to checkmate your competition.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com 

Accounts Receivable Financing- Yesterday

Most people intuitively understand the time value of money from first time they received an allowance from their parents. All other things being equal, you would rather get your allowance today instead of having to wait for the weekend. Go to the movies today instead of waiting for the money. Instant gratification. 

In business, if you have the money today you are positioned to increase the future value of your business by increasing sales of services or products over a period of time. There are several mathematical concepts to compute the time value of money such as present value, future value, present value of an annuity, and future value of an annuity. These computations are beyond the scope of this article.

Uneven cash flow is a challenge to B2B businesses that have to meet regular obligations such as payroll, rent and supplies. One solution to this problem is accounts receivable financing which is also known as factoring, factoring receivables and asset based lending. With accounts receivable financing you can get cash for your invoices immediately and give terms to your customers to pay you in thirty, sixty or ninety days.

The financial markets today are exceptionally volatile. There are grave concerns regarding a meltdown in the mortgage finance market and several major providers of home mortgages than have declared bankruptcy or exited this market. The secondary market for certain types of mortgage securities has virtually closed the door on securities known as subprime home loan securitizations which makes these types of bonds, not having any liquidity, virtually worthless. Why is this relevant to accounts receivable financing?

A little known fact is that many commercial finance firms that provide accounts receivable financing are not using their own money to fund their transactions. This is sometimes called “refactoring”. Their funds may be available from three sources: bank lines of credit, investor participations and the equity of the firm. Bank lines of credit, or asset based credit lines from major non-bank commercial finance firms are by far the largest source of funds for most firms that offer “refactoring” accounts receivable financing. 

These firms are under more pressure from their lenders to make safe and sound loans. The pressure comes from Banks, Federal regulators such as the Federal Deposit Insurance Corporation and the Federal Reserve Banks. This may affect how long it takes to get financing. 

There is a process called due diligence which is a pre-requisite to accounts receivable financing. Several components are: analyzing the credit of the borrower; analyzing the credit of their customers, and running a UCC-1 search in each state where the company operates. The UCC-1 search and filing is required to give the lenders the legal right to collect the accounts receivable that are being sold or pledged for the financing. This can take 5 to 10 days depending on the state bureaucracy and how busy they are with such requests. If the UCC-1 report is not “clean” meaning first lien status is not available to the lender, there will be no financing. Tax liens, legal judgment liens, and earlier financing liens can delay financing until they either are paid or subordinated. 

When a B2B business is growing rapidly and needs more cash flow for operations the time value of money becomes critical. There is a common answer the question: “When do you need the money?” Answer: “Yesterday”. 

John Lennon and Paul McCartney understood the time value of money and more importantly for them, the money value of time. They were the primary songwriters for the group, The Beatles, from 1960 to 1970. The group experienced major cash flow difficulties because of poor financial management of recording contracts, out of control costs of running their record business, Apple, and the pressures that caused them to renounce public performances (which was a major source of income). Some of their greatest songs (and a source of substantial future income) were created while they were on a hiatus to meditate with the Maharishi Mahesh Yogi in India in 1965. In 1970 The Beatles disbanded because of personality differences, the stresses of mass popularity and financial problems. Paul McCartney’s song, Yesterday, is considered to be the most recorded song in the history of popular music, if not the most popular song of all time. Here are the lyrics to Yesterday: 

Yesterday, 
All my troubles seemed so far away, 
Now it looks as though they're here to stay, 
Oh, I believe in yesterday. 

Suddenly, 
I'm not half the man I used to be, 
There's a shadow hanging over me, 
Oh, yesterday came suddenly. 

Why she 
Had to go I don't know, she wouldn't say. 
I said, 
Something wrong, now I long for yesterday. 

Yesterday, 
Love was such an easy game to play, 
Now I need a place to hide away, 
Oh, I believe in yesterday. 

Why she 
Had to go I don't know, she wouldn't say. 
I said, 
Something wrong, now I long for yesterday. 

Yesterday, 
Love was such an easy game to play, 
Now I need a place to hide away, 
Oh, I believe in yesterday. 

Mm-mm-mm-mm-mm-mm-mm.

The bottom line: If your B2B business needs money yesterday accounts receivable financing may be the answer to your cash flow challenges.

Copyright 2007 © Gregg Financial Services
www.greggfinancialservices.com  

Commercial Finance- Marketing to the African Marketplace

The U.S. Export-Import Bank is committed to providing financing for American exports to many countries in Africa. There are substantial opportunities for American companies to sell to the South African countries that in 2006 purchased over 12 Billion dollars of U.S. exports.

The market opportunities in Africa are ginormous. With a total market size of over 400 billion dollars and a population of over 680 million people, the continent is hungry for food, housing, energy, transportation products, health products and services, and sanitation facilities.

In the health care market there is an enormous need for quality pharmaceuticals. Fake drugs are a problem in Africa. Similarly, quality health care services are lacking. The large African health market is in need of companies to distribute medicines and other health related consumer products and essential prevention and treatment products.

In the telecommunications market there is a great need for increased mobile phone services. There is also a need for pre-paid test messaging services; eventually, Africa will catch up to the internet/computer revolution.

The water market presents new opportunities as cities grow faster than the water infrastructure can expand. There is an urgent need for devices to abate pollution caused by industrialization, agricultural runoff and lack of sanitation services. In these areas, high tech inventions that are relatively inexpensive to sanitize water will create social and health benefits for millions of people. 

