Export Receivable Financing

Accounts Receivable Financing: Exporting to Africa

2009-01-27T07:19:00.002-08:00

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

2009-01-27T07:19:00.001-08:00

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!

2009-01-27T07:18:00.002-08:00

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

2009-01-27T07:18:00.001-08:00

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

2009-01-27T07:17:00.001-08:00

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

2009-01-27T07:16:00.003-08:00

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

2009-01-27T07:16:00.001-08:00

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

2009-01-27T07:15:00.004-08:00

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

2009-01-27T07:15:00.003-08:00

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

2009-01-27T07:15:00.001-08:00

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

2009-01-27T07:13:00.002-08:00

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

2009-01-27T07:13:00.001-08:00

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

2009-01-27T07:12:00.000-08:00

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

2009-01-27T07:11:00.002-08:00

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

2009-01-27T07:11:00.001-08:00

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

2009-01-27T07:10:00.001-08:00

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.

Accounts Receivable Financing- Fuel Your Growth

2009-01-27T07:09:00.002-08:00

“Truckin got my chips cashed in. Keep truckin, like the do-dah man.
Together, more or less in line, just keep truckin on.

Arrows of neon and flashing marquees out on Main Street, Chicago, New York, Detroit and its all on the same street.
Your typical city involved in a typical daydream
Hang it up and see what tomorrow brings…”- The Grateful Dead lyrics to their song, Truckin’.

“There is a road, no simple highway, between the dawn and the dark of night, and if you go, no one may follow, that path is for your steps alone”- Jerry Garcia quotation.

Many books have been written about the Greateful Dead and about Jerry Garcia. It has been written that they succeeded “in spite of themselves”. The lyrics of Truckin’ suggest a meandering of purpose albeit a desire to get somewhere. One might say that Jerry Garcia was telling us that there is no simple way to success. You have to find your own way there.

One of the greatest impediments to success in the trucking business is getting paid on time. What if it takes 30 to 60 days to be paid after you have delivered the goods to your customer? How do you pay for fuel, insurance, equipment leases and wages? Accounts receivable financing may be your answer. Once you have a receipt/bill of lading for delivery and an invoice that can be confirmed, you can receive an advance of 80% to 95% of the funds due to you. When your client pays, you receive the remainder due, less applicable finance charges.

Johnny Cash wrote in his song “Further On Up the Road”:

“Now I been out in the desert, just doin’ my time
Searchin’ through the dust, lookin’ for a sign
If there’s a light up ahead well brother I don’t know
But I got this fever burnin’ in my soul
So, Let’s take the good times as they go
And I’ll meet you further on up the road”

If you are “Truckin’” accounts receivable financing may help you get “Further on Up the Road” to your financial success. Why not just go to your bank for all the funds you need to grow your business? If you have great credit, two past years of successful operations, excellent bookkeeping, and no major needs for substantial growth your bank may be the best choice.

If the bank says “no” to your growing company’s needs because you do not meet their qualifications, accounts receivable financing can accelerate your cash flow to pay your payroll, your fuel, insurance and other costs. You can take on new business opportunities and grow successfully by managing your cash with this proven method of commercial financing.

Here are some questions to ask yourself: Do you need a back office to help you with your collections and operations? If you company is a startup, you may want a commercial finance company to handle one hundred percent of your collections. If your company is established and you have administrative personnel, you may not want a third party talking to your customers regarding collections, especially if you believe these contacts may cost you business. Perhaps you want something in between regarding collections, where you can be the “good cop” and the commercial finance company’s collection department can be the “bad cop”.

Do you need credit check on prospective customers? Do you need help with legal or regulatory compliance issues? Are you in a cash crunch emergency that requires you to make a decision in a very short time such as one to three days? Do you have the time to read and compare proposed terms from several commercial finance companies just as you might if you were getting a loan on your home? Are you computer literate and will you have online access to your accounts? Lastly, is the cost of these extra back office services worth the extra expense you may be charged?

Here are a few legal issues to think about: Are you required to sell all invoices for a particular shipper or can you pick and choose which invoices you desire to sell? What does the contract say about choice of law? If you have a dispute with the commercial finance company and your headquarters is in California, will the dispute be pursuant to California law and California courts, or will you be agreeing to settle any dispute in a distant state such as New York? Can you afford to go to New York? Are you giving up your right to litigate disputes with a mandatory arbitration clause? Is there an attorney’s fee clause in the contract so if you have a dispute and win, your attorney will be paid?

The bottom line: The Grateful Dead and Johnny Cash were right: keep on trucking further on up the road with accounts receivable financing; and choose your lender wisely.

Accounts Receivable Financing - Cleantech

2009-01-27T07:09:00.001-08:00

Look at the headlines in your newspaper. Environmental concerns are major concerns today and every day: people are worried about the price of gas; scientists and governments are debating the issue of global warming and what to do about it; stories abound regarding solar energy and other alternative energy sources such as nuclear energy, biodiesel fuelproduction, and energy produced by wind farms. The price of a gallon of gas and how many miles to the gallon a particular car can achieve- both are familiar topics. The quality of our air is reported regularly and in some areas alerts are posted on particularly polluted air days. The purity of our water and whether or not we will have enough water for humans and agriculture are serious concerns. Is it any wonder that world wide concerns regarding our environment are subjects of intense debate today? What are governments and businesses doing about these issues? What is cleantech?

According to the Cleantech Group: “Cleantech is any knowledge based product or service that improves operational performance, productivity or efficiency; while reducing costs, inputs, energy consumption, waste or pollution.” In other words, cleantech may be a product, a technology, or an application (way of doing things) that achieves environmental and social goals with economic benefits superior to the status quo.

Another definition by Diana Propper of Expansion Capital Partners states: “On one side, cleantech is really about resource efficiency and productivity in supply- how to manufacture and produce to save energy, water, materials, etc. On the other side, these technologies are enhancing the bottom line of customers.” Solar energy, subsidized by government and the Prius automobile come to mind.

Thomas L. Friedman in the New York Times, January 2006 said: “Sorry, but being green, focusing the nation on greater energy efficiency and conservation, is not some girlie-man issue. It is actually the most tough-minded, geo-strategic pro-growth and patriotic thing we can do.”

The meaning of cleantech is changing with innovations and new thinking. For instance, polluted land, called brownfields, may be remediated i.e. cleaned up into greenfields- land suitable for homes or industry- this is cleantech. New technologies like sensors, monitors and scrubbers to reduce pollution from factories in Singapore that manufacture semiconductors- this is cleantech. Fuels for cars that pollute less like electric cars or ethanol engines- this is cleantech. Energy efficient light bulbs and double pane windows for superior insulation- this is cleantech. Other cleantech examples are wind turbines, fuel-efficient engines, geothermal energy, energy-efficient appliances and water treatment systems.

