Electronic Invoice Factoring Blog

Small Business Factoring - Does Your Personal Credit REALLY Matter?

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You've seen advertisements from many small business factoring companies indicating that your personal credit does not matter and that factoring companies really only rely on the credit worthiness of your customers.  This is true to a large degree, however, it is important to note that many small business factoring companies want to get a sense of how much a person cares about maintaining a good credit history. 

Often times, we encounter potential prospect clients that have poor credit.  Many of them have very reasonable explanations for the reason why their personal credit is less than stellar.  For example, one client of ours was in a car accident and his car was totaled.  Due to the fact that there was litigation and the insurance company was involved, he had to wait to receive a settlement from the insurance company for the wrecked vehicle.  However, this amount was not sufficient to pay off the auto loan he had on the vehicle.  A multi-month adjudication process ensued prior to his having the ability to settle up with the auto lender.  The auto lender's servicer went on auto-pilot, and when payments didn't show up every month, whammo...his personal credit got whacked. There was a very reasonable story that explained his poor credit score, and when we pulled his credit report, this is exactly what we saw.  His candor and transparency about the issue was appreciated during our underwriting process.  This is just one example and why we often encourage prospects to apply for factoring services even if their credit is less than perfect.

I was very pleased to see the news in a recent Wall Street Journal article regarding the Credit Agencies that the US government is getting involved (for the first time) in providing some additional oversight to these huge companies in an effort to assist the consumers they rate every day.  Consumers need the ability to dispute items on their credit reports, and have corrections issued in a more timely manner.  In the end, if there is just a better process for this, it will make for a better resolution system when reasonble disputes arise.  Rather than having "no one to talk to" and since the credit rating agencies have such a strong influence on validating a person's "reputation", hopefully this new focus by the US government will push for some solid reforms for consumers...and entrepreneurs.

To learn more about Accounts Receivable Factoring Services download our free Factoring 101 Guide by clicking on the button below, or give us a call at 888-833-2286.

Invoice Factoring Companies Part 3 - Financing Mobile App Revenue

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Factoring Invoice Finance - Part 2 - Online Advertising Finance

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The second article on our series for web services companies will focus on how Fast A/R Funding can be the factoring invoice company of choice for online advertisers.

We spend a lot of time and money advertising on the internet so we are familiar with the industry.

Online advertising through affiliated advertising networks continues to expand with total payments to publishers worldwide under the AdSense program alone exceeded $6 billion in 2010 and were expected to exceed $7 billion in 2011.

If your company generates revenue as an ad publisher on Google's Adsense display network we can help finance your company through a process called invoice financing or invoice factoring.

The process is relatively simple.  Once your ads are displayed and Google notifies you of the amount you will be paid, you can a get a payment right away from us instead of having to wait for Google to pay you directly.

We built our own software from the ground up to make the process and as efficient as possible with no paper documents.  

• Totally online process
• FREE to apply
• Approvals generally in 48 hours.

Online Factoring Services - More benefits then just Cash Flow!

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So you're heard about factoring services, but for the most part, you've really only focused on the "factoring" part.  You've gone down your checklist as you've conducted your research and due diligence to learn about invoice factoring, or as it is otherwise commonly called, accounts receivable finance.  Your initial checklist may have included items such as:

1. Advance rate
2. Eligible collateral
3. Pricing
4. Factoring agreement
5. Amount of time before initial funding

All of these items are indeed important to the transaction you ultimately enter into with a factoring company, and ultimately a factoring relationship will help to smooth out your cash flow month to month.  However, there are some other significant benefits to the "service" part of the term factoring services.  These items include:

1. Ability for you to check the credit worthiness of your customers
2. Removal of the administrative burden (and cost) of mailing invoices to your customers
3. More robust financial statement

First, a company providing factoring services is very focused on the credit worthiness of your customers because that is the primary repayment source of any invoices you factor.  Therefore, many factoring companies have excellent access to various business credit reporting agencies.  Since factors are checking customer credit very often, they buy access to these databases at reduced rates and often can pass that savings along to you.  Also, factors work with other factors and can check on mutual customers in the spirit of being good corporate citizens.

Next, many companies providing factoring services take over the burden of mailing the physical invoices and back up documentation to your customers.  At Fast A/R Funding, we use an electronic uploading and invoice creation tool so that it is super easy.  At that point, you're done, and Fast A/R Funding's back office prints out and mails the invoices to your customers...at no extra cost to you.  Depending on your volume, the postage savings can be something...in times like these, it's has more impact on your company's bottom line than any interest rate you'll earn at your local bank for your business checking account!  Every bit helps!

Finally, when you use a factoring service, it is different that borrowing money from a bank.  When you borrow money, you have "debt".  When you present your financial statements (Profit & Loss, Balance Sheet, & Cash Flow), you don't have a line item of "debt" on your Balance Sheet.  This often makes outsiders more comfortable with your businesses financial health.

