Working Capital: Financial Options For Small Businesses

Introduction

Large companies have always had a number of options that they could depend on to raise capital for their businesses. The have always had access to a number of alternatives such as selling stock, issuing bonds, bank loans and accounts receivable financing among others. Looking at the other side of the coin, smaller companies, those that have between $20,000 and $500,000 of yearly revenues, have always had a challenge trying to find capital to operate their businesses.

The lack of access to capital has prevented many small businesses from growing and capitalizing on the many opportunities that are available to them. It is not uncommon for small companies to reject large deals or opportunities because they do not have the necessary capital to obtain the resources to service the account. However, even when small businesses do take on large contracts, they find that they are never paid immediately upon delivery of services. Most contract terms demand that the supplier provide 30 to 60 days for the customer to pay their invoice - in effect, forcing them to extend them with supplier credit. The lack of adequate capital resources, along with the necessity to offer commercial credit to clients, creates a "perfect storm" that prevents small businesses from growing and that is very difficult to avoid.

A number of these issues could be sidestepped if the company had immediate access to working capital. Working capital could enable the business to add employees and resources to serve new clients and larger contracts. It also enhances a company's ability to extend 30 to 60 day payment terms to their customers.

This paper outlines the most common sources for working capital and provides an evaluation of each source. Each source has also been assigned a score, which summarizes the availability and flexibility of the source.

Scoring System

Each working capital source that has been evaluated has been given a score from 1 to 10. The following features where considered when assigning a score:

Accessibility to small businesses Requirement complexity (e.g. do they require significant financial reporting?) Flexibility Payment terms

A higher score indicates that the source of capital has a positive outlook on a number of these criteria and is available to small businesses. A lower score indicates that a particular source of capital may not be best suited for most small businesses.

Financial Options

Venture Capital - Score: 1

Many books and publications tout the benefits of obtaining venture capital to finance a new or ongoing operation. Venture capital is an option for small companies that have a seasoned management team and very aggressive growth plans, however, venture capitalists will rarely invest in small businesses that have no intention of going public. The venture capitalist objective is to invest in a company for a short period of time - say 5 years - and then cash out of the business while making a significant return on their investment.

Angel Investors - Score: 2

An Angel investor is a wealthy individual or group of individuals that typically invest in pre-venture capital companies. That is, companies that don't meet the current requirements of a venture capitalist but that could meet their requirements with a capital and management influx. However, you should not rule out angel investors completely since there are angel investment groups who focus on the growth of certain communities and will invest in small businesses. The best way to find an angel investment group near to you is to search them on the Internet using a search engine such as Google (www.google.com).

Banking Institutions - Score: 4.5

Most small businesses owners will first approach their bank to try and obtain a loan or line of working capital. However, unless the business has been in operation for a number of years, has substantial assets and all the appropriate financial records, their chances of obtaining any financing are minimal. Banks, however, can provide lines of credit if the business owner personally guarantees them. This means that the business owner will be personally liable for the repayment of these loans. These lines of credit can provide the business with the needed working capital; however they can be very risky, especially if the business does not produce the expected results and the owner is unable to repay the bank. Business owners should use this method of financing very cautiously.

Credit Cards - Score: 5

Much like bank lines of credit, many business owners use their credit cards to fund their businesses. Credit cards offer the ability to make purchases or obtain cash advances and pay them at a later time. It should be noted that credit cards can be a very expensive source of funding. Although most credit cards have reasonably low interest rates for purchases, their cash advance rates can be as high as 17% to 19% due to greater delinquency rates. Furthermore, most credit cards will charge you 2% to 4% of the face value of a cash advance as a "fee". Much like bank lines of credit, the business owner personally guarantees payment of a credit card. Thus, this method of financing can be very risky if the business does not produce the expected results and the business owner cannot repay the credit card company. Business owners should use this method of financing very cautiously.

Home Equity Lines of Credit- Score: 5.5

Business owners who are also homeowners have the option of tapping into their home equity to finance their ongoing business operations. Home equity loans and lines of credit have many advantages, such as low interest rates and the possibility of having some portion of it deducted from taxes . This method of financing gained a lot of momentum between the years 2000 and 2004 when interest rates where at their lowest point in decades and real estate was appreciating in value. A major disadvantage if this financing method is that it directly places the business owner's home at risk. In fact, the business owner is placing a bet - with their home as the potential wager - that the business will succeed and will be able to repay the loan. Much like lines of credit, business owners should use this method of financing very cautiously.