In national energy markets Africa is a century behind the times. Kerosene is the main fuel source for lighting. Firewood is the primary fuel source for cooking in urban and rural markets. There is a tremendous need for solar powered LED lighting, high tech home cook stoves and alternative cleantech energy sources.

The Export-Import Bank of the United States is the official export credit agency of the United States. Their mission is to assist in financing the export of U.S. goods and services to international markets. They provide working capital guarantees to U.S. companies in the form of pre-export financing. They also provide export credit insurance and loan guarantees to facilitate transactions. They also provide buyer financing. A select number of U.S Banks partner with the Ex-Im Bank to provide working capital loans, accounts receivable financing, bridge loans and long term financing. For more information regarding the Ex-Im Bank visit their website. 

The bottom line: With a willing U.S. seller and a credit-worthy African buyer, the United States Export-Import Bank is anxious to help facilitate exports to the vast Sub-Saharan African marketplace.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com 

Accounts Receivable Financing- The Weight

Cash flow is essential for every business. Cash flow is an accounting term that refers to the amount of money received and spent by a business during a specific period of time. Working capital is a similar but different financial term that is based on the daily operating liquidity available to a business. To calculate working capital, an accountant for the company takes current assets and subtracts current liabilities. A company may have substantial working capital but little liquidity because the working capital is either spent or owed in matters of accounts receivable, inventory or accounts payable.

Cash flow is necessary to a company’s survival, especially for those companies with limited access to financing. In particular, a company’s accounts receivable and inventory may be like a weight preventing growth and expansion. The Merriam-Webster Online dictionary has eleven different definitions of the word weight when used as a noun. As used in this article, the word “weight” pertains to four of these meanings:

“4 a: something heavy: load b: a heavy object to hold or press something down or to counterbalance;
5 a: burden, pressure b: the quality or state of being ponderous; 
7 a: the relative importance or authority accorded something b: measurable influence especially on others ;
8: overpowering”

Inadequate cash flow is a heavy load and a heavy burden that holds down growth and productivity. Illiquidity creates a ponderous situation, such as whether or not to accept a new order, which bills to pay or is the survival of the business at stake? For instance, consider the example of a company that invented a weight training machine.

After years of research and development the company obtained a patent on a weight training machine that was designed for professional use at gyms. The machine includes a main frame, a lever carriage mechanism, an adjustment linkage and a stop mechanism. A lever carriage mechanism is pivotally connected to the main frame. The lever carriage mechanism includes a weight carrying portion adapted to carry at least one weight. An input mechanism is connected to the lever carriage mechanism. The adjustment linkage is connected between the lever carriage mechanism and the main frame and is configured to selectively adjust an arc of rotation of the weight carrying portion of the lever carriage mechanism about the main frame such that the weight carrying portion may selectively traverse each of a plurality of predefined strength curves in response to movement of the input mechanism by a user.

The machine has a catchy name; let’s call it the Flexigym. It works to burn calories, make muscle and it is very popular with users. Suddenly, orders are overwhelming the company/manufacturer. The irony is success is a weight on the business and if the invoices for the Flexigym are not paid promptly this wait period is a serious burden to liquidity and growth. What are the options for improving cash flow for Flexigym?

Payments for inventory, sales commissions and accounts payable may be delayed. Manufacturing plant maintenance may be deferred. Professional fees to attorneys or consultants may be deferred. Most of these options may have negative consequences. 
There may be a positive solution. If the company sells its product or service to other businesses accounts receivable financing may be the solution. 

Accounts receivable financing creates instant cash for working capital. If Flexigym cannot wait 30, 60 or 90 days to be paid, a commercial finance company will purchase the accounts receivable and the wait for cash will be over. The process is relatively simple.

Flexigym agrees to terms with a commercial finance company. The customers of Flexigym are notified of this arrangement and instructed to send their payments to the financing entity. After the Flexigyms are sold and delivered, the commercial finance company verifies that delivery was satisfactory. Many finance companies use an internet based system; some use fax. In either case, upon receipt of the invoice and verification of satisfactory delivery 80% to 90% of the accounts receivable monies due will be wired to Flexigym’s bank account. The weight is lifted, the wait is over, and cash flow is available for exponential growth. If accounts receivable financing is not sufficient for cash flow needs, purchase order financing may be employed to further increase cash flow. 

“The Weight” is the title of a song by The Band which was very popular in 1968. The Band backed Bob Dylan on many occasions. The song is a good example of a silent title record where the title never appears in the lyrics. Accounts receivable financing is not obvious either unless you are educated regarding the merits and details of this financial technique. Here are the lyrics to The Weight:

“I pulled into Nazareth, was feelin' about half past dead;
I just need some place where I can lay my head.
"Hey, mister, can you tell me where a man might find a bed?"
He just grinned and shook my hand, "No!” was all he said.



Take a load off Annie, take a load for free;
Take a load off Annie, And (and) (and) you can put the load right on me.

I picked up my bag, I went lookin' for a place to hide;
When I saw Carmen and the Devil walkin' side by side.
I said, "Hey, Carmen, come on, let's go downtown."
She said, "I gotta go, but m'friend can stick around."

Take a load off Annie, take a load for free;
Take a load off Annie, And (and) (and) you can put the load right on me.


Go down, Miss Moses, there's nothin' you can say
It's just ol' Luke, and Luke's waitin' on the Judgement Day.