The momentum of cleantech is growing because of international political issues such as climate change, energy security issues and concerns about CO2 emissions. Consumers are demanding faster, cheaper, lighter and cleaner products. Large corporations are responding with greening efforts. The potential growth in the cleantech industry is a worldwide opportunity for business of all sizes to participate in a huge marketplace. Entrepreneurs have unprecedented opportunities to create transformative technologies in the cleantech industry.

Cleantech starts with an idea, an entrepreneur, and a new business to incubate a technology, a processes or an innovation. Until the company has proven the technology and has significant revenue and growth, it is unlikely to draw attention from large industrial conglomerates, angel investors or venture capitalists. Entrepreneurial start-ups have a much higher risk tolerance to nurture fledgling technology and retain the talent that start-ups attract. Accounts receivable financing can provide capital for start-ups to achieve profitability when other types of financing are not available.

The dominant cleantech markets are solar energy, efficiency technologies (sensors, monitoring and control devices), energy storage, and water technologies. The emergent cleantech markets are bio-based materials, marine energy technologies, superconductors and waste-reducing plasma technologies. Government subsidies may be a blessing and potential curse because if removed, an entire industry economically based on subsidies such as the solar energy industry might go bankrupt.

The creativity and ingenuity of small entrepreneurs cannot be underestimated. They will invent ways to make products, services, and processes cheaper, faster, longer and cleaner. As soon as they can bring these innovations to market and receive purchase orders for sales, accounts receivable financing companies will take the financing risks by purchasing the receivables which will create virtually unlimited capital for growth. Exponential growth for business is needed in a world that needs exponential growth of cleantech.

Attention: entrepreneurs! Here is a partial list of businesses that need cleantech innovation: car batteries, hybrid engines, lighting, toys, photograph tools, appliances, watches, calculators, medical equipment, diving equipment, cell phones, cordless phones, portable computers, power tools, industrial instruments, cranes, elevators, portable power generators, lawn care equipment and energy storage devices. Opportunities abound.

The bottom line: as the meaning of cleantech expands so do the opportunities for entrepreneurs. Accounts receivable financing may be the capital source to help you succeed in the cleantech industry.

Medical Accounts Receivable Financing-Stat!

2009-01-27T07:08:00.000-08:00

According to the U.S National Library of Medicine and the National Institutes of Health Medline dictionary the word “stat is an adverb for the latin word: STATIM. Statim is an adverb that means immediately or without delay. When a persons arrives at the hospital emergency room with a gunshot wound, the staff might say, “We need to get this patient to surgery stat!” meaning immediately, now. In a medical situation “stat” connotes extreme urgency. Does your medical business need to accelerate cash flow with accounts receivable financing “stat”?

One of the greatest challenges for medical professionals is managing their accounts receivable. Medical accounts receivable typically are the largest asset on their balance sheet. It typically takes 60 to 120 days or more to collect medical accounts receivable because of the long reimbursement process from third party payors, such as Medicare, Medicaid, and commercial insurance companies. The collection process is long and complex. Disputes regarding payment amounts are common. Medical accounts receivable financing accelerates cash flow to pay for expenses such as payroll, malpractice insurance, rent, inventory and advertising.

What are the types of medical professionals that may qualify for medical accounts receivable financing? The following is a partial list: hospitals, medical centers, rehabilitation centers, medical laboratories, surgical centers, sports medicine centers, MRI imaging centers, physical therapy centers, substance abuse clinics, physical therapy centers, manufacturers and/or distributors of medical devices, and physician’s practices whether general or specialized from A to Z such as anesthesiologists, gastroenterologists, obstetricians, and Zygote – Morula Specialists.

How lengthy is the process to obtain medical accounts receivable? It generally takes four to eight weeks to obtain funding because of the unique issues presented. The commercial finance company must perform extensive audits and analysis of the prospective client’s financial situation. They need to determine that the business is and will be a “going concern”. They need to examine billing practices which often are outsourced. This may require a separate audit of a third party. And they need to examine the forseeability of collection of the outstanding accounts receivable by auditing the accounts receivable aging reports from a historical collection perspective. In other words, how much of the amounts owed will be collection losses? How much will actually be collected?

What are other unique issues regarding medical accounts receivable financing? There are potential bankruptcy issues, lien priority issues and the “big bad wolf” issue: after a commercial finance company has purchased medical accounts receivable, the federal government can assert lien priority on the assets of a bankrupt medical company. One example of this is the case of American Investment Financial (“AFI”) versus the US also known as the internal revenue service.

AFI loaned over $800,000 to a pediatric and urgent care clinic. The clinic defaulted on their financial obligations to AFI and also defaulted on their tax obligations to the federal government. It was undisputed that AFI had followed the rules correctly in terms of filing their liens and perfecting their security interests. Nevertheless, the court held that pursuant to Federal law, after a 45 day statutory safe harbor period had passed, the government’s lien took priority. AFI lost hundreds of thousands of dollars because of federal tax law and IRS regulations. It is no wonder that commercial finance companies look very carefully before they purchase medical accounts receivable.

Commercial finance companies will generally advance an amount equal to 70% to 80% of a borrowing base, which may be called “the aggregate amount of eligible accounts”, “net realized value” or “net expected collections”. You can expect the following items to be excluded from your borrowing base: accounts which are subject to dispute, counterclaim or setoff; accounts of any account debtor who has filed or has filed against it a petition in bankruptcy; accounts owed directly by patients or customers.

The bottom line: medical accounts receivable financing, or medical factoring, is more difficult to obtain than other types of factoring because of the legal risks and business risks faced by the lenders. The process to obtain medical accounts financing usually takes much longer than accounts receivable financing for other industries, such as a manufacturer. This good news is, once the credit facility is established, funding can take place in a day or less from your request for financing. You can have medical accounts receivable financing “stat”!

Accounts Receivable Financing: Exporting to Africa

2009-01-27T07:06:00.002-08:00

New loan Website for Small Business Startups Provides Entrepreneurs Financing Resources

2009-01-27T07:06:00.001-08:00

Toronto, ON February 26, 2007 – All Startups begin with a dream or an idea. Perhaps a need for independence, or freedom from conventional corporate restrictions is wanted. http://www.AngelBusinessLoans.com is an on-line community that connects entrepreneurs with investors who are looking for new opportunities to invest their funds.

According to the Bureau of Labor Statistics 2005 data, 370,000 young people from 16-24 were self-employed, the occupational category that includes entrepreneurs. The Bureau of Labor statistics further indicate that the self-employed category will grow 5% from 2004 to 2014.

Not only are today’s young people finding new avenues to support themselves, many others seeking a work life balance are leaving the corporate world behind to explore new opportunities that provide them with a greater sense of autonomy and satisfaction.

According to the Centre for Women’s Business Research, between 1997 and 2006, the number of majority women-owned businesses increased 42%. Further, the Centre states that in 2006, majority women-owned businesses are expected to generate $1.1 trillion in revenues.