So, as you can see, it is worth the time to pay attention to the other "services" associated with a factoring relationship.  The three examples above are definite value-added services that you can access through an on-going relationship with a factoring company.

If you want to find more information about invoice factoring, please download our Factoring 101 Guide by clicking on the button below, check out our FAQ, or give us a call anytime at 888-833-2286.

Invoice Finance for Web Services Companies - Part 1

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Invoice Finance for Web Services Companies - Part 1

Our next series of blog articles will focus on invoice finance provided by Fast A/R Funding for companies that do business on the web.

We view ourselves as an internet company so it is natural that we provide invoice financing to other companies that generate revenue on the web. 

Over the next week we will producing some articles about invoice finance that focus on three types of businesses:

1. Daily Deals - (Groupon, Living Social, Google offers)
2. Online Advertising - (Google and Bing adnetworks)
3. Mobile Ap Sales - (Apple, Android)

Invoice Factoring - It's the best alternative when you need cash!

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Let's face it, when you need cash for your business for growth, to make payroll, to purchase equipment or raw materials, it isn't always readily available.  The traditional places entrepreneurs think they should go are a bank (for a loan) or Angel or venture capital investors (for equity).  In today's investment climate, both are probable dead ends...why??

Most business owners would first think about borrowing money from a bank. After all, that's what they are supposed to be there for anyway, right?  As you will hear in most publications, loans from banks to small businesses are VERY difficult to come by and take lots of time and paperwork, when they arrive at all.  SBA loans do exist, but take a look at this article about SBA Loans and you'll get a sense of what is involved...YUCK!

So, the next thought to cross a business owner's mind might be to find a wealthy investor or venture capital firm to invest in "this great business which has lots of potential".  I'd need pages and pages to write about the challenges of getting an equity financing done, but I'll just cut to the chase and give you the conclusion...getting this type of investor funds isn't just about giving up a "little piece" of your company, it truly means having to deal with "bosses" you never had and to do it in a proper way (which limits the liability of an entrepreneur) costs a decent amount of money with a securities lawyer (just because you're a private company doesn't mean you should skimp on formal legal documents...this can hurt you big time).

This leads us to the unknown world of invoice factoring!  So simple, so fast, and leaves you in control of your business.  Most people don't think about it because it's just not well publicized and sounds fancy.  The bottom line is that if some of your customers are really solid companies, invoice factoring will be a much faster way for you to access needed cash.  Here is a simple description on Invoice Factoring Services.  Or, if you want a full whitepaper on Invoice Factoring, download our free Factoring 101 Guide by clicking the button below.

If you want to talk to a live person and get a free consultation, call us at 888-833-2286. 

Freight Bill Factoring - All Online with No Paper Documents!!!!

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Freight Bill Factoring - All Online with No Paper Documents!!!

At Fast A/R Funding we are seeing a large influx of clients from the trucking and transportation industry. Our new freight bill factoring clients are coming from a combination of sources, but what is so exciting or for us is that a lot of the business is coming from word of mouth from our current clients.  The highest compliment we can receive is having one of our clients refer us to a friend who is in their same industry.  

From my conversation with clients and prospective clients what makes our program so attractive is that it is efficient and easy to us.  The following is a short list of the reasons companies are looking to Fast A/R Funding as their freight bill factoring company of choice:

• It isn't unusual to have new clients funded within 48 hours
• It costs nothing to apply
• We are funded by a group of successful entrepreneurs and are not dependent on outside banks or other "Wall Street Schemes"
• Our contracts are generally short.  
• We don't have charges for factoring minimums
• Our system is great.  We built our own system that eliminates all the paperwork traditionally associated with freight bill factoring.

Debt Factoring - The Budget Process - Part 4. What? (cont.)

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Debt Factoring - The Budget Process - Part 4.  What? (cont.)

In part 4 of of our series on the budget process we discussed exactly what we should be projecting for our business as part of the budget process. Today's post will continue that discussion with a focus on balance sheet items.  

You may ask why we need to spend time projecting what our balance sheet will look like over the year when we have already spent time projecting our profit and loss statement that will show the financial performance of our business.

Projecting balance sheet items is valuable because it will give you an idea of what assets and liabilities your business will need in order to produce the financial results outlined in your profit and loss.  Will you need to increase your line of credit with your debt factoring company?  Will you need longer terms from your vendors?  Will you have to increase the size of your facility to support the increase in sales you are projecting?  These are just some of the questions that a good balance sheet budget will help answer for you.  