Small Business Administration - Score: 7.5

The US Small Business Administration (www.sba.gov) provides a number of very viable options to finance business operations. Although the whole scope of SBA services is beyond the scope of this paper, the SBA provides a "Microloan" program. The program objective is to stimulate micro-enterprises and provides loans of up to $30,000 to small businesses. These loans are usually provided through a financial institution or a bank. They have higher interest rates than traditional loans, but their requirements are more flexible, making them more accessible to small business owners.

Founders, Friends and Family - Score: 7

Friends and family are one of the most conventional ways of financing small businesses. Many entrepreneurs have been able to leverage existing relationships and obtain funding, either as a loan or as a capital investment, for their businesses. Although this source of funding can be easier to obtain that others, it does have some inherent problems. First, the business owner runs the risk of placing the relationship in jeopardy if things do not go as expected and the business defaults. Furthermore, these transactions are usually done with little formality and without written agreements, further complicating matters. If you elect to use this funding option, you should consult an attorney and draw some formal documents that describe the intent and responsibilities of each party.

Accounts Receivable factoring- Score: 8

Accounts receivable factoring, also known as invoice factoring, has been a source of working capital for large companies for many decades. It is now becoming mainstream and available to mid-size and small businesses. Factoring enables a company to sell their slow paying accounts receivable to a financial company, who in turn pays for the invoices within a day or two. After the sale, the financial company waits to be paid for the invoices. A key feature of factoring is that the factor will take the credit strength of the business' customers, as it's main consideration. Until recently, accounts receivable financing was out of the reach of the small business owner. However, enhancements in technology have now turned this method of financing into a viable alternative for small businesses. This means that a small company with little or no credit can leverage a strong roster of clients, sell their invoices and get funding very quickly. Factoring should be considered as an option for businesses that sell products or services to other businesses, rather than to consumers.

Conclusion

Obtaining working capital for their businesses is one of the most important decisions that a business owner can make. Like all important decisions, it should be carefully thought out and deliberately executed. The old adage that "the best time to look for capital is when you don't need it" is still true. You should spend some time researching the all available options for your business ahead of time, so that you can be ready to "tap" your war chest when the right opportunity arrives.

DISCLAIMER

This paper is written to provide small business owners with an overview of the financial options that are available for their businesses. However, this paper does not intend to provide financial or legal advice as only qualified professionals can do so. The author and Commercial Capital LLC disclaim all liabilities arising from the use of the information on this paper. Please consult a professional before making an important decision about your personal or business finances.

Invoice Factoring Group

Invoice Factoring Group and its small business factoring subsidiary can provide you with factoring and purchase order financing quotes at no cost to you. Marco Terry, its president, can be reached at 866-730-1922.

Accounts Receivable Factoring Allows You to Take Advantage of Your Biggest Asset (Part 2)

Another term for Accounts Receivable Factoring is Invoice Factoring, the terms are essentially interchangeable.

When you evaluate the statistics of the number of days your invoices are waiting to be paid and how many are over due. This is simply data about the likelihood of collections. It has nothing to do with sales and how to increase sales.

Do you consider a large Accounts Receivable as a bad thing? Most people do. To determine if this is a bad thing, or good, it will depend on how the Accounts Receivable is made up. Here is an example.

What I am referring to is, if you have a huge inventory finishing out a season, you will need to sit on the goods for several months while you wait for the season to come back. If you had the opportunity to sell off the goods right away, but wait 90 days to get paid, what would you do?

If it is a new customer and you have never dealt with them before, you will review their credit. You come to the expectation that it will take a few months to collect your invoice. Will you accept the order from the client?

Certainly not if we think in terms of the traditional role of the area of credit and collection and containment of risk.

Of course yes, if we consider the area of credit as a generator of value. Even better, use Invoice Factoring to collect on the payment with 48 hours of delivery of the goods and clear out the warehouse. Yes it will cost a bit in terms of a fee for Invoice Factoring, but now you will not have to pay for warehouse space.

This is a very simple example of how Invoice Factoring can help your company. Invoice Factoring will play a major role in the coming years of Commercial Finance and Commercial Credit as it is quickly becoming the preferred method for Working Capital finance.

Think, is 3 times cheaper to retain and maintain a client to get a new one and if Invoice Factoring will help you keep the business you have now, grow new business and reduce the stress of juggling your Cash Flow, you definitely need to speak with a Commercial Finance Broker.