Unquestionably, the desire and passion to start a new business exists but many don’t have the financial means to turn their ideas and plans into reality. Angelbusinessloans.com is an on-line community that connects entrepreneurs with financers who are looking for new opportunities to invest their available funds. Finally, a one-stop solution to satisfy the needs of both parties is here.

Accounts Receivable Financing- The Fine Art of Happiness

2009-01-27T07:05:00.002-08:00

Four thousand years ago, a long time before banks were invented, the concept of accounts receivable financing, or factoring, was invented somewhere in the midst of the Roman Empire. Why did this make merchants happy? Because they would be paid for their merchandise many months before payment for their merchandise was received. With this cash in hand, suppliers, employees and Imperial taxing authorities could be paid. These financing agreements were based on long term relationships and trust.

Two hundred years ago accounts receivable financing evolved in the United States of America, primarily for the textile industry, for the same reason: to accelerate growth and profitability by accelerating cash flow. Again, long term relationships and trust were the main basis for these financing arrangements because there was no effective court system to enforce international contracts for the purchase of European fabrics for American factories.

Thirty years ago the concept of accounts receivable financing, or factoring, was considered to be on the fringes of respectable financing for products or services other than textiles. It was considered radical to finance the accounts receivable of relatively high risk businesses. Since then accounts receivable financing has evolved into a multi-billion dollar industry. Long term relationships and trust are still very important because when you utilize accounts receivable financing you are entrusting a commercial finance company with the lifeblood of your business- your cash flow.

Let’s make some assumptions. The purpose of life is to be happy. As a business owner, you are happier if your customers pay immediately when they receive your invoice as opposed to many months later. As a business owner, you are happier if you are more profitable when you are selling more goods or services at greater profits.

Accounts receivable financing may be the enabling tool for more capacity, more flexibility, more fluidity, more efficiency, and more sales if you have to give credit terms to your customers and your internal cash flow, or bank financing will not keep up with you need for cash to grow. So you need to ask yourself, are you happy with the status quo? Do you feel like you are stuck because your capital expenditures and operational costs are too high? In the life of your business, do you feel like you are being held back from succeeding- like receiving the “Do not Pass go, do not Collect $200” card from the game, Monopoly?

Here are some questions to ask yourself regarding overcoming obstacles to your happiness and success: What is your market? Is it local, national and/or international? What are your short term and long term challenges? What is your customer base? What is your company sales and distribution strategy? What is your strategy for accelerating growth, market presence and penetration? Do you have strong gross margins with additional opportunities to drive operating efficiencies as you business scales upward? Will you realize increasing margins as a result of increasing sales? Query: could your business be expanded exponentially if you had virtually unlimited financing? Is this a reasonable goal and would this make you happy?

You need to evaluate the cost-effectiveness of accounts receivable financing versus the scalability and capability of your own company. Accounts receivable financing may be your solution to the fine art of happiness and your success as a business owner.

Accounts Receivable Financing - Think Differently!

2009-01-27T07:05:00.001-08:00

What does this have to do with accounts receivable financing?

Banks exist primarily to loan money to people and businesses, on a safe and sound basis according to federal banking regulations. The banking paradigm for businesses involves offering checking and savings accounts to take money in, and offering various types of business and personal loans to “get the money out”. Their goal is to make a profit on your cash for the bank. To qualify for these loans you have to prove, to the bank’s satisfaction, that you have the clear and present ability to repay these loans. If you are a startup company, a company that is growing very rapidly, or an established company that is affected by a sudden negative event, the banking paradigm may not work for you. Perhaps, you need to think differently; perhaps your perspective is “inside the banking paradigm box” and you need an alternative.

What is inside the box thinking? According to 'Thinking Outside the Box'? By Ed Bernacki Published April 2002:

“Thinking inside the box means accepting the status quo. For example, Charles H. Duell, Director of the US Patent Office, said, "Everything that can be invented has been invented." That was in 1899: clearly he was in the box!

In-the-box thinkers find it difficult to recognize the quality of an idea. An idea is an idea. A solution is a solution. In fact, they can be quite pigheaded when it comes to valuing an idea. They rarely invest time to turn a mediocre solution into a great solution.”

Mr. Bernacki distinguishes “inside the box” thinking vs. “thinking outside the box” as follows:
“Outside the Box

Thinking outside the box requires different attributes that include:
• Willingness to take new perspectives to day-to-day work.
• Openness to do different things and to do things differently.
• Focusing on the value of finding new ideas and acting on them.
• Striving to create value in new ways.
• Listening to others.
• Supporting and respecting others when they come up with new ideas.

Out-of-the box thinking requires openness to new ways of seeing the world and a willingness to explore. Out-of-the box thinkers know that new ideas need nurturing and support. They also know that having an idea is good but acting on it is more important. Results are what count.”

If your B2B business does not have enough bank credit to expand at the rate you need, or if your B2B business cannot take advantage of growth opportunities because of lack of funds, you may need to think differently: think outside the box. Think of using the virtually unlimited financing that is available from accounts receivable financing.
To think differently, you may need to overcome the two most common “inside the box” concerns regarding accounts receivable financing.

Objection: “Our customers will not want do business with our company if they know we are dealing with a commercial financing company to finance our accounts receivable”.
Think Differently: Accounts receivable financing allows you to offer credit terms, like the bank. Many businesses prefer to resell your products or services and earn a profit before they have to pay you for your product or service. Accounts receivable financing generally involves notification to your customers of the arrangement to “manage” your receivables; and verification from your customers that your product or services were “satisfactory”. From your customer’s point of view, someone in their account’s payable department is changing the “pay to” portion of their check to the address of a commercial finance company. Usually the check is cut payable to you and sent to a P.O. Box of the commercial finance company. In certain situations, notification may not be required at all; this is called non-notification factoring.

Objection: “Accounts receivable financing is too costly”.
Think Differently: Accounts receivable financing is a paradigm for success; you will have the necessary working capital you need to fulfill larger orders by accelerating your cash flow. You will need a gross margin of 20% or more, in general, for this type of financing to make economic sense. There is an inverse relationship between the cost of financing and the size of your credit facility: the larger the credit facility, the lower the cost. In other words, the fees and rates will be less for $500,000 per month than for $25,000 per month.

The bottom line: Accounts Receivable Financing- Think Differently! is intended to help you think “outside the box” and become more profitable. One tried and true paradigm for achieving this result as an entrepreneur with a B2B business is accounts receivable financing.

Accounts Receivable Financing- Be Inspired!

2009-01-27T07:04:00.001-08:00

Benjamin Zander and his wife wrote a book entitled: “The Art of Possibility; Transforming Professional and Personal Life”. Their idea is that “you can create a passionate energy permeating The Art of Possibility that will be a true force in your life. You can make your own rules.” Their book is inspirational. You will be inspired if you buy and read it. The question is: how does this pertain to accounts receivable financing?