"Well, Luke, my friend, what about young Anna Lee?"
He said, "Do me a favor, son, woncha stay an' keep Anna Lee company?"


Take a load off Annie, take a load for free;
Take a load off Annie, And (and) (and) you can put the load right on me.

Crazy Chester followed me, and he caught me in the fog.
He said, "I will fix your rack, if you'll take Jack, my dog."
I said, "Wait a minute, Chester, you know I'm a peaceful man."
He said, "That's okay, boy, won't you feed him when you can."


Take a load off Annie, take a load for free;
Take a load off Annie, And (and) (and) you can put the load right on me.

Catch a cannon ball now, t'take me down the line
My bag is sinkin' low and I do believe it's time.
To get back to Miss Fanny, you know she's the only one.
Who sent me here with her regards for everyone.

Take a load off Annie, take a load for free;
Take a load off Annie, And (and) (and) you can put the load right on me.”

The bottom line: The Band was right. Take a load off yourself and be free from cash flow problems. Consider the weight, the cost to eliminate the wait, and whether accounts receivable financing is appropriate for your circumstances. 

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com 

Purchase Order Financing- The China Advantage

As of July, 2007, the Central Intelligence Agency for the United States government estimated that the population of China is over one billion three hundred twenty one million people. In contrast, the population of the United States is estimated to be a little over three hundred two million people. That’s 1,321,000,000 versus 302,000,000 people; China has over four times the population of the U.S.

In the past two decades China has completed and put into operation over 2000 large and medium-sized industrial projects; these include railways, atomic power stations and completely new cities. There has been ginormous investments in other fixed assets such as basic industries, 100,000 new reservoirs for water storage, irrigated land, coal mining, oil-drilling, steel-making, power generation, highway construction, and newly constructed and extended ports.

China has the world’s largest manufacturing workforce- over 100 million people. In comparison, there are about 14 million manufacturing workers in the United States. China’s labor costs are low compared to the United States and many other parts of the world. As of 2002 statistics indicate that employees in China’s city manufacturing enterprises received about $0.95 per hour; rural workers average about half this amount: $0.41 per hour. A large majority of manufacturing employees work outside the cities. They earn about 3% of the average hourly compensation of factory workers in the U.S. and many other developed countries. With low land costs and low labor costs it is no wonder that the cost advantage to manufacturing in China is extremely attractive to American entrepreneurs. When their products are manufactured with sufficient quality controls, the cheaper costs and effective delivery systems create a win-win situation for those who are able to participate.

Manufacturing is a basic Chinese industry. When you take raw materials and labor and produce products that can be sold in high quantities at a lower cost than U.S. competitors, and successfully import to them to the U.S. and it is possible to have excellent returns on your investment. And China’s political and economic system is relatively stable compared to other developing nations such as many countries in Africa.

What is the approximate size of the trade in goods from China? According the U.S. Census bureau, Foreign Trade Division, imports from China in 2006 were over $287 Billion dollars; for the first five months of 2007 imports from China were over $120 Billion dollars. 

What are the main categories of products imported into the U.S. from China? This includes iron and steel products, specialized industrial machinery, office machines and computer, telecommunications and sound equipment, electrical machinery and parts, road motor vehicles, building and lighting products, furniture,travel goods and handbags, footwear, professional, scientific and controlling instruments, photographic and optical equipment, timepieces, personal care products, and food products such as tea. According to the American Electronics Association, high-tech imports from China are on the rise.

What are some of the main risks associated with doing business with a manufacturer in China? We do not speak the same language, so a good interpreter is necessary. Our legal systems are completely different and the Chinese legal system is complicated and weak. Therefore it is vital to develop good relationships with the proper trading partners. It is also important to have excellent international legal counsel to comply with the complexities of contract law, local Chinese law and relevant U.S. law. Protecting intellectual property is a challenge in China.

What does this all have to do with purchase order financing? International purchase order financing is complicated and complex in details, but the concept is simple. If you have a product that can be manufactured in China, and you have made the proper arrangements for production and shipping but lack sufficient capital to finance the transaction- with a large purchase order from a creditworthy customer a commercial finance company will agree to have their bank issue a Letter of Credit to guarantee that the Chinese factory producing the product will be paid. When the goods are shipped and delivered to your customer the commercial finance company pays the Chinese factory. Between 70% and 100% of the product’s cost may be financed depending on the product’s gross margins and the risks involved. Purchase order financing may facilitate your exponential growth and profits for all concerned.

When your customer is invoiced for the product an account receivable is created which will be paid to the commercial financing company. Purchase order financing with an international letter of credit can make the deal possible. Accounts receivable financing, or factoring, is the back end financing that guarantees payment to all concerned. The expertise of the commercial finance company can be invaluable with regard to helping you succeed in this challenging marketplace.

A wise man once said if you put a flea in a jar with a lid, the flea would keep jumping into the lid time after time. After a while if you take the lid off, the flea will only jump as high as the lid. Why limit your potential when it is just as easy to set your expectations higher? For businesses that sell manufactured products to other businesses, purchase order financing may be the way to reap the benefits of the China advantage.
Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com

Purchase Order Financing - A Bridge Over Troubled Water

America is a land of opportunity. According to the United States Census Bureau, recent data indicates over six million new businesses were created in 2003, the latest year for which data is available. It appears that for every business that was created another business met its demise. Does this mean these business enterprises failed?