Wade Henderson - very Professional - 15 yrs in the Business Finance Field - Gets the deal done.
IMMFinancial.com - Accounts Receivable Factoring - Accounts Receivable Financing

With Factoring - Businesses Run Smoother & More Efficient

Factoring has emerged as one of the most favorite ways of

providing cash flow to businesses. When businesses have

money they are able pay bills sooner and take advantage of

vendor discounts. In essence, companies can run smoother and

more efficiently with factoring. Factoring is the process of

speeding up cash flow by selling credit worthy Invoices and

Accounts receivables for cash. This cash flow tool has been

around for many years and has evolved into a powerful way for

small business to prosper and compete with big business. As

small business grows, they are able to offer flexible selling

terms to customers. This puts a strain on cash flow and creates

the need for urgent cash. Therefore by factoring invoices, a

business can offer flexible terms with the confidence that they

will have cash for the sale within a short period of time.

There are two types of factoring; Recourse factoring and non

recourse factoring. Recourse factoring allows the factor to go

back to the seller if payment is not received, normally after a 90

day period. The factor reverses the liabilities transfer back to the

creditor during the recourse factoring process. Therefore in

cases where customers default, the seller must buy back the

invoices from the factor. This is the most common type of

factoring the world over. Unlike recourse factoring, non

recourse factoring puts the risk of non payment fully on the

factor should customers fail to pay. The factor cannot seek for

reversal of the liabilities transfer back to the creditor. This

seems the more favorable factoring method for both the seller

and the factor. As for the seller, once he has sold the credit

worthy invoices, the deal is closed and credit risks eliminated.

The factor on the other hand will eliminate risks by buying only

solid credit worthy invoices. This will also enable the factor to

establish and sustain long term business relationships with both

the sellers and credit worthy customers. The cost is usually

higher for this factoring method because the factor assumes

greater risks.

However the best factoring solutions will entirely depend on

how a business feels about its customers. If customers pay

invoices on a regular basis, then recourse factoring will provide

the best solutions with less factoring expenses. Non recourse

factoring will be more suitable if elimination of unreliable credit

customers is the chief aim. As much as it brings along a higher

factoring fee structure, the peace of mind it brings along makes

businesses more willing to pay more and risk less.

Invoice and Accounts receivables factoring therefore, stands out

as a very effective process because it makes it possible for

businesses to offer flexible sales terms to clients. This

increases sales opportunities with credit worthy customers apart

from providing immediate access to cash. Unlike other trading

methods, factoring utilizes the credit quality of customers,

allowing the businesses to gain more working capital than bank

credit lines can normally offer. Factoring also provides

opportunities for collection help by courteous professionals

whenever desired.

If you are seeking an invoice factoring company, then Diversified

Financial Services is the smart choice. Our Financial Consultants are

ready to answer any factoring questions. Call today 800-954-0012.

Thomas McCarthy has designed, developed & implemented financial systems for many years. Thomas was a Factoring customer for over 7 years prior becoming a business owner and webmaster.

Download our FREE EBook "Growing Your Company Without Debt" learn how Invoice Factoring may be right for your company at: http://www.dfsfactoring.com

Building a Teacher's Home Business - Factors to Consider

Building a teacher's home business is perhaps the most practical and convenient investment an educator can make. For one thing, the space is free since you are doing the whole thing in the comfort of your very own home. Additionally, this is also a good opportunity to boost your finances, since you will be able to add some extra cash to your bottom line.

However, just like any other business, having a teacher's home business involves serious consideration and study. After all, initial money for investment is still needed, and your efforts will be put to waste if the venture does not prove successful. To get things right, it is necessary to consider some factors before starting up a business. It can mean the difference between a successful undertaking - or a failed one.

Factor #1: Readiness. When you decide on building a teacher's home business it is important to assess yourself to see if you are indeed ready for one. For example, make sure you have sufficient capital to build it. Although you are simply building a home business, there are still things that you need to spend on. For instance, you will be investing in advertising. Next, make sure that you are mentally and emotionally ready. You must have the will and the heart to start on this and keep it going. It is hard to maintain a built up business if in the middle you feel like giving up. So make sure you are indeed ready - both financially and mentally.

Factor #2: Resources. Before building a business, double check if your resources are already in place. These are the materials you will need to come up with for your business and your product. Double check if your capital is enough for the business' expenses. This may involve buying equipment, or paying wages for labor. If you need raw materials for your marketed product, make sure you have a continuous supply. As an added note, you can even consult someone who can provide you with these materials and start a partnership to save more time and money.

Factor #3: Labor. In every business, the most important factor that must not be overlooked is the people who are involved. If you happen to be working alone, or your soon to be business will only involve you as the owner and worker, then this factor could be very simple for you. But if you feel the need to hire others to improve services or increase production, then make sure they are qualified for the position they would be filling. In addition, they must be ready to work come the launch of your business.