It’s all about attitude, enthusiasm and point of view regarding how to conduct your business. Can you make your own rules regarding how banks, commercial finance companies and other financial entities operate? Of course not. Can you make your own rules regarding how you utilize the financial recourses that are available to finance your business? Absolutely!

Here are three examples how to harness the power of accounts receivable financing sometimes with other types of financing to grow your B2B business.

Case Study One:

A Solar Energy Company that designed and supervised the installation of renewable energy systems was unable to obtain bank financing. They were one of the area’s lowest cost providers of solar panels, system design and supervision. One of their biggest assets was State Solar Tax Credits that are paid to homeowners who install the solar energy systems. An obligation from a State to a consumer is not within the definition of an account receivable. In other words, it could not be financed because it was not an obligation to a business. Using the art of possibility, the homeowners were persuaded to assign their solar tax credits to the Solar Energy Company. This transformed a consumer receivable into a commercial accounts receivable. Voila! The Solar Energy Company received accounts receivable financing it needed to grow.

Case Study Two:

An individual purchased an Importing Company that had been financed with a bank’s SBA loan. As collateral for the loan, the bank placed a UCC1 filing on the accounts receivable and inventory of the business. UCC refers to the Uniform Commercial Code in effect throughout the United States of America. In some respects, it simplifies the process of lending, selling and borrowing nationally. In other ways it is very complex. A UCC1 filing by a bank usually prevents any further financing because there is no collateral left to be financed. It is similar to a first mortgage loan on a house. If you have a 95% loan on your house, no other financing is available on the house because there is no equity to lend on. Using the art of possibility, the Importing Company was successful in convincing the bank to subordinate their UCC1 filing to another commercial lender’s UCC1. The Importing Company convinced the bank that it would be mutually beneficial to lower the bank’s UCC1 lien to a secondary position to allow a commercial finance company to offer new accounts receivable financing and inventory financing. Voila! The Importing business has a new credit line available for growth. It is now more profitable and the bank is more likely to be repaid. This is a win-win situation.

Case Study Three:

A start-up Clothing Company involved in manufacturing, distributing and designing T-shirts landed a substantial purchase order for their product. The product was to be made in China, and the Clothing Company lacked sufficient funds to pay for the costs of manufacture and distribution. Using the art of possibility, the Clothing Company obtained a letter of credit to guarantee the Chinese factory of payment, purchase order financing to pay for the T- shirts upon delivery, and accounts receivable financing to pay the purchase order company upon delivery of the goods to the customer in the US.

Accounts receivable financing can help your B2B business realize the art of possibility for growth and profits. Voila!

Budgeting – Where to Start...

2009-01-27T07:03:00.003-08:00

If you have never set up a budget before, it can seem like a daunting prospect: “How do I decide how much I can really afford?”, “Where can I make cutbacks?”, “How can I keep track of my spending?”, the list goes on.

This article aims to provide the basics which will allow you to set up your own budget & start controlling your finances, instead of the other way round.

Deciding how much you can afford
The first step in any budget is to work out exactly what you have coming in & going out. Make a list of your current monthly income. Be sure to include any part-time jobs, benefits and/or child support payments. Then write down all of your monthly expenses. Again, be sure to include everything. If you are not sure about the exact amounts, save up all your receipts for a month.

The next step is to subtract your expenses from your income. The figure that is left is your monthly ‘disposable income’. If the figure is a negative one, this means that you have more going out than you have coming in. If this is the case, you need to seek professional financial advice as soon as possible.

Making cutbacks
If your disposable income is not enough, or you want to start saving some of this money, you could look at ways to reduce your spending & free up some more money. The most obvious areas are shopping bills, television packages & mobile phones. You could try a few supermarket own-brands, as these are often just as good quality, but a lot cheaper. Could you reduce your TV subscription or maybe downgrade your mobile phone package? These are all ways in which you can save extra money every month.

Keeping track
In order to make the budget successful, you need to log everything you spend so that you can avoid going over budget & if necessary, spot the areas where you are overspending & make appropriate cutbacks. You could record everything on a spreadsheet, keep all your receipts, or simply write everything on a piece of paper. Whatever method you choose, this is an important step.

At the end of the month, hopefully you will have stayed within budget. Even if this is the case, look back at what you have spent. Could you cut back even more? Could you refine your budget in any way? Always look for ways to save more money.

Accounts Receivable Financing: Exporting to Africa

2009-01-27T07:03:00.001-08:00

What To Look For In An Accounts Receivable Financing Program

2009-01-27T06:02:00.000-08:00

Let's start with what account receivable financing is all about? It is a program of converting your business invoices, private or government, into cash easily and without any personal guarantees or long term contracts. Sometimes small business owners have to struggle hard to obtain capital to meet the cash requirements in the organization. In comparison, loans and credit are limited to an extent, so the question of what they should do to overcome this crisis arises. The remedy for this financial crisis would be an accounts receivable financing program.

Accounts receivable financing helps to maintain cash flow in your organization and at the same time give you an opportunity to maintain a steady and good relation with your clients. Accounts receivable financing offers numerous benefits to its client, which helps them in the smooth running of their business. Let us examine the advantages of accounts receivable financing and procedures followed prior to availing of this program.

Sufficient capital for the daily operations and the expenses in your company are easily got. You can outsource your accounts receivable management to another company and concentrate on the growth of your organization. As far as working capital is concerned accounts receivable allow you to set free the working capital, which is tied up in inventory. As such no business plans or statements are required to receive cash it immediately gives you the money to relieve you from the financial crunch.

Compared to the payment of the invoice from the client that takes 30 to 60 days and sometimes even more than that, accounts receivables funding process takes 24 to 48 hours, once the invoice is submitted. The funding amounts vary on the terms of the business loan. In the first installment 80% will be paid of the invoice value and in the second installment the remaining 20% is given to you after a deduction of 1% - 5% as factoring fee from the amount paid by your client company.

Before entering into an agreement with an accounts receivable financing company, keep a few points in mind. There are certain pitfalls in this method of financing, and one of them is that the invoice is either not funded or funded on the face value which means only the first installment is paid. The problem here is not related with the invoice but the company to which the invoice was issued. So you should do a thorough research about the companies you are working with and inspect the contract as well as the terms and conditions and try to negotiate discounts.

You should also consider whether the financial strategy matches with your business plan and if you have not yet prepared any plan please prepare it first before drawing additional money. You should also review your current economic conditions and think before any kind of business expansion.

Definitely accounts receivable financing is better option to overcome the monetary crunch in your company, but you should always consider how it could facilitate you and your company's growth.