Not necessarily. The United States Census Bureau records closures of companies with employees, but they do not look further into the specific circumstances for the closure. When a business closes its doors, there can be many reasons for what's statistically a "failure," including a sale or merger, which may actually be a sign of robust financial health or good prospects. When a business closes, it may be because the investors have lost their investments or because they have sold out profitably.

Selling out profitably is known as an exit strategy; it is also known as “cashing out”. If you have a business that manufactures or distributes a product that suddenly becomes very popular, you may be presented with a once in a lifetime opportunity. Here are two examples. 

An inventor of a device that permits parents to regulate the time that their children can watch television wins best of show in a commercial competition for innovative products. Commercial interest in purchasing the product is intense, but funds to manufacture are insufficient. Another company manufactures a device that is related to pets. For twenty years they struggle. They pitch it to a “Big Box” store and sign a proposal to test market it in fifty stores; if successful, it will be rolled out to 200 to 300 stores with wholesale purchase orders for $1000 per week per store. If the product sales meet expectations, how will the manufacturer afford to pay to produce the immense quantity of product required? 

Both of these situations are in need of a bridge over troubled water called purchase order financing. Purchase order financing can be complicated and complex in details, but the concept is simple. 

When a manufacturer or distributor has a large purchase order from a creditworthy customer, a commercial finance company will issue a Letter of Credit to guarantee that a factory producing the product will be paid. When the goods are shipped and delivered to the customer (i.e. the big box store) the commercial finance company pays the factory. The customer is invoiced for the product. An account receivable is created, which will be paid to the commercial financing company that provided the letter of credit. Purchase order financing is the bridge that makes the deal possible. Accounts receivable financing, or factoring, is the back end financing that guarantees payment to all concerned. This may involve one company on both sides of the transaction, or two companies- a purchase order financing company and an accounts receivable financing company with an intercreditor agreement to contractually obligate all parties to be repaid.

The Free Dictionary defines bridge as a verb, - .to make a bridge across; "bridge a river"
To bring together, join- cause to become joined or linked; "join these two parts so that they fit together".
Simon and Garfunkel were an extremely popular band staring Paul Simon and Art Garfunkel. They became famous in 1965 with their hit single "The Sound of Silence”. Their music was featured on the academy award winning film, The Graduate. They were well known for their close harmonies and sometimes unstable relationship. Their last album was called “Bridge Over Troubled Water” which featured a single with the same title. They broke up in 1970. In 1981 they reunited for one more concert called: “The Concert in Central Park” which attracted 500,000 people.

The lyrics to “Bridge Over Troubled Water” are:
When youre weary, feeling small,
When tears are in your eyes, I will dry them all;
I’m on your side. when times get rough
And friends just can’t be found,
Like a bridge over troubled water
I will lay me down.
Like a bridge over troubled water
I will lay me down.

When you’re down and out,
When you’re on the street,
When evening falls so hard
I will comfort you.
I’ll take your part.
When darkness comes
And pains is all around,
Like a bridge over troubled water
I will lay me down.
Like a bridge over troubled water
I will lay me down.

Sail on silvergirl,
Sail on by.
Your time has come to shine.
All your dreams are on their way.
See how they shine.
If you need a friend
I’m sailing right behind.
Like a bridge over troubled water
I will ease your mind.
Like a bridge over troubled water
I will ease your mind.”

The bottom line: Simon and Garfunkel were right. Like a bridge over troubled water, purchase order financing combined with accounts receivable financing will “ease your mind” and help you overcome “troubled waters” when a huge sales opportunities are on the table and exponential growth and financing are necessary to your success.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com 

Accounts Receivable Financing- Don’t Worry, Be Happy

There is a reason why accounts receivable financing is a four thousand year old financing technique: it works. Accounts receivable financing, factoring, and asset based financing all mean the same thing as related to asset based lending- invoices are sold or pledged to a third party, usually a commercial finance company (sometimes a bank) to accelerate cash flow. 

In simple terms, the process follows these steps. A business sells and delivers a product or service to another business. The customer receives an invoice. The business requests funding from the financing entity and a percentage of the invoice (usually 80% to 90%) is transferred to the business by the financing entity. The customer pays the invoice directly to the financing entity. The agreed upon fees are deducted and the remainder is rebated to the business by the financing entity. 

How does the customer know to pay the financing entity instead of the business they are receiving goods or services from? The legal term is called “notification”. The financing entity informs the customer in writing of the financing agreement and the customer must agree in writing to this arrangement. In general, if the customer refuses to agree in writing to pay the lender instead of the business providing the goods or services, the financing entity will decline to advance funds.

Why? The main security for the financing entity to be repaid is the creditworthiness of the customer paying the invoice. Before funds are advanced to the business there is a second step called “verification”. The finance entity verifies with the customer that the goods have been received or the services were performed satisfactorily. There being no dispute, it is reasonable for the financing entity to assume that the invoice will be paid; therefore funds are advanced. This is a general view of how the accounts receivable financing process works.

Non-notification accounts receivable financing is a type of confidential factoring where the customers are not notified of the business’ financing arrangement with the financing entity. One typical situation involves a business that sells inexpensive items to thousands of customers; the cost of notification and verification is excessive compared to the risk of nonpayment by an individual customer. It simply may not make economic sense for the financing entity to have several employees contacting hundreds of customers for one financing customer’s transactions on a daily basis.

