Receivables Factoring - How to Self Finance Growth

Do you own a company that is growing quickly? If your company were a car, do you feel like you are pressing on the accelerator while at the same time stepping on the brake? Or worse, that your growth is stuck in neutral?

Slow cash flow is the biggest challenge to company growth. And business owners, like you, know that the biggest cash flow problem is having to wait up to 90 days to get paid by your commercial and government customers.

Going to the bank for a business loan won’t help much, unless your company has a great past history. This is because banks give business loans based on past performance. What you need is a financing product that can finance your company based on its future potential. And who better to evaluate your future potential than yourself? This is where receivables factoring can help you. This is because receivables factoring is self-financing.

Receivables factoring, also known as invoice factoring, works by eliminating the 30 to 60 days it takes for commercial clients to pay you. It enables you to get a substantial portion of the money owed to you within a day or two of invoicing, providing you with funds to pay rent, meet payroll and more importantly – expand your business.

Imagine if you could get paid consistently, just two days after invoicing. How fast could your business grow? And without debt. This is how receivables factoring works:

1. You invoice your customers as you always do

2. You send a copy of your invoice to the receivables factoring company for financing

3. The factoring company advances you up to 80% of your invoice (20% is not advanced to cover potential disputes, etc.)

4. You get your money right away. The factoring company waits to get paid by your customer

5. Once your customer pays, the factoring company rebates you the 20% reserve, less a small fee

Factoring can be a very cost effective way of financing your business. The factoring fee is based on three factors:

1. The credit quality of your customer,

2. Your monthly volume and,

3. How long it takes customers to pay your invoices.

As a rule of thumb, monthly costs can go from 1.5% to 6% per month depending on these criteria. If you own a company that has a lot of capital tied in slow paying receivables and if you need financing right away, you should consider factoring your invoices.

About Commercial Capital LLC We can provide you with a no obligation factoring, invoice factoring or receivables factoring quote. For more information, please call Marco Terry at (866) 730 1922 Article Source: http://EzineArticles.com/?expert=Marco_Terry

Financing Growth Series - Part 2

In the first part of this Financing Growth series of articles, we began by observing that many businesses share a common risk...access to capital. Lenders' and investors' appetites have change and many business owners and executives are left wondering "how do I finance my company and who can I depend on?" In this article, we will explore alternate ways to back-stop or replenish permanent working capital for emerging growth and middle-market businesses. As in most recessions, the pull-back in demand has resulted in decreased sales...leading to operating losses or minimal profits. Losses usually erode working capital, and if not addressed quickly, they can lead to a company being in a precarious position.

Permanent working capital is the base capital used to fund core operations; this is different than short-term or cyclical capital needed to bridge a project, orders or few high growth months. The first step is to determine how much permanent capital is required. This is done by forecasting the financial performance of the company for several years...then evaluating the basic financial metrics of your type business and how they compare to industry benchmarks. It is likely that part of the need for capital can be satisfied with short-term funding and a portion may require permanent capital.

Depending upon how much equity is in your business, you may be able to obtain permanent capital in the form of a term loan. These loans are payable like a home mortgage with principle and interest paid monthly over three to five years. With an SBA guarantee, you may be able to get funding for as long as seven years. The SBA's 7(a) program is very popular at this time and being funded by commercial banks and some non-bank lenders (i.e. UPS Capital and CIT). Another type of debt that can be used to create long-term capital is a lease. Even with existing equipment, some leasing companies will purchase existing equipment and lease it back to your company...freeing the existing capital for use in current cash flow.

If your company is already significantly leveraged, you may require additional equity. The obvious approach is a capital called from existing investors or to recruit new investors. A more creative approach is to establish partnerships with key suppliers and/or customers that have a vested interest in your success, and arrange for an equity investment (or a loan that has equity like features).

Obtaining equity from an outside or unrelated party takes time and is expensive. Obtaining debt in today's market also takes time coupled with a strong go-forward plan evidencing your company's viability. We suggest that management be aggressive in controlling cost and managing cash until a clear path exists to fund your capital needs.

This article is written by Kenneth H. Marks, Managing Partner of High Rock Partners located in Raleigh, North Carolina. He is the lead author of the Handbook of Financing Growth published by John Wiley & Sonshttp://www.HandbookofFinancingGrowth.com You can reach him at khmarks@HighRockPartners.com Article Source: http://EzineArticles.com/?expert=Kenneth_Marks

Financing Growth Series - Part 1

Many businesses share a common risk in today's market...access to capital. With lenders' and investors' appetites changing - new levels and expectations regarding risk and returns - many business owners and executives are left wondering "how do I finance my firm and who can I depend on?" In this series of Financing Growth articles being published over the next few issues, we will explore the current market trends and funding alternatives for emerging growth and middle-market businesses.

Let's start with your bank. Most companies have some form of commercial bank credit, be it a line of credit, term loan, lease, etc... Commercial banks are primarily cash flow lenders using collateral as a backup source of repayment. So if your company is making less money than before or is struggling to be profitable, it is likely your banker is getting nervous. Just when you may need more capital and have a softening in your cash flow...the bank maybe trying to tighten your credit limit or worse call your loan. A proactive way to address the capital structure of your company is to look at your likely cash flow in the next one to two years and determine the overall needs (how much, what for, and when). It may be that you can refinance a various portions of your balance sheet with lenders that specialize in the supporting assets.

For example - If your company has fixed assets that have been paid for with your line of credit, you may consider refinancing them with term debt or a lease. Even if you didn't recently pay for them with line, you may considered a sale-leaseback of real estate or existing fixed assets to free some of the cash invested in these assets. Either of these techniques can be used to free the demand on your line of credit and easy pressure that you may be experiencing. Another alternative to a traditional line of credit is an asset based line which is more closely monitored by the lender....availability is directly tied to outstanding accounts receivables and inventory. A more expensive approach is factoring and purchase order financing.

We have found that the best solution begins with the end in mind...meaning that management revisits its overall strategy in building the company and takes a long-term view of its financing needs. Then backs into the current situation and how to correct or adapt to enable it to move forward.

This article is written by Kenneth H. Marks, Managing Partner of High Rock Partners located in Raleigh, North Carolina. He is the lead author of the Handbook of Financing Growth published by John Wiley & Sonshttp://www.HandbookofFinancingGrowth.com You can reach him at khmarks@HighRockPartners.com Article Source: http://EzineArticles.com/?expert=Kenneth_Marks