Accounts Receivable Financing- Yesterday

2009-01-27T06:01:00.000-08:00

Accounts Receivable Financing- Great Ways to Increase Profits

2009-01-27T06:00:00.002-08:00

For small and medium businesses or those which are in their growing stages, to obtain finances is a very tough task. Bank loans are not easily provided to such organizations as they take into consideration factors like number of years in business, assets and other factors. Moreover getting a loan is a time consuming process. In situations, where organizations have customers who pay in a period of 30 to 60 days or more, managing funds becomes difficult. They may miss out on an opportunity to attain new business merely due to lack of funds. This in turn leads to financial losses, as well as further opportunities to grow.

Additionally, regular expenses like rents, wages etc., which are unavoidable, need to be taken care of. So money gets help up because of the slow paying customers. In such a scenario, can a business deliver the larger orders of larger customers and provide them larger credits for 60-90 days? The solution for this lies in accounts receivable financing. Accounts receivable financing provides you with immediate cash against collateral of your accounts receivables. The only criterion here is that your customers must be credit worthy. Some companies would even provide you with finance even if you do not have hard collateral but have good invoices, with good profit margins and a great business plan.

Accounts receivable finance allows a great way to increase profits. Initially you may feel what is left for you if you are earning 5% profits and are paying around 4% to the finance company? However, because of finances being available at the right time, you will not miss an opportunity to get bigger contracts. Improved business, leads to higher profit margins and thus an overall increase in profits. Cost of production is reduced in case of higher volumes, though there may be slight rise in certain fixed costs like electricity bills, wages and insurance, which may very slightly affect overall profits.

Moreover as your business grows you have more invoices which you can use as collateral to avail loans from such accounts receivable financing companies. When you take a loan from the bank it is a one time thing, as compared to the accounts receivable financing where you have continuous loans of amounts as and when you require them. At the end of the year you have no debt left.

When you use the accounts receivable financing you assume that the customer would take the stipulated period of 30-60 days to pay the bill. However if the customer pays later than that, then when you are applying for finance you can see to it that the invoice is 30 days old or so, so that you pay fees for 30 days only. Another thing you may do is use the faster paying customers first for your urgent cash needs. As the responsibility of collecting the invoices is upon you, it often leads to bringing about more discipline in business management. With the financing companies guidance you may also put your finances in order and choose those customers who have good credit ratings or get government contracts.

Accounts receivable financing thus helps increase profits which is a major factor in the growth of any business.

Accounts Receivable Financing In The Medical Industry

2009-01-27T06:00:00.001-08:00

The medical industry faces the challenge of keeping their practices or medical institutions functioning smoothly for the need of timely working capital. The health care industry is bogged down by the growing accounts receivables from their patients' providers of medical insurance carriers. The medical fraternity also faces the difficulty in keeping tracks of invoices and the billing process; this diverts them from their mainstream work of providing medical care to their patients. Accounts receivable financing is fast emerging solution to this specialized sector.

Many accounts receivable financing companies offer services to the medical world, which act as a respite for securing cash to run their daily operations smoothly. These financing companies have customized processes specific to this segment. In simpler terms, medical factoring or medical accounts receivable financing means selling off the accounts receivables accrued by the medical institution to the financing firm. The claim owed to the patients' medical insurance provider by the patients' medical insurance carrier is the accounts receivable in this case.

Medical practice provides its service to the patient and the medical insurance company is billed on behalf of the patient, this is the receivable accrued by the medical industry. The medical industry then approaches the accounts receivable financing industry and sells these accounts receivables which in turn releases about 80% to 95% of the net collectible amount for a small fee ranging from as low as 1% to 5%. The funding company assumes the responsibility of collecting the receivable amount from the medical insurance companies and pays up the balance amount once the entire amount is collected from the insurance company.

The medical industry in this way can gain a lot of advantages by selling off their receivables. Most funding companies release funds in about one to two days. The funding companies also provide regular reports to update and enhance the billing process. The ready cash flow also increases the ability of the medical industry to get discounts from their suppliers for regular and timely payments. The capital can be rightly used to enhance services and stimulate growth by attracting and retaining good support staff. The balance sheet will also have a positive effect, as accounts receivable financing is different from a loan. It just advances the cash that will otherwise come in after 30 to 60 days. It is just a conversion of a non-liquid asset, the account receivable into a liquid asset, cash. Thus the debt capacity of the medical institution also remains strong.

Thus, with the help of medical receivable financing the medical practice can reap the benefits of fast and continuous cash flow streaming in to stimulate the growth and expansion of medical facilities. Other benefits also include enhanced business efficiency, by electronic updates on billing, tracking and collections. A wide range of medical industry professionals can get the advantages of this type of hassle free financing. This includes hospitals, nursing homes, surgeons, physicians, osteopaths, oral surgeons, and treatment centers, like rehab, dialysis and surgery centers. Imaging and medical laboratories and even ambulance providers can benefit from this effective funding solution.

The Right Accounts Receivable Financing Company Could Be The Key To Your Success

2009-01-27T05:59:00.001-08:00

In order to survive cutthroat competition in the corporate world, companies have to offer world-class services, which are not only at par but also a cut above the rest. Companies have to provide good services consistently to be able to stay ahead, and to enable survival in providing consistent services; companies require constant and even flow of working capital.

Working capital or revenue is the basic requirement of any company to establish its day-to-day operations smoothly. The day-to-day operational expenses include the capital needed for conversion of raw materials to finished goods or services that can be marketed to generate profits or further revenue and other overhead expenses. Any company's financial status and efficiency may be ascertained by the amount of working capital the company has.

However most small-scale companies have their assets blocked in accounts receivables. The buyers of the products or services usually make their purchases on credit. Hence the companies have a waiting period of thirty to sixty days or even more before they receive the payments of their products. However during this period of debts waiting to be cleared off, the companies face the crunch of generating the working capital for their daily operations.

As opposed to large-scale companies that have a number to options available to generate or maintain their working capital, small-scale companies often have problems in raising their capital. Thus small-scale companies have to be vigilant about the proper management of their working capital. In order to establish themselves and become successful small-scale companies have to find ways to generate the working capital.

Accounts receivable financing could be the key to solving the problems of deficit working capital. The purchasing of the outstanding receivables or invoices by an accounts receivable company is considered to be accounts receivable financing. This outright selling of the receivables brings in instant cash flow and offers many fringe benefits, giving respite to the fund requirements of the small-scale companies.

It is important to choose the right accounts receivable financing companies that suit all your business needs. Most accounts receivable financing companies offer the secured loan on the accounts receivables based on the age of the receivable. The more current the receivable is, the easier it is to get optimum funding against it. A receivable that is over 90 days usually is not considered for buying by the financing firm. The financing firms usually disburse up to 90% of the receivable bill amount.

However there are firms that can offer up to 95% amount. Rest of the amount would be paid when the debts are cleared off on the receivables. The amount of time taken to process the receivable bill financing is also an important factor to be considered; usually the process is done in 3 to 4 working days before the funds are released, but some well established and experienced firms release the funds in just 1 or 2 days. The fee charged by the financing firm may range from 1% to 5%, so go for the firm that offers a competitive service for a competitive price.