Non-notification factoring may require additional collateral requirements such as real estate; superior credit of the borrowing business may also be required with personal guarantees from the owners. It is more difficult to obtain non-notification factoring than the normal accounts receivable financing with notification and verification provisions.

Some businesses worry that if their customers learn that a commercial financing entity is factoring their receivables it may hurt their relationship with their customer; perhaps they may loose the customer’s business. What is this worry, why does it exist and is it justified?

The MSN Encarta Dictionary defines the word worry as:

“Worry

verb (past and past participle wor•ried, present participle wor•ry•ing, 3rd person present singular wor•ries)Definition: 1. transitive and intransitive verb be or make anxious: to feel anxious about something unpleasant that may have happened or may happen, or make somebody do this
2. transitive verb annoy somebody: to annoy somebody by making insistent demands or complaints
3. transitive verb try to bite animal: to try to wound or kill an animal by biting it
a dog suspected of worrying sheep
4. transitive verb 
Same as worry at
5. intransitive verb proceed despite problems: to proceed persistently despite problems or obstacles
6. transitive verb touch something repeatedly: to touch, move, or interfere with something repeatedly
Stop worrying that button or it'll come off.
noun (plural wor•ries)Definition: 1. anxiousness: a troubled unsettled feeling
2. cause of anxiety: something that causes anxiety or concern
3. period of anxiety: a period spent feeling anxious or concerned…”

The opposite is: 

”not to worry used to tell somebody that something is not important and need not be a cause of concern (informal)
Not to worry. We'll do better next time.
no worries U.K. Australia New Zealand used to say that something is no trouble or is not worth mentioning (informal)”.
Query: if a business is financing their invoices with accounts receivable financing, is this an indication of financial strength or weakness? Query: from the point of view of the customer, if you are buying goods or services from a business that is factoring their receivables, should you be concerned? Query: is there one answer to these questions that fits all situations? 
The answer is it’s a paradox. A paradox is a statement, proposition, or situation that seems to be absurd or contradictory, but in fact is or may be true. 
Accounts receivable financing is both a sign of weakness with regard to cash flow and a sign of strength with respect to cash flow. It is a weakness because, prior to financing, funds are not available to provide cash flow to pay for materials, salaries, etc. and it is an indication of strength because, subsequent to funding cash is available to facilitate a business’ needs for cash to grow. It is a paradox. When properly structured as a financing tool for growth at a reasonable cost, it is a beneficial solution to cash flow shortages.
If your entire business depended on one supplier, and you were notified that your supplier was factoring their receivables, you might have a justifiable concern. If your only supplier went out of business, your business could be severely compromised. But this is also true whether or not the supplier is utilizing accounts receivable financing. It’s a paradox. This involves matters of perception, ego and character of the personalities in charge of the business and the supplier. 
Every day, every month thousands of customers accept millions of dollars of goods and services in contracts that involve notification, verification and the factoring of receivables. For most customers, “notification” of accounts receivable financing is a non-issue: it is merely a change of the name or addresses of the payee on a check. This is a job for a person in the accounts payable department to make a minor clerical change. It is a mainstream business practice.

Bobby McFerrin wrote and performed a song called “Don’t Worry, Be Happy” for the movie “Cocktails” starring Tom Cruise. The song was a number one U.S. pop hit in 1988 and won the Grammy for Best Song of the Year. Here are the lyrics:

”Here is a little song I wrote 
You might want to sing it note for note 
Don't worry be happy 
In every life we have some trouble 
When you worry you make it double 
Don't worry, be happy...... 

Ain't got no place to lay your head 
Somebody came and took your bed 
Don't worry, be happy 
The land lord say your rent is late 
He may have to litigate 
Don't worry, be happy 
Look at me I am happy 
Don't worry, be happy 
Here I give you my phone number 
When you worry call me 
I make you happy 
Don't worry, be happy 
Ain't got no cash, ain't got no style 
Ain't got not girl to make you smile 
But don't worry be happy 
Cause when you worry 
Your face will frown 
And that will bring everybody down 
So don't worry, be happy (now)..... 

There is this little song I wrote 
I hope you learn it note for note 
Like good little children 
Don't worry, be happy 
Listen to what I say 
In your life expect some trouble 
But when you worry 
You make it double 
Don't worry, be happy...... 
Don't worry don't do it, be happy 
Put a smile on your face 
Don't bring everybody down like this 
Don't worry, it will soon past 
Whatever it is 
Don't worry, be happy”

The bottom line: “notification” should not be an issue in most situations involving accounts receivable financing; non-notification factoring is another option that is available for businesses concerned with confidentiality that meet minimum credit standards for asset based lending. Bobby McFerrin was right: “Don’t Worry, Be Happy”.

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com

Accounts Receivable Financing- Jobs

Until the early 1900’s staffing agencies, also known as employment agencies, generally did not exist. Communities were smaller, and because there was no telephone or internet, people communicated face to face. People in small towns knew each other and hiring was based on that personal knowledge. One of the first staffing agencies was created in 1906 in response to the enormous calamity of the San Francisco earthquake of 1906. With an entire city of people displaced, there was an urgent need to hire workers on a mass scale to re-establish businesses that had been destroyed by the earthquake and fire, and to rebuild the city. Out of this urgent need to match workers to jobs the staffing agency industry was born.

Today the staffing industry is a multi-billion dollar industry. There are many staffing companies with more than $1 Billion in sales; the number of companies with over $100 Million in sales grew in 2006. According to the American Staffing Association, “America’s staffing companies employed an average of 2.96 million temporary and contract workers per day in 2006…and they added an average of 52,000 jobs per day in 2006”. 