Just like your profit and loss you want to spend the bulk of your time projecting the largest items on your balance sheet. Unless you have information to the contrary a balance sheet projection can be as easy as increasing each balance sheet item as a percentage of the increase in your profit and loss.  When we put together the budget for our debt factoring business we know that the largest items on our balance sheet will be the accounts receivable that we purchase and the equity and liabilities we need to purchase them.  If we expect our gross revenue to increase by 50% for the year and our gross profit to be stable it is safe to assume that the largest items in our balance sheet will grow linearly with the increase in gross revenue.  

If we start the year with $10,000,000 in accounts receivable on our balance sheet we know that at the end of the year we will have accounts receivable of $15,000,000.  Please keep in mind that your balance sheet projection could be affected by things like seasonality and other things that could cause the growth to not be as linear.  

If we expect accounts receivable to increase by 50% then we know that the assets and liabilities will increase by a like amount. For our firm what is important is that once we account for an increase of 50% revenue we have to be sure that the financing we have in place with our funding sources will be able to accommodate that kind of growth.  The most important balance sheet items will be different for each firm depending on what type of industry they are operating in and where the company is in its life cycle.

Look for our next article in this series later this week.

For more information about our electronic debt factoring company please click the link below or give us a call at 888.833.2286.

Factoring Loans - The Budget Process - Part 4 - What?

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Factoring Loans - The budget Process - Part 4 What? (continued).

In our last article (click this link to see the previous blog entry entitled Factoring Loans - The budget process - Part 3 What?) we discussed what we should be forecasting in our annual budgets.  We focused on Top Line Revenue as the starting point for all of our budgeting.  In today's article we will focus on estimating the fixed expenses that go into our budget.

Now that we have a gross revenue number we are comfortable with we need to start thinking about the expenses it takes to produce the forecasted revenue.  I always start with our historic expenses and go through each line item and think about what we will need to add or subtract to meet our budget.  Start with the largest expense item and think about how they relate to your revenue forecast.  The large expense items that make affect your income statement are different for every business.  In our factoring loans business, the biggest fixed expense we have is labor so that is where we start our analysis.  We expect big growth for 2012 because of current market conditions and the ease of use of our system.  We know that every so many clients we add we need to have an account executive to service the accounts. If you are a manufacturing firm you may have to add fixed assets like equipment in order to expand.  

In general, spend the most time on the largest expense items.  Once you have finished with the largest expense items you should be able to estimate the rest of your expenses as a percentage of the increase in your revenue.  If you expect revenue to grow by 25% then unless you have information to the contrary, you can expect other expenses to grow linearly with the increase in revenue.  As as example, if you spent $10,000 last year on shipping costs you can estimate those costs to be approximately $12,500 this year if revenue is growing by 25%.

In our next entry we will be discussing how you should estimate balance sheet items based on the work you have done in forecasting your profit and loss statement.

To learn more about our all electronic factoring loans click the link below or give us a call at 888.833.2286.  

Receivables Financing - The Budget Process - Part 3 - What?

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Receivables Financing - Part 3 Three of our series on Budgeting.  

In this entry we will focus on what you should use in your budget.

Gross Revenue

In composing a budget start with the big picture.  For our receivables financing firm that means starting with top line revenue, sales.  Since all of your assets and liabilities will be used to support your estimated sales this is a great place to start.

The best way to estimate sales for the next twelve months is to look at the same period of time during the past few years.  Once you know how the company performed over the past few years the next step is take a look at the macro level economic environment your business operates in.  Is the government doing things that can affect your business?  Are there new regulations in your industry?  

After the macro level take a look at what your competitors are doing and how well you are positioned for the year to come.  Are your competitors leaving a certain area of your business that presents an opportunity for you?  Do you have a new product that is coming to market? You can get great information from your sales people and your vendors. You should also try and make some informal contact with your competitors.  Take the person you know best at your key competitor to lunch and try and get as much information as you can as to their plans for the coming year.

Gross Profit

Once you have a good handle on expected revenue take a hard look at what you expect your cost of sales to be for the coming year.  If you know what your historic sales have been then you should have a good idea of what your gross profit for the prior years was. For our receivable financing firm the most important cost of revenue for us is the amount we pay for the money we use in financing our client base.  If you are a service firm it might be labor, and if you are a manufacturing concern it would be the cost it takes you to produce the "widgets" that you sell your customers. You may be able to spot trends in your gross profit by looking at the monthly financial results of your firm over the past year. You should also take a look at your product mix and the gross profit associated with each SKU.  Do you expect the product mix to change in the next year?  Should you be pushing a higher gross profit product?  Remember, budgeting isn't all about the results, it is about the things you learn by going through the process.  

I try to keep these blogs in small bite sizes so I think we will extend part 3 of this series to include another entry that includes fixed costs and the assets and liabilities it takes to produce your product.

For more information about our all electronic, online receivables financing product for small business click the link below or give us a call.  888.833.2286