Thus the right accounts receivable financing company can serve many purposes, like providing the free working capital, which enables the firm to concentrate more on the business expansion activities rather than worry about the collections.

Accounts Receivable Financing- How to Use Other People’s Money to Finance your Growth

2009-01-27T05:58:00.001-08:00

Many people grew up reading Superman comics for fun. Ask yourself, would it be wonderful (think of this as a metaphor) if your B2B business was “faster than a speeding bullet, more powerful than a locomotive and able to leap tall buildings in a single bound?” Would your business benefit if you could always have the cash from your invoices when you needed it? Would your business benefit if cash available for growth was virtually unlimited? Would your business benefit if you could “leap over” your cash flow problems to provide more products or services to you customers?
In general, the larger your customers are, the slower they pay your invoices. It’s like the old joke, Question: “Where does a gorilla sit?” Answer: “Anywhere it wants to.” For example, a small sound engineering company was engaged to provide sound effects for a major motion picture production studio. When asked to comment on their experience working with such a prestigious client, the owner said: “fear the ears”.
It simply is a universal trend that your largest customers may be the slowest to pay you. Do you have to wait 60 to 90 days to be paid by your largest commercial or government customers? If so, accounts receivable financing may be the answer to your cash flow problems.
There are several advantages to accounts receivable financing compared to regular bank financing. Your current credit score, or your company’s credit, is not an issue because the financing entity relies on the creditworthiness of your customer. In fact, some companies that are in the “Special Assets” division of a bank (which is a euphemism for being asked to leave the Bank” are prime candidates for accounts receivable financing. At another extreme, some companies that are in a Chapter 11 Bankruptcy proceeding, (called Debtor’s in Possession) can obtain accounts receivable financing with the express permission of the Bankruptcy court.
Accounts receivable financing will grow in terms of your credit limit as your company grows. So if you are with the right commercial finance company, your growth is potentially unlimited. Compare this with regular bank financing which looks at your current situation and your past two years operating history.
Many entrepreneurs are optimistic, energetic and very positive in their predictions about their future. Bank analysts are trained to look at worst case scenarios. Every Bank has to undergo a periodic “Safety and Soundness Examination”. Part of this process is a team of federal regulators second guessing every loan decision where the bank has granted credit.
There’s a lot of truth to the old adage that bank’s will only lend money to people who don’t need it. Banks do not want to suffer the penalties that may be imposed by the federal regulators if they found to have made a “bad” loan. So the standards and perspectives of Banks and Commercial Finance Companies are very different.
Accounts receivable financing can provide you with the cash you need within a day or two of your invoicing your customer. Some commercial finance companies have very sophisticated internet based submission systems. You submit the invoice electronically; it is reviewed and verified; and the agreed upon cash advance is wired to you the very same day. Other companies use a paper fax based system but the results are very similar.
Accounts receivable financing terminology can be confusing. The following words have essentially the same meaning: accounts receivable financing, factoring, receivables factoring, factor invoices, discount factoring, asset based lending (usually associated with very large transactions).
The bottom line: if your customers are paying you too slowly, and this is limiting your business growth potential or profits, you should consider accounts receivable financing.

Accounts Receivable Financing- Think Differently!

2009-01-27T05:56:00.000-08:00

Borrowing money is as American as apple pie. Americans borrow money to purchase houses, to finance automobiles, and to pay for luxury items on their credit cards every day. It is a rare individual that can pay all cash for their house, their car, or their credit card bill every month. The U.S. economy thrives on credit because of the recycling of cash when these purchases occur. America is an economic powerhouse, partly because collectively we borrow so much money to have things today, instead of saving the cash to buy these items some day, if ever, in the future. Economic theorists are of the opinion that when you purchase a house, the cash recycles about seven times: to the realtor, to the title company, to the mortgage broker, to the lender, the butcher, the baker and the candlestick maker, and so forth.

We live in the land of opportunity. You do not need a college degree or pedigree to become an entrepreneur. All you need is the ability to organize, manage, and assume the risks of a business with a sufficient amount of cash to fund the business.

Borrowing money is the American paradigm for success for individuals and for businesses. According the American Heritage Dictionary, a “paradigm is:

1. One that serves as a pattern or model.
2. A set or list of all the inflectional forms of a word or of one of its grammatical categories: the paradigm of an irregular verb.
3. A set of assumptions, concepts, values, and practices that constitutes a way of viewing reality for the community that shares them, especially in an intellectual discipline.

Usage Note: Paradigm first appeared in English in the 15th century, meaning "an example or pattern," and it still bears this meaning today: Their company is a paradigm of the small high-tech firms that have recently sprung up in this area. For nearly 400 years paradigm has also been applied to the patterns of inflections that are used to sort the verbs, nouns, and other parts of speech of a language into groups that are more easily studied. Since the 1960s, paradigm has been used in science to refer to a theoretical framework, as when Nobel Laureate David Baltimore cited the work of two colleagues that "really established a new paradigm for our understanding of the causation of cancer." Thereafter, researchers in many different fields, including sociology and literary criticism, often saw themselves as working in or trying to break out of paradigms. Applications of the term in other contexts show that it can sometimes be used more loosely to mean "the prevailing view of things." The Usage Panel splits down the middle on these nonscientific uses of paradigm. Fifty-two percent disapprove of the sentence The paradigm governing international competition and competitiveness has shifted dramatically in the last three decades.”

For more dictionary information please see: The American Heritage® Dictionary of the English Language, Fourth Edition Copyright © 2000 by Houghton Mifflin Company.
Published by Houghton Mifflin Company. All rights reserved.
What does this have to do with accounts receivable financing?
Banks exist primarily to loan money to people and businesses, on a safe and sound basis according to federal banking regulations. The banking paradigm for businesses involves offering checking and savings accounts to take money in, and offering various types of business and personal loans to “get the money out”. Their goal is to make a profit on your cash for the bank. To qualify for these loans you have to prove, to the bank’s satisfaction, that you have the clear and present ability to repay these loans. If you are a startup company, a company that is growing very rapidly, or an established company that is affected by a sudden negative event, the banking paradigm may not work for you. Perhaps, you need to think differently; perhaps your perspective is “inside the banking paradigm box” and you need an alternative.
What is inside the box thinking? According to 'Thinking Outside the Box'? By Ed Bernacki Published April 2002:
“Thinking inside the box means accepting the status quo. For example, Charles H. Duell, Director of the US Patent Office, said, "Everything that can be invented has been invented." That was in 1899: clearly he was in the box!
In-the-box thinkers find it difficult to recognize the quality of an idea. An idea is an idea. A solution is a solution. In fact, they can be quite pigheaded when it comes to valuing an idea. They rarely invest time to turn a mediocre solution into a great solution.”