These are just a few of the many things a future business owner must consider before setting one up. These are important in order to assure a successful venture from inception to end. Building an enterprise is a serious endeavor, but can be a fulfilling as well.

Thinking of starting up a teacher home business? Check out http://www.teachersbusiness.com/teachersmakemoneyonline first!

Why is Everyone Talking About Factoring & Accounts Receivable Financing in Canadian Business Circles

There continues to be a fair amount of press about the alternative financing method known by a number of different names - These include Factoring, Working Capital Financing, Cash Flow Financing, Invoice Discounting, etc!! Let's keep it simple and we'll just call it factoring for our purposes.

The old clich? that the 'cheques is in the mail 'probably has never run more true for Canadian business owners and financial managers. Receivables, on balance, tend to be in most cases either the largest (or pretty close to it) liquid asset of the company, next to cash. And there is never enough cash.

As the economic challenges of 2008-2009 massively affected business credit liquidity all over the world, including here in Canada the other clich? of 'cash is king' became even more important. Many business owners we talk to continually say they are devoting too much time to collection of receivables and their working capital issues, rather than focusing on running and growing their business.

We should mention that as Canadian business owner's work on liquidating their receivables into that much needed cash that it is, many times, the larger corporations that are paying them as slowly as their smaller customers. Larger corporations by delaying payables can increase their own cash flow rations significantly, and the smaller customer or supplier, your firm, has little leverage with such large corporations. (We won't name any names to protect the innocent!)

Standard payment terms for most industries, more often than not, is 30 days, but it is of course not unusual for suppliers to stretch out to 60 and sometimes even 90 days.

So where does factoring come in. It certainly can be a consideration for Canadian business owners, as it alleviates the problems we have mentioned above - namely high investment in current assets of receivables and inventory, and prolonged delays of payment from even the largest customers.

The 'factor ' purchases the account receivable, withholds a fee for doing that, and advances cash immediately, almost the same day, against those invoices.

Factoring has been around over a hundred years or more, and has gained huge acceptance in Europe and the U.S. - It certainly never caught on in the past to the same degree in Canada as it has in other places. Some analysts estimate that in the U.S. it's a 100 Billion dollar business, and in Canada it's a 4 Billion dollar business.

So let's get back to our core theme - why is everyone talking about Factoring. Again, it's the instability of the financial markets and the difficulties that smaller and medium sized firms have in arranging 'adequate' business financing. We emphasize adequate because yes, it is great to get a line of credit at your bank of say $ 100,000 at current Canadian rates of 5 or 6 per cent per annum, but if you need 300,000.00 and all your collateral is tied up what good does that do - not a lot.

We believe factoring has done when primarily because of the tightening of chartered banks - Business owners go where the money goes, so alternative non traditional financing such as factoring will continue to do well when banks tighten credit facilities

As Canadian business optimism improves, but credit remarkets remain unstable to a certain degree factoring continues to be a solid viable solution. If your firm has assets such as receivables and in some cases inventory or purchase orders the Canadian business owner can obtain immediate cash for those assets. Most of these firms would not qualify for larger term oriented loans with various financial requirements such as other collateral, debt covenants, operating covenants, etc.

Depending on which type of factor facility the Canadian business owner chooses the facility can also reduce his collection and administrative work.

The best candidate for a factoring facility is a high growth firm with good gross margins. That profile is very important. Why is that? It's because factoring is more expensive than bank financing, so the firm gets all the cash it needs, but margins are eroded by a couple per cent age points. A low margin, commodity type business is not optimal for a factoring solution...

In Canada, as we have noted, factoring is still not widely accepted, in the U.S. it is dominated by a couple of huge players and probably a thousand smaller firms.

In summary, factoring continue to gain traction in the Canadian business financing marketplace. It is more expensive than bank financing, but provides a lot of liquidity that could otherwise not be found. Business owners need to thoroughly investigate this type of financing if they feel it's appropriate, or engage the services of a trusted financing advisor in this area with credibility and solid partner firms in this area.

Stan Prokop is the founder of 7 Park Avenue FInancial.

See http://www.7parkavenuefinancial.com The company originates business financing for Canadian companies and is a specialist in working capital and asset based financing of all types. For more information or contact details please see: http://www.7parkavenuefinancial.com/Home_page.html.

