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Small business owners with start-up companies tend to have limited financial resources, significant costs, minimal credit history, and a lot of questions. For many of those companies, the answer is invoice factoring.

What is invoice factoring?
Invoice factoring is a method of small business financing (also called “accounts receivable factoring”) whereby the start-up company sells its invoices to a factoring company (or “factor”) at a slight discount. The factor pays the start-up company up to 95% of the invoices’ face value, providing funding in just a day or two, whereas, had the start-up waited for the customer to pay, those funds might have been tied up in accounts receivable for 30, 60, or even 90 days.

How does invoice factoring help?
Invoice factoring does more than help start-up companies boost and manage cash flow by alleviating the typical 30- to 90-day wait times associated with direct customer payments. Invoice factoring services remove the need to bill and re-bill customers and spend excessive amounts of time managing invoices.

Additionally, invoice factoring helps start-up companies avoid debt. Small business loans are liabilities against start-ups. Invoice factoring allows invoices to be recorded as assets while increasing cash flow, all of which helps start-ups develop a strong credit history from the very beginning.

How does invoice factoring save my company money?
Beyond the reduction in time and personnel costs invoice financing provides, factoring also creates opportunities to save money. For example, many start-up companies have additional needs and costs, in addition to regular overhead. These may include expenses such as additional marketing, new equipment, needed tools, and additional personnel. That means every dollar needs to be carefully spent and every possible discount needs to be utilized.

One such discount is the “early pay discount,” sometimes called a “2/10, net-30 discount” provided by vendors, including those used by start-up companies. In short, these vendors provide services and offer their customers a discount, typically 2% of the invoice, if the invoice is paid in a shorter time frame: 10 days as opposed to 30. The ability to regularly save 2% on overhead costs can make a significant difference to a start-up company. Unfortunately, most start-ups are plagued by cash-flow challenges with their money tied up in accounts receivable for months. But for start-up companies using accounts receivable factoring, the process is smooth:

1. Provide goods or services.
2. Sell the associated invoices to the factoring company.
3. Receive funding almost immediately.
4. Use that funding to take advantage of “early pay discounts” from vendors.

Some companies take this system a step further by incorporating the factoring costs into their customer pricing whenever feasible. Additionally, while some companies view invoice factoring as a form of short-term financial assistance, many companies find financial success in factoring all of their invoices on an ongoing basis. The benefits are tremendous: reliable, fast payment of invoices; minimal costs or requirements; and the ability to budget, plan, and take advantage of vendor-offered discounts.

Invoice factoring through secure, dependable factoring companies (such as those who are members of Factors Against Fraud and The International Factoring Association) is a reliable, safe method of small business financing for start-up companies. And as those companies face ever-increasing challenges, factoring has become the ideal solution to cash-flow management.

Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.

November 8, 2010

The Associated Press (AP) reported this week that, despite economic improvements, “U.S. banks are failing at the fastest rate in two decades.” While the report is clear that America’s financial crisis has not returned, it demonstrates that smaller “Main Street” banks are still in serious danger: “[In] communities around the country, 143 banks have collapsed so far this year - more than all of last year. This time, the failed banks are smaller, on average, than in 2008 and 2009. The damage to the industry has thus been milder this time. Still, the wave of closings points to the persistent struggles of many communities and states.”

For American entrepreneurs dependent on local lending institutions for small business financing, bank closures are no small concern. Small business loans remain tremendously difficult to obtain, and as local banks fold, small business owners who have cultivated long-standing relationships with their local banks are left without a lifeline. Still, the economy does continue to improve, and small business owners trying to meet increased customer demands in order to save, or even grow, their companies are left without the funding sources necessary to provide working capital.

Financial experts predict that, according to AP, “…more small banks will go under. Estimates are for 160-200 banks to close this year, and a similar number next year.” In addition, “While banks have closed this year in nearly every region, some states have been struck especially hard. Illinois and Georgia have each had 16 bank closings. California has had 12, Washington state 11. All four are among the 14 states with the highest foreclosures rates.” Even long-standing institutions are not immune to the effects of this recession, “The Peoples Bank in Winder, Ga., for instance, survived the Great Depression, but fell in mid-September. It had about $447 million in assets and had been in business since 1926.”