Why are staffing agencies so popular? In a word, it’s because of flexibility. Staffing agencies help workers to find work when they want, and they help business hire workers when they are needed. Staffing agencies provide workers to fill in when regular workers are absent, to provide extra help during busy times such as Christmas, and to work on special projects. The variety of jobs provided by staffing agencies is enormous.

A partial listing of staffing agency jobs include the fields of engineering, aviation, environmental services, architecture, administrative services, automotive services, energy, manufacturing, construction, mortgage banking, contact centers, science, health care, secretarial, manual labor, accounting, finance, executive recruitment, temporary staffing and student employment. One staffing agency specializes in administrative staffing by Microsoft Office Certified Professionals. 

Most parents encourage their children to go to college and learn something that will help them get a job after they graduate. After four or more years of college, many graduates would prefer to take some time off to see the world, or just find themselves. In the movie, Back to School, Rodney Dangerfield was cast as a parent who goes back to school primarily to get his son to stay in school so his son can get an education and a job. Rodney is invited to give the college commencement address. ''It's a jungle out there,'' he says. ''So my advice is don't go. Live at home. Let your parents worry about it.'' Perhaps this is the sociological reason for the growth of staffing agencies to provide people with jobs. 

According to MSN Encarta, the word job is a “noun and a verb:

noun (plural jobs) Definition: 1. paid occupation: an activity such as a trade or profession that somebody does regularly for pay, or a paid position doing this
She's got a new job.

2. task: something that remains to be done or dealt with
I have a couple jobs to do this afternoon.
several jobs around the house

3. assignment: an individual piece of work of a particular nature
We managed to complete the job in under a week.

4. function: the role that somebody or something fulfills
It's her job to look after the finances.

5. difficulty: something that is difficult to accomplish
I had quite a job getting it to start.

6. quality of work done: a completed piece of work of a particular quality
They did a very good job on the exterior.

7. particular kind of object: a particular kind of object, especially a manufactured item ( informal ) 
one of those big four-wheel-drive jobs

8. crime: a criminal act, especially a robbery ( informal ) 
a bank job

9. computer programming task: a computer programming task run as a single application or unit”

All of the nouns, with the exception of crime, relate to what staffing agencies provide. As a verb, with the exception of a jobber who deals in wholesale merchandise, most of the definitions relate to what staffing agencies do:
“verb (past and past participle jobbed, present participle job•bing, 3rd person present singular jobs) Definition: 
1. intransitive verb work occasionally: to take occasional or casual work
He jobs as a gardener from time to time…

2. transitive verb distribute work to others: to subcontract portions of contract work to others
job out the plumbing work on the house”

It would be unusual for most staffing agencies to provide a songwriter or an artist to a business. This is a pity because there are so many songwriters and artists that need jobs. One of the greatest vocal rock and roll songs ever written was called Get A Job by the Silhouettes. It was recorded in the late 1950’s. It was a number one hit on the pop charts and it sold over one million copies. The song was written by Richard Lewis after he completed his military service. When he came home he had no work and his mother told him to “Get A Job” and this inspired him to write the song. 
The lyrics are:
“CHORUS
Sha na na na, sha na na na na(repeat 4x)
Yip dip dip dip dip dip, bum bum bum bum bum bum
Sha na na na, sha na na na na
Well, from about the time every morning when she wakes me up and cries,"Get a job!"
Well, after breakfast every day, she throws a polish on my way and never fails to say (bass)Get a job
REPEAT CHORUS
Oh, oh, and when I get the paper
I read it through and through
And my girl never fails to see
If there is any work for me
BRIDGE
And when I go back to my house
I hear my woman's mouth
Preachin' and a-cryin', tell me that I'm lying 'bout a job”

Whoa-ooh-oh, and when I get the paper
I read it through and through
And my girl never fails to see
If there is any work for me”

If Mr. Lewis had other marketable skills he might have joined the legions of people working for the staffing agency industry. One of the biggest concerns of a growing staffing agency is cash flow. To grow into a multimillion dollar business, it takes a considerable amount of cash. Payroll obligations must be met every two weeks to pay staffing agency employees, but the actual employers (i.e. the companies that are using the staffing agency people) may take 30 to 60 days to pay their bills. Accounts receivable financing can provide staffing agencies with virtually unlimited cash for growth. The main requirement is to have staffing agency employees working for creditworthy businesses. 
This financing technique can accelerate cash flow for exponential growth because the cash for the invoices is available immediately every time an employer is billed for services rendered. Commercial finance companies are the primary providers of accounts receivable financing for staffing agencies; some banks are involved in financing larger, multi-million dollar transactions that are low risk. As a general rule, banks will not provide accounts receivable financing for a staffing agency that is a start-up or for one that is growing very rapidly in the early years of their business.
The bottom line: if you need to get a job, a staffing agency may be an excellent choice to find work on your terms; if you need cash flow to grow a staffing agency, accounts receivable financing may be an excellent choice for financing growth without bank terms. 