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Small Business Finance - Mistakes to Avoid When Factoring Receivables

Running out of cash to run a business is something that no business owner wants to occur. But even if you are the most careful money manager in the world an unexpected series of events can send your company spiralling and cash flowing right out the door. In those times you need solutions to help you through financial distress. One way to meet funding needs is through factoring account receivables. To make this option work for your business here are two factoring mistakes that you should avoid.
Missing the Signs of Financial Trouble
Factoring is the process of selling a customer's account to a lender in exchange for a percentage of the balance that the customer owes. Business owners typically turn to this option when customer payments are slow, sales decline, or expenses are rising faster than the growth in revenue. Before agreeing to a factoring arrangement you should prepare a cash flow projection. This will help you pinpoint cash needs, see exactly when revenues are expected to come in, and when shortfalls may occur. As you note the shortages, it is important to determine the cause of negative cash balances. Having this information in advance will help you see how your projections will change over time. When possible try to secure funding before you need it because failure to do so can put your company at an unfair borrowing advantage. Have other options available so that you have some leverage when negotiating factoring terms.
Confusing the Sources of Cash
Another word of caution involves being fully aware of where cash comes from in your business. It is easy to be deceived by the deposits that you see in your account when you do not adequately track cash sources. If your plans are to get out there in a big way you will need to manage big money. So stay informed every step of the way with financial reports. This can make the difference between needing factoring and having adequate cash reserves to take on larger projects. Refer to your company's income statement, balance sheet, and statement of cash flows for the information that you need. It is important to understand what the reports are telling you so that you are not misled by a cash balance that is derived primarily from debt.
Factoring receivables is one of the many options available to help meet the cash requirements of companies. Use this resource wisely by preparing forecasts and negotiating fair terms. Set your sights on building a company that can sustain itself. The ultimate cash flow picture is one where most of the cash comes from revenues and investments. Learn more about receivables factoring and funding a small business at http://www.tbsusa.com/



Copyright (c) 2010 Benita Tyler
TBS USA is committed to helping small business owners by providing proven financial management strategies to help them achieve their profit goals, minimize tax liabilities, and build wealth. Business advice and tax tips are available at http://www.tbsusa.com/

The Business of Factoring: A Manager's Guide to Factoring and Invoice Discounting

American Factoring LawFactoring is one of the fastest growing financial services in the UK and yet it is often under-used and misunderstood. This book explains in a practical way how factoring and invoice discounting can help organizations to develop. Aided by real life illustrations, Hawkins demonstrates how to use factoring effectively and ensure its continuity. This book examines the strengths, weaknesses, prospects and risks of the entire factoring industry and illustrates the benefits of this financial facility.
Price:

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The cash-flow factor: is debtfactoring for you. (Special Feature/Debt Factoring).: An article from: NZ Business

This digital document is an article from NZ Business, published by Profile Publishing Ltd. on May 1, 2003. The length of the article is 1407 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

Citation Details
Title: The cash-flow factor: is debtfactoring for you. (Special Feature/Debt Factoring).
Author: Rey Chapman
Publication: NZ Business (Magazine/Journal)
Date: May 1, 2003
Publisher: Profile Publishing Ltd.
Volume: 17 Issue: 4 Page: 30(3)

Distributed by Thomson Gale

Price: $5.95

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SIAM GENERAL FACTORING PUBLIC CO. LTD.: Labor Productivity Benchmarks and International Gap Analysis (Labor Productivity Series)

Clearly written in a simple and engaging style, Factoring Small Receivables has become the standard reference on this subject.

This book shows the aspiring factor how to start a small factoring business, how to find, qualify and work with clients, and how to avoid common errors and limit risk. A sample factoring transaction puts it all together, step-by-step. With common sense directions and first-person experiences adding ?been there? flavor to each page, the reader will learn how factoring small receivables can be a lucrative and enjoyable business, as well as an excellent tool for investing retirement or discretionary funds.

Price: $210.00

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The Importance of B2B Business Factoring of Invoices

Accounts receivables, when held back, holds up company capital. The sale of your invoices to a factoring company provides quick cash that is usable for your business right away. It is a struggle for small business owners to obtain cash at times and that is why it is important for B2B business factoring of invoices to a factoring company. The importance behind B2B business factoring of invoices becomes evident when a business is facing a financial crunch.

Many small business owners do not want to become bogged down with loans that yield a high interest rate. When the business needs ready cash for company survival or even to take advantage of an opportunity is when B2B factoring of invoices becomes a vital means of income to the business. Factoring out a company's invoices does not require a business plan or tax statements. The cost behind doing this factoring is minimal for only a month or two; however, on a long term basis it can become more costly than a loan.

The idea of B2B business factoring of invoices may seem the solution you need for your circumstances. It would be advisable for you to consider some of the following facts:

o Do you really need the money for your company's survival?

o Are you taking advantage of an opportunity that will enhance your business?

o Have you checked to see if this type of financing matches up with your business plan?

o At this time do you feel your business is ready for expansion and more money?

o Is this Accounts Receivables factoring your only way out or have you tried a small business loan?

o Finally, what are the current economic and industry conditions? Is now the time to finance or should you wait?