Mr. Bernacki distinguishes “inside the box” thinking vs. “thinking outside the box” as follows:
“Outside the Box
Thinking outside the box requires different attributes that include:
• Willingness to take new perspectives to day-to-day work.
• Openness to do different things and to do things differently.
• Focusing on the value of finding new ideas and acting on them.
• Striving to create value in new ways.
• Listening to others.
• Supporting and respecting others when they come up with new ideas.
Out-of-the box thinking requires openness to new ways of seeing the world and a willingness to explore. Out-of-the box thinkers know that new ideas need nurturing and support. They also know that having an idea is good but acting on it is more important. Results are what count.”
If your B2B business does not have enough bank credit to expand at the rate you need, or if your B2B business cannot take advantage of growth opportunities because of lack of funds, you may need to think differently: think outside the box. Think of using the virtually unlimited financing that is available from accounts receivable financing.
To think differently, you may need to overcome the two most common “inside the box” concerns regarding accounts receivable financing.
Objection: “Our customers will not want do business with our company if they know we are dealing with a commercial financing company to finance our accounts receivable”.
Think Differently: Accounts receivable financing allows you to offer credit terms, like the bank. Many businesses prefer to resell your products or services and earn a profit before they have to pay you for your product or service. Accounts receivable financing generally involves notification to your customers of the arrangement to “manage” your receivables; and verification from your customers that your product or services were “satisfactory”. From your customer’s point of view, someone in their account’s payable department is changing the “pay to” portion of their check to the address of a commercial finance company. Usually the check is cut payable to you and sent to a P.O. Box of the commercial finance company. In certain situations, notification may not be required at all; this is called non-notification factoring.
Objection: “Accounts receivable financing is too costly”.
Think Differently: Accounts receivable financing is a paradigm for success; you will have the necessary working capital you need to fulfill larger orders by accelerating your cash flow. You will need a gross margin of 20% or more, in general, for this type of financing to make economic sense. There is an inverse relationship between the cost of financing and the size of your credit facility: the larger the credit facility, the lower the cost. In other words, the fees and rates will be less for $500,000 per month than for $25,000 per month.
The bottom line: Accounts Receivable Financing- Think Differently! is intended to help you think “outside the box” and become more profitable. One tried and true paradigm for achieving this result as an entrepreneur with a B2B business is accounts receivable financing.

Accounts Receivable Financing- the Fine Art of Happiness

2009-01-27T05:21:00.000-08:00

What Makes You Qualify For Accounts Receivable Financing

2009-01-27T05:20:00.000-08:00

There are often situations when small, medium and even large companies find themselves in a tough spot as far as revenues are concerned. They are at a loss of funds or finance to undertake a project that is expected to give good results. In such a scenario the option available for financing is accounts receivable financing.

Accounts receivable financing is a secured loan for which accounts receivables are pledged as collateral with financial organizations. For small businesses it acts as a boon to help improve their cash flow. Generally small businesses find it hard to receive finance from a bank as they have less credit rating to show because they are yet in a developing stage. Unless finance is available, it is not possible for business to grow at a good pace. A timely finance from finance companies or even banks proves to be helpful for their growth. They often have customers who do not pay before 30-60 days. In such cases the accounts receivable are given as security to a financial organization and finance is received.

Any company can opt for accounts receivable finance. It is very popular with transport or trucking companies, construction companies, manufacturing companies, textiles, staffing and engineering and other small businesses. It benefits medium business and any other business that needs finance on a daily basis. These companies would need to have accounts receivable in hand. The companies who can qualify for such finances would need to have accounts receivables from credit worthy customers.

Moreover, aging of accounts happen to very large extent. They may have regular contracts with organizations with good credit history or government organizations. Some financial organizations also consider the period for which the credit is given, which they prefer should be within 30- 60 days. Companies which are experiencing modest speed of growth and find it hard to keep the cash flow constant find the accounts receivable finance very beneficial.

These finances ensure growth and stability of a company. The process is very quick and you can get the finance in a very short period of time. As finances are available on a timely basis, the companies may be able to get some advantage of reduction of overheads. The processing time of this type of financing is very less. Some of the companies also have online submission, and invoice submission systems which are then verified and checked and finance is provide in less than 2 days also which is a very timely help for these companies which need finance to undertake their daily activities. One more benefit that you get from such a finance function is that the accounts of the companies are managed better as proper records and collection on the due date is very important. For the small companies it is an additional benefit that the business in itself is well organized to make the entire process cost effective.

Accounts receivable financing is available to all those organizations that are in urgent need of finance or cash and are caught up in tricky situations wherein customers make payments very late. Companies find this financing highly beneficial to keep the growth of their organization on track.

Your Resource Guide to Accounts Receivable Financing

2009-01-27T05:19:00.000-08:00

Accounts receivable financing is nothing but selling your outstanding invoices or receivables at a discount either to a factoring or finance company, which assumes risk on the receivables and gives you instant cash for your business. Depending on the age of a receivable, the amount of value is assigned to the account. Business houses use these loans in order to avoid the bad cash flow in the company. Sources for accounts receivable financing could be commercial financial institutions and banks. Accounts receivable is also known as accounts receivable funding or accounts receivable factoring.

This form of financing comes in the category of secured loan, where accounts receivable acts as covenant against cash. As the receivables are collected, the loan is repaid. Accounts receivables have a particular time or an age. A current invoice will pay you more. Any accounts receivable over 90 days are not financed. Thus, the older the invoice the less value it has. Sometimes the lenders don't pay attention to the age of the accounts, but when they find the accounts is over 90 days, they may refuse to finance. Few lenders may apply a scale to value the accounts, such as accounts which are 31 to 60 days old have loan to value ratio of 60 % and accounts from 61 to 90 days have 30%. Sometimes the overall creditworthiness of the account of debtors may affect the loan to value ratio.

Some of the benefits of accounts receivable financing are:

Free working capital: Most of the companies have the majority of capital tied up inventory. But, accounts receivable financing allows you a free capital tied in inventory.

Instant cash: Accounts receivable funding doesn't require any kind of business plan or tax statements. Instant cash is provided, which are being used by business houses during a bad cash flow in their organization.

Pass off Collections: Passing off your accounts receivable management to the factoring company will help you to focus on other perspectives of your organization, which can take you to road of success.

Make advantageous purchases: Availability of funds enables you to buy advantageously from suppliers and can take advantage of special offers or discounts.

Before plunging your feet into accounts receivable financing, you should do a thorough research about certain factors. A monthly interest rate is calculated to the daily percentage to the outstanding receivables each day. The lesser the outstanding bills the lower the interest. But a default on payment can let the financier seizing the pledged accounts receivable. In some states a notice is required to be sent to the business' debtors that their debt has been pledged as loan security. But in some other state, the businesses do not notify the customers because they fear that customers might feel that this method of financing is a sign of instability.