Copyright © 2007 Gregg Financial Services
www.greggfinancialservices.com

Accounts Receivable Financing - Work

According to the Merriam-Webster Online Dictionary, the word “work” has over 26 different meanings. The first ten meanings are:

“Main Entry: work
Pronunciation: 'w&rk
Function: noun
Etymology: Middle English werk, work, from Old English werc, weorc; akin to Old High German werc work, Greek ergon, Avestan var&zem activity
1 : activity in which one exerts strength or faculties to do or perform something: a : sustained physical or mental effort to overcome obstacles and achieve an objective or result b : the labor, task, or duty that is one's accustomed means of livelihood c : a specific task, duty, function, or assignment often being a part or phase of some larger activity
2 a : energy expended by natural phenomena b : the result of such energy c : the transference of energy that is produced by the motion of the point of application of a force and is measured by multiplying the force and the displacement of its point of application in the line of action
3 a : something that results from a particular manner or method of working, operating, or devising b : something that results from the use or fashioning of a particular material
4 a : a fortified structure (as a fort, earthen barricade, or trench) b plural : structures in engineering (as docks, bridges, or embankments) or mining (as shafts or tunnels)
5 plural but singular or plural in construction : a place where industrial labor is carried on : PLANT, FACTORY
6 plural : the working or moving parts of a mechanism
7 a : something produced or accomplished by effort, exertion, or exercise of skill b : something produced by the exercise of creative talent or expenditure of creative effort : artistic production
8 plural : performance of moral or religious acts
9 a : effective operation : EFFECT, RESULT b : manner of working : WORKMANSHIP, EXECUTION
10 : the material or piece of material that is operated upon at any stage in the process of manufacture
11 plural a : everything possessed, available, or belonging b : subjection to drastic treatment : all possible abuse -- usually used with get or give  
- at work
1 : engaged in working : BUSY; especially : engaged in one's regular occupation
2 : having effect : OPERATING, FUNCTIONING 
- in the works : in process of preparation, development, or completion 
- in work
1 : in process of being done
2 of a horse : in training 
- out of work : without regular employment : JOBLESS
synonyms WORK, LABOR,TRAVAIL, TOIL, DRUGERY,GRIND mean activity involving effort or exertion. WORK may imply activity of body, of mind, of a machine, or of a natural force . LABOR applies to physical or intellectual work involving great and often strenuous exertion . TRAVAIL is bookish for labor involving pain or suffering . TOIL implies prolonged and fatiguing labor . DRUDGERY suggests dull and irksome labor . GRIND implies labor exhausting to mind or body .
synonyms WORK, EMPLOYEMENT, OCCUPATION, CALLING, PURSUIT, Métier, BUSINESS mean a specific sustained activity engaged in especially in earning one's living. WORK may apply to any purposeful activity whether remunerative or not . EMPLOYMENT implies work for which one has been engaged and is being paid by an employer . OCCUPATION implies work in which one engages regularly especially as a result of training . CALLING applies to an occupation viewed as a vocation or profession . PURSUIT suggests a trade, profession, or avocation followed with zeal or steady interest . Métier implies a calling or pursuit for which one believes oneself to be especially fitted . BUSINESS suggests activity in commerce or the management of money and affairs .

As used in this article the word “work” is meant to convey all of these meanings. Think of it this way:

• When you work at your business you exert effort to accomplish your livelihood.
• When your business works your energy produces a result, a product or a service that people desire. This is because of the particular manner or methods you are using, or because of the particular materials you are using, making or assembling.
• Work is a place people go to earn their livelihood- the office, the factory, the medical clinic. 
• Work always requires effort, skills and exertion.
• Work often involves creative expression.
• Work may be for a higher purpose than moneymaking; this may be moral, religious, or something to further a public purpose such as to combat global warming.
• Work is an effective operation; if the manner of working is not effective, the work will not succeed.

There is a distinction between working at your business and working on your business. It has been written that when you work at your business, you are developing business, inventing products or processes; you are working on the creative part of the enterprise. When you work on your business, you are dealing with more mundane albeit important matters: organizing; making a business plan; filing; getting a new location; hiring and managing employees; dealing with accounting, regulatory, taxation or legal matters.

Most businesses work at getting more work. All things being equal, the more work you get the more money you make. If you feel that your business is not work, you are probably happy with your choice of work. Work does not feel like work when you enjoy it. If you feel that your business is too much work, you probably need to do something about it; make some changes or get someone else to do some of the work.

Writing music is creative work. Once in a while it is also lucrative. In the field of jazz music, sometimes an instrumental song will be written that is so special, so compelling, that another musician will create lyrics for the song. A famous example of this is the “Work Song”.

The Work Song was written and recorded by Nat Adderley for the Riverside label in January, 1960 with a band which featured guitarist Wes Montgomery. Nat played the cornet, which is an instrument similar to a trumpet. Nat was the brother of the famous American saxophonist Julian Cannonball Adderley. Lyrics to the Work Song were written by Oscar Brown, Jr., who was a singer, songwriter, playwright, poet and civil rights activist. The lyrics to the Work Song are:

“Work Song”
Breaking rocks out here on the chain gang
Breaking rocks and serving my time
Breaking rocks out here on the chain gang
Because they done convicted me of crime
Hold it steady right there while I hit it
Well reckon that ought to get it
Been working and working
But I still got so terribly far to go
I commited crime lord I needed
Crime of being hungry and poor
I left the grocery store man bleeding (breathing? )
When they caught me robbing his store
Hold it steady right there while I hit it
Well reckon that ought to get it
Been working and working
But I still got so terribly far to go
I heard the judge say five years
On chain-gang you gonna go
I heard the judge say five years labor
I heard my old man scream "lordy, no!"
Hold it right there while I hit it
Well reckon that ought to get it
Been working and working
But I still got so terribly far to go
Gonna see my sweet honey bee
Gonna break this chain off to run
Gonna lay down somewhere shady
Lord I sure am hot in the sun
Hold it right there while I hit it
Well reckon that ought to get it
Been workin’ and workin’
Been workin’ and slavin’
An’ workin’ and workin’
But I still got so terribly far to go”