B2B business factoring of invoices plunge can mean the difference between company survival and bankruptcy. As a business person we understand that obtaining cash is one of the most vital means of keeping the business alive and doing well. Remember that this process is not regulated as the banking industry. We should investigate such things as the company we are going to work with. Make sure that you negotiate the rates, and inspect contracts. After you have done your homework and feel your ready then go with confidence.

The latest method in converting your invoices into fast cash is referred to as Inzap. We wanted to mention this procedure as it is a form of B2B business factoring of your invoices. Inzap has some good advantages that you might want to use. The fact is you can convert your invoices into fast cash for about 2% which is the best rate around. It only takes a few days to get your money but Inzap offers a more attractive payment terms to business customers.

This is a new approach to B2B business factoring of invoices. You do have many advantages over the traditional factoring services. I would like to mention some of these advantages for you to consider.

o The rates are lower about 2% of the invoice amount.

o The cash is available in just a few days.

o There are no minimum requirements you can use Inzap as little or as much as you like.

o You receive 100% of the cash upfront minus the fee charge.

o It takes about 5 minutes to sign up and they accept small business owners as well as the larger ones.

o You control your customer relationships while your customers enjoy getting more attractive payment terms.

Many business owners wonder why Inzap can offer such good services and low prices over the traditional method of factoring invoices. The importance of B2B business factoring of your invoices is always noted as essential to business. That is one of the main reasons that you should always investigate any business that you plan on doing factoring of your receivables with. Inzap has two good reasons that are beneficial to them which help them to keep good rates for the service they provide. The following two primary reasons may affect your business but you are the one who needs to consider if it will or not.

o One of the main things that Inzap does not do is insure you against non-payment by your customers.

o Cash flow is sped up but if your customer doesn't pay for any reason then Inzap makes you responsible to pay them back. When you use this service I would advise that you use customer accounts that you can depend on.

o Inzap may start you out with a low credit line and build you up over time.

The B2B business of factoring invoices is indeed a method worth considering as a means of getting fast cash without the hassles.

This article has been supplied courtesy of Bill Darken. Bill often writes and works closely with Small Business Answers who can help with more information on B2B Business Factoring. This site is dedicated to supplying the latest news and articles on small business factoring to assist people progressing and with information and news. You can also look for small business information at small business answers. Small Business Lons are accessed at, http://loans-only.com/

What is Small Business Factoring Really About?

When your company sells your accounts receivable to a factoring company at a discount in order for them to collect the payment, that is called Factoring. The responsibility of the factoring company is to collect the payment of your accounts receivable as quickly as possible, and your company pays a fee for their services. Many of them, are paid at front with a range between 70% and 90% when they first collect your invoices. In most cases, the fees they charge range between 2% and 5%, but they can vary depending on the situation.

Why and when to use Small Business Factoring.

The cash flow is king for a company! 80% of business failures are directly attributable to a lack of cash flow and/or working capital. A company can grow at a rapid pace, but if billed monthly sales do not produce cash in time to pay wages or creditors, it may also fail due to lack of cash.

Small Business Factoring allows a company to sell their invoices to a third party, at a discounted price in exchange for an amount of cash in advance before the bill expires. Besides the benefit of having cash available earlier than expected to cover operating expenses and growth, factoring does not usually affect assets outside the company and involves the payment of a debt at some future time or on a certain date, and frees the internal resources normally devoted to keeping track of accounts receivable collections and performance.

Small Business Factoring can be an attractive tool for many companies, but could be more appropriate for those whose activities are expanding rapidly. For businesses that have sufficient volumes of accounts receivable and sales levels, Factoring can also be a valuable financial tool.

Although there is a cost to your company for Small Business Factoring, the amount or a portion of it should be included in cost of sales and / or justified in terms of the value of having money available in advance for the operation of your business. Often companies can raise prices or take advantage of supplier discounts and benefit from better purchasing power which provides them with additional capital.

The following factors are imperative in the calculation of factoring fees:

Risk: credit worthiness of the debtors (customers).

Maintenance: Work that involves the administration of their accounts receivable. In other words, if you have a large number of small bills or a small number of invoices for amounts higher.

Collection time. The least the better.

The volume of the accounts receivable to be handled. The larger ones pay smaller fees.

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Small Business Financing.

Why Consider Small Business Factoring?

In Business, everyone has creditors and debtors. If you are a Small Business owner, your largest debtor is represented in your accounting books as accounts receivables. The total of your Accounts Receivables is the expected collections from your debtors.