So, before using accounts receivable you should see, that the financial strategy matches with your business plan, and that your business should be ready for more money and expansion and try to explore all kind of sources for small businesses financing. You should spend some quality time to investigate the companies you are working with and analyze contracts to negotiate discounts.

What Accounts Receivable Financing Companies Look For In A Client

2009-01-27T05:18:00.000-08:00

Growing and emerging companies require immediate capital in order to facilitate their successful ventures. These start up companies often face a deficit of working capital needed for the smooth functioning of their daily operations as most of their capital is blocked in accounts receivables. In layman's terms it means that the growing company performs the service or delivers the product to the client, and then bills them.

However as per business norms the payment is usually held up and cleared after about 30 to 60 days. This held up or to be cleared amount is the accounts receivable of the company rendering a service or selling a product. Since capital is blocked in accounts receivables, these companies have to look for alternative sources to secure continuous cash flow to meet their daily operational needs. Accounts receivable financing is fast emerging as one of the best funding options that emerging companies are choosing to solve their cash deficit problems.

Accounts receivable financing is the process of selling off the accounts receivable bills of the company to an accounts receivable finance company to secure immediate capital. The accounts receivable financing company provides funding to the service or product selling companies against their accounts receivables which act as collaterals. This process is relatively simple, requires no other collaterals and does not take much time for releasing funds.

The financing firm usually disburses the funds a range of up to 60% to 90% of the amount receivable for a fee that could range from 1% to 5% depending upon a certain criteria set by the financing companies for each company they are funding. These companies are the clients for the financing companies. So in case the company wants a funding for their accounts receivables from the accounts receivable financing company certain criteria have to be looked at while approaching them.

Accounts receivable financing companies look at the creditworthiness of the client's debtors. Their debt records and performance records are taken into account. The age of the receivable is a consideration while determining the fundability of the client company, in case the receivable bill is as old as 90 days or more then no accounts receivable financing company will finance it. The client company also will not qualify to secure funds on their accounts receivables, if there is already loan secured on the same accounts receivable from a banking institution, unless the bank is willing to release its security interest on the receivable held by them.

The client company's customer's average repayment cycles, the factoring volume and the size of the invoices are also few more determinants an accounts receivable financing company will take into account while releasing the funds. Based on this, the financing company will give the client company 60% to 95% amount of the total face value of the receivable. The balance amount would be released after the invoice is cleared.

This type of financing can prove advantageous as the service rendering or product selling companies can free up their tied up capital and use it to maximize their growth and concentrate on business development activities rather than worry about collections and rising debts.

Accounts Receivable Financing- Don’t Worry, be Happy

2009-01-27T05:16:00.000-08:00

Is Accounts Receivable Financing Right For Your Business?

2009-01-27T05:15:00.000-08:00

As a small business owner, you will encounter the need for capital at various points in your business development. Understanding financial options available is a crucial business step to take, as the primary cause for small business failure is under capitalization. While you may not be having a cash crisis, you may simply be seeking the money to expand your business. If you are unable to turn to traditional financing, accounts receivable financing may be a sound option for you to consider.

What is Accounts Receivable Financing?

In its simplest terms, accounts receivable factoring is the selling of your outstanding receivables at a discount to a factoring company. Accounts receivable financing is also known as accounts receivable factoring or accounts receivable funding. In this transaction, the factoring company pays you a percentage of the accounts receivable up front, typically 75-80% of the total, with the remainder to be paid once the invoice has been paid. The factoring company will charge you a nominal fee for the transaction, but will handle the collections of your accounts receivables that you have sold to them. The fee that you will be charged will be based upon the factoring company that you select, the amount of the invoices that you sell and the duration of time that it takes for the invoice to be paid. Typically, the shorter the time it takes to have the invoice paid, the smaller the factoring fee. So, for companies that have clients who quickly pay their invoices, the fee could be as small as 1%.

The process of accounts receivable financing is quite simple. Your business will sell your accounts receivable, either all or a portion, to a factoring company in return for a discounted rate. The factoring company will generally wire you the funds the same day or the next day once they have received their proper paperwork, and then they will handle the collections of the invoices. Once the invoices have been paid, the remainder of the invoice, minus any applicable fees will be paid to your company directly. Most factoring companies will provide you with a consolidated monthly statement so that you can review the transactions and for your company's record keeping.

Benefits of Accounts Receivable Financing

Pass off Collections: Outsourcing your accounts receivable management to another company can free up your previously dedicated accounts receivable resources to focus on other more productive activities such as selling. Once you sell your accounts receivables, the factoring company manages collection of the payment.

Free up Working Capital: Most small businesses have a need for additional working capital, yet have their assets tied up and are unable to qualify for additional financing. Accounts receivable factoring can provide your company with cash as quick as the same day for invoices submitted. This cash can then be used for your customary business expenses, to meet payroll or for business expansion needs.

Quick Financing: Accounts receivable factoring will not require a business plan, long applications, credit checks, tax statements or other financial information. Accounts receivable factoring is not considered to be a loan, so there is much less qualification work involved to establish a relationship with a factoring company. Also, the approval process can generally only take a few days instead of a few weeks when compared to traditional financing.

Assistance with Slow Paying Customers: One of the challenges that many small businesses face when trying to grow is that many of the larger customers that they are looking to partner with have slow paying accounts receivable policies. For example, many larger retailers have a standard payment policy of 90-120 days. If it requires a substantial amount of capital to fulfill their product orders, your small business could be placed in a cash crunch simply by accepting a great new, large retail customer. Accounts receivable factoring allows you to sell this invoice for a discount in order to capture the capital that you had to spend in order to fulfill the order.

Selecting Factoring: Many factoring companies will allow you to pick and choose which invoices you send to them to factor. This can mean a substantial cost savings to your business and will allow you to factor only the larger invoices, or the ones that you know in advance are going to be paid in the mid term, giving you the cash that you need and helping to justify the fees associated with factoring.

Once you are ready to consider factoring as an option for your accounts receivable, ask the following questions of the companies that you are interviewing:

* Is the money needed necessary for your company's survival? Or, are you looking to take advantage of a businessopportunity?

* How does this financing strategy match with your business plan? If you so not already have an established business plan in place, put one together prior to seeking factoring financing. Having a solid business plan will help you to make choices for your business that are in alignment with all of your business purposes and goals.

* Is your business in need of expansion capital? Have you explored other more traditional methods of financing?

* Have you reviewed the real cost of factoring your accounts receivable? For example, what percentage of your current repeating customers pay on time, how many pay late and do you traditionally have any issues with customers who don't pay?

* Have you researched multiple factoring companies to determine their rates and services before selecting one?

Getting financing can often mean the difference between a company closing its doors and staying open.

While it can do more than just prevent bankruptcy, many business owners are not aware of the process or its benefits. Spend the necessary time to investigate the companies you are working with, inspect the contracts prior to signing, and work to negotiate discounted rates for your business.