If you have a businesses that sells products or services to other businesses, accounts receivable financing can make your business work. When other types of financing are not available, or not adequate, accounts receivable financing may be the solution to your cash flow issues. Invoice factoring is another term for this financing method. Accounts receivable financing may be combined with purchase order financing and inventory financing to make your business work nationally and internationally. These off balance sheet financing techniques work to finance exponential growth by turning the credit you extend to your customers into cash immediately. If you have “been workin’ and slavin” ... “But still got so terribly far to go” it may be appropriate to consider accounts receivable financing.

The bottom line: accounts receivable financing is like adding lyrics to a great instrumental song; it can make your business work.

Accounts Receivable Financing- HOT

The word “hot” has over forty different meanings, according to the Merriam-Webster Online Dictionary. As used in this article, the word “hot” is used to mean:
“6 a : of intense and immediate interest b : unusually lucky or favorable c : temporarily capable of unusual performance (as in a sport) d : currently popular or in demand e : very good ”. The words eager, zealous and fresh are second place synonyms for the hot idea of accounts receivable financing.

When a B2B business suddenly needs financing fast, it is hot. It is hot because it is on fire with potential business: money is needed to power this growth.

According to the Wikipedia, “"Money (That's What I Want)" was a 1959 hit single by Barrett Strong for the Tamla label, distributed by Anna Records. The song was written by Tamla founder Berry Gordy. It became the first hit record for Gordy's Motown flagship label.” The song was hot. It has been recorded by over twenty different artists; it reached number 23 on the Rhythm and Blues Charts. The lyrics to “Money (That’s What I Want)”, as recorded by the Beatles, go like this:

“ The best things in life are free
But you can keep 'em for the birds and bees
Now give me money (that's what I want)
That's what I want (that's what I want)
That's what I want (that's what I want), yeah
That's what I want

Your lovin' gives me a thrill
But your lovin' don't pay my bills
Now give me money (that's what I want)
That's what I want (that's what I want)
That's what I want (that's what I want), yeah
That's what I want

Money don't get everything, it's true
What it don't get, I can't use
Now give me money (that's what I want)
That's what I want (that's what I want)
That's what I want (that's what I want), yeah
That's what I want…”


The Beatles were hot. It is an interesting fact that it took the Beatles many years to personally make substantial money even though they were the hottest band on the planet. For years they sold more records than any other group, but the profits did not find their way into the individual Beatle bank accounts. When in the course of a B2B business’ development does the business get “hot”? Here are a few examples:

1) A video game developer labored for years to create novel technology and interesting new types of multi-player games for the internet. They were almost put out of business one year when a burglar broke into their office and stole all of their computers and office equipment. A major corporation in the video game business offered them a contract to develop a new game; substantial progress payments were offered for meeting the contract milestones; the challenge was to meet a very tight production schedule. All of a sudden, the business was hot; they needed to hire thirty new game developers. How could they meet the increased payroll requirements and accomplish the goals in the contract?

2) A small distributor of novelty products from Australia established a California corporation to sell their products throughout the United States. They introduced their product to many major department stores. After of several years of marketing they landed several new contracts for five times their previous year’s sales. All of a sudden, the business was hot. How could they pay for the product and provide the items to the department stores?

3) A manufacturer of products for the military struggled to survive for five years. They invented a terrific product. Unfortunately, they were involved in patent litigation and other disputes that burdened them with substantial attorney’s fees. After years of struggling, the disputes were settled and the attorney’s were paid. The manufacturer was “cash poor”. They negotiated an order for their products that was several times their previous year’s sales. All of a sudden, they were hot. How could they manage their cash flow to take advantage of the new opportunities? 


If these businesses could sing, “Money (That’s What I Want)” could be their anthem. Accounts Receivable Financing may be the answer to their universal cash flow issues and requirements for substantial growth. Time is of the essence because these businesses, all of a sudden, are hot. 

In five to ten working days, or less, accounts receivable financing may be obtained to make these businesses ready for prime time. The process is relatively simple. The business completes an application for financing. They give the appropriate accounting information and details regarding their customers to the finance entity. The finance entity conducts a due diligence review regarding their financial condition, and the strength of their customers. If there are no issues, a process is started whereby the businesses deliver their products or services to their customers and the finance entity advances 80% to 90% of the contract amounts. When their customer pays the finance entity it pays itself back the funds that have been advanced, deducts the agreed upon fees, and the business receives the difference. This accelerates their cash flow. It eliminates the wait of thirty to ninety days to receive payment from their customers.

Sometimes there are other complicating issues such as tax problems, UCC-1 lien priority matters, subordination of pre-existing financing, the need for purchase order financing to pay for costs of production, or letters of credit to guarantee international trade- all in addition to accounts receivable financing to make financing a hot business work correctly. Often these issues will be overcome successfully.

The bottom line: if your business is ready for prime time and your sales are hot, if you feel like singing “Money (That’s What I Want)” like the Beatles, Accounts Receivable financing may be the cash flow solution for your business’s success.