You bill each customer for the amount they owe you and until they pay, each invoice is recorded as Accounts Receivables in your books. But even though this figure actually represents current assets to your company, they cannot be used to finance anything. That's where Small Business Financing comes in.

There are many different terms used as synonyms for Small Business Factoring such as Invoice Discounting, Invoice Factoring and Accounts Receivable Factoring. With this type of Commercial Lending, a company would sell or offer as collateral their outstanding Invoices to a Commercial Funder who would advance them a percentage of the face value of the Invoices. The advance rate will vary from Commercial Funder to Commercial Funder, but an average will be 85% of the Invoice face value.

Once you enter into an agreement with a Small Business Factoring Company, the Factoring Lender will now take over the rights to collect the debt amount from your debtors. Thus your debtors would be informed to pay the Factoring Company directly on behalf of your company. This works out to be a win-win situation for you and the Factoring Company.

The advantages to Small Business Factoring are many, here are a few:

1. Cashflow Increased: With an available Cashflow, your company will be able to pay bills and meet payroll without having to worry about having sufficient funds.

2. Predictable source of funding for your business: You will not be forced to wait for 30 to 90 days to collect on your sales; you will have funding available to you within 48 hours of generating your invoices.

3. Reduced reporting: As you know, when you have a traditional Line of Credit with a bank, you will likely need to do monthly reporting to stay within the covenant set out by the bank. With Small Business Factoring, you will not need to do nearly the same reporting. In fact, much of the Accounts Receivable reporting is done from the Factoring companies systems.

4. Fewer rules than banks have: Banks are famous for their strings being attached to everything. Factoring Companies do not have as many rules and are more flexible for changing situations.

Now that you have seen some of the advantages of Small Business Factoring it is time to speak with your Commercial Finance Broker to see which programs fit your company the bestBest of all, most Commercial Finance Brokers are set up with the Small Business Factoring companies and they pay your broker, not you!

Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done.
IMMFinancial.com - Factoring Companies - Factoring Company

Starting a Restaurant Business - Factors to Consider

For many entrepreneurs, starting a restaurant business represents a great way to make a good living while doing something that they love. The restaurant business has a high failure rate though with many people quickly realizing that there is more work involved than they originally anticipated and they find that they are not really suited to the restaurant business. Here are some things to consider before you jump in to this industry and invest your time and capital into opening a restaurant.

1) Qualifications and experience. While these are not absolutely necessary you will be drastically increasing your chances of success if you have or can acquire a qualification from a culinary school or if you have some other kind of food, beverage or hospitality industry experience or training

2) Business management skills. If you don't have reasonably good skills and knowledge in areas like bookkeeping, marketing and management there are numerous courses in small business administration that you could consider taking before you take the plunge with your own business.

3) Creativity. To be a successful restaurant owner it helps to have some creative talent. You will have to come up with a marketable restaurant concept possibly with a theme, coordinate interior designers and have considerable input into menu development.

4) Long working hours. Unless you focus on breakfast and lunches only you will be likely be working long shifts late into the evening, possibly seven nights a week to start with. You will need the support of your spouse and your family if you are going to be spending so much time away from home. If you intend to work with your spouse as partners in the business then you will have to be certain that your relationship is rock solid and that it can handle the stress of working together.

5) Startup capital. You will need to have access to sufficient funds not only to get your business up and running but also to support yourself in the early days of your restaurants life when revenue is still low.

6) People skills. As a restaurant owner you will have to be a good communicator and be able to relate well to all kinds of people such as suppliers, city officials, customers and staff. You should be a strong leader capable of organizing a team.

7) Hard work and organization. To get everything done you must have good time management skills and be organized. As you won't have a boss telling you what to do you will also have to be self-motivated in order to get things done and to achieve your goals.

8) Calm and confident. Challenges will arise almost daily in the restaurant business in the form of one crisis or another. As the leader you must keep calm, avoid stressing out your employees and take control of the situation.

Their are many things that you should consider about yourself before you deciding to go ahead and start a small restaurant. Some of these skills and attributes can be acquired along the way or before you start but all will play their part in determining your success.

For expert guidance on starting your own restaurant visit -

http://www.StartaRestaurantBiz.com

To compare some of the top guides, startup kits and resources for restaurant industry entrepreneurs.

Small Business Factoring - Finding a More Flexible Alternative

For a small business, factoring used to be among the most attractive alternatives to traditional lending. However, now there is a more efficient way for small and mid-sized businesses to quickly access the working capital necessary for improvements and growth.

Similar to factoring, this form of invoice financing offers an online marketplace where sellers can auction off accounts receivable(s) for faster access to cash rather than waiting for their customers to pay the invoice. This can help businesses dramatically improve cash flow, considering the credit terms extended to most customers are typically 30-90 days.

Why is this market-based solution to receivables finance more advantageous than small business factoring? Simply put, the small and mid-sized business maintains complete control of the receivables auction process whereas factoring gives power to the factor.

It often requires an all-asset lien agreement which means all of the accounts receivable must be made available to the third party factor and allows your customers to be notified that the receivables have been sold. It also allows the factor to set the price -how much you will receive as an advance amount and how much of a fee they will charge you - for purchase of the invoices.

Unlike most small business factoring relationships, the online receivables auction marketplace maintains the privacy of the seller. By selling accounts receivable through an auction marketplace, the seller retains control setting the auction parameters and pricing. To add to the flexibility, the seller also gets to choose which invoices to sell, how many to sell and when he wants to list the invoices for auction.

Although any outstanding commercial invoices can be sold, Sellers often find that by selling often and building a solid history and/or selling invoices from investment-grade account debtors with good credit ratings often get the best cost of capital.

Understandably good credit risks and solid transaction history tend to expedite the auctions because they are an attractive acquisition for buyers (accredited institutional investors). The receivables seller can expect the advance amount to be funded in as little as 24 hours after the auction closes.

While small business factoring often requires an all-asset lien, using the online auction marketplace gives small and mid-sized businesses control over their cash flow and significantly reduces the number of Days Sales Outstanding which provides them the freedom for growth.

Flexibility and multiple sources of capital have proved to be essential to small to mid-sized company success, especially in today's economy. The old days of reliance on one source of funding are over. This innovative online receivables marketplace can provide both flexibility and diversification of funding sources.

The financial flexibility allows the seller to maintain control of the transaction. Small and mid-sized businesses are the backbone of the U.S. economy. It is these businesses that will turn the economy around and drive sustainable U.S. economic growth. By selling receivables on this innovative online auction platform businesses can quickly access working capital and refocus their efforts on day-today operations and growing their business.

With small business factoring, working capital requirements of small business can be met effectively with the help of invoice financing. Know more about the process at http://www.receivablesxchange.com

Wholesale Business - Factor Indicators in Wholesale Business

There are factors that indicates assured places in the business world and become successful. The first factor to consider is that wholesalers help customers merchandise their goods. Wholesalers do this by telling them about the good practices of the efficient merchants among their customers. They get involved in the promotional advertising of products, even advising retailers how to display their products and how to price them. They instruct retailers on good merchandising techniques, and encourage them to enhance their image with attractive storefronts, more effectivelyu designed and illuminated interiors, and attention-arresting advertising campaigns.

We also consider that wholesalers help retailers with their buying. Wholesalers keep their customers posted on price changes, new lines of merchandise, and merchandise being discounted. This service is valuable to retailers since it eliminates some of their accounting and clerical costs.

Wholesalers offer assistance to customers in running their businesses. Often, this assistance is not easily available from other sources. Like for example, wholesalers compose accounting forms for use by the retailer, offer product and sales training for customer employees, provide purchasing and inventory maintenance services, assist their customers in computerizing their systems, and establish computer-to-computer systems for access to wholesale and retail prices, stock replenishment, and accounting assistance. Because the astute wholesaler recognizes that his or her business depends on the success of the retailer, the range of assistance offered is wide.

These factors indicate why, even in the face of increasing competition from manufacturers and the growing number of national chains, independent wholesalers have an assures place in business and the resources with which to prosper.

The key resource is their lower cost of purchases; the size of a wholesaler's order entitles it to discounts not extended by manufacturers to retailers. In computing discounts manufacturers also consider the savings in shipping costs resulting from sending a large amount of goods at one time to one place. But this resource is a vulnerable one. Wholesalers can only profit if the addition of their overhead expenses to the cost of merchandise still permits them to charge the retailer a lower price than the retailer could have gotten directly from the manufacturer. The ability to do that depends entirely on meeting customers' needs with high efficiency. Failure to meet such needs efficiently is the leading cause of wholesaler failure.

Price is not the sole factor considered by retailers in choosing suppliers. They also take into account the services wholesalers perform and are inclined to go to and stick with those who help them prosper in their businesses.

As Seen on BBC News, FORBES and CNN Money
See: Dropshipper Wholesale (Platinum Edition) and Turnkey Store Online

Shanie S. Geralds gave up her full time job a year ago and has since been running a very successful eBay business online. Find out how she manages to move over $70,000 in sales monthly, with profits being as high as 40%! Learn How To Leverage!