The scarcity of small business lending has led to many entrepreneurs seeking alternative funding sources and, in doing so, discovering the benefits of accounts receivable factoring. Accounts receivable factoring, sometimes called “invoice factoring,” provides companies with a reliable form of small business finance without creating debt. By selling their accounts receivable to a factoring company, small businesses receive payment on their outstanding invoices usually within a matter of days instead of waiting up to three months for a customer’s payment. With this influx of working capital, the small business is able to meet customer demand while avoiding the typical pitfalls of traditional small business loans such as generating debt, relying on insecure funding sources, and paying high interest rates.

Not all factoring businesses are equal. It is important, in making the switch to invoice factoring, that small business owners choose reputable factoring companies, such as online accounts receivable factoring firms associated with Factors Against Fraud and the International Factoring Association.

Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.

As the American economy slowly begins to show signs of life, small business loans remain largely unavailable, stalling improvements in the national unemployment rate and further challenging American small businesses.

Small businesses account for some 70% of the U.S. workforce, making Main Street growth essential to economic recovery and improvements in unemployment. Unfortunately, while lending has increased in recent months, small businesses are not reaping much, if any, benefit. William Alden of The Huffington Post reports that the majority of new lending has been for the benefit of “large borrowers.” Writes Alden, “With the unemployment rate at 9 percent, small business job-creation is a crucial piece of the recovery.”

However, with traditional small business loans unavailable, cash-strapped entrepreneurs lack the operating capital to do more than tread water, thus preventing job creation and keeping unemployment high. According to Alden, this lack of small business financing is a systemic issue: “Part of the problem for small businesses stems from the challenges facing small banks, which traditionally enjoy a co-dependent relationship with local businesses. 2010 was the worst year for bank failures since 1992, as the Federal Deposit Insurance Corporation seized 157 banks. On average, the failed banks last year were smaller than in 2009.”

With the economic landscape unlikely to change dramatically any time soon, it is time for small business owners to try new ways to fund their operations while maintaining strong credit ratings and balanced ledgers. One such form of small business financing that provides the funding entrepreneurs need and the benefits they want is accounts receivable factoring.

Accounts receivable factoring is a financial transaction whereby the business owner sells his or her outstanding invoices to an accounts receivable factoring company. The benefits are immediate and significant: Factoring invoices allows small businesses to receive payment, often within a few days, on invoices that might otherwise sit as liabilities on their balance sheets while in accounts receivable for 30 to 90 days. Additionally, factored receivables are recorded as assets on small business’ ledgers, which means companies have access to small business funding without creating debt. This helps small business owners maintain good credit ratings while gaining access to the working capital necessary for America’s small businesses to function, compete, and finally be able to begin creating the new jobs necessary for meaningful economic recovery.

For more information on factoring invoices for small business financing, contact your financial advisor.

As part of the U.S. government’s stimulus package, the Small Business Administration (SBA) developed “America’s Recovery Capital” (ARC). The ARC loan program was designed to provide zero-interest loans to American small businesses negatively impacted by the recession. According to a recent CNNMoney.com article, “Since launching in early June, the ARC loan program has backed 2,715 loans totaling just over $88 million, with an average loan size of $32,425, according to the latest data from the Small Business Administration.”

While this is good news for some, most small business owners seeking funding are finding that the ARC program is slow, cumbersome, and extremely hard to qualify for. In an interview with CNNMoney.com, Chuck Blakeman, president of a Denver-based small business advisory firm states, “(ARC) was supposed to be able to be something for business owners in distress, but business owners in distress aren't going to be able to touch this loan. I sent in 301 pages of background information, and I have not yet heard back from Wells Fargo" -- a bank he has a 20-year relationship with.” In the same CNNMoney.com article, Mack Sullivan, owner of Due South Publishing, reports similar frustrations: “After months of searching, Sullivan found that a BB&T (BBT, Fortune 500) branch in Georgia … would accept his application -- with conditions. ‘I met with the local branch of BB&T last week and had a good meeting,’ said Sullivan. ‘They are participating, but with the provisos that you become a customer and, interestingly, have a loan with their bank other than the ARC loan,’ he said… (Sullivan) is still waiting for a final word on the status of his ARC loan, and hopes to hear within the next few weeks.”

Waiting weeks or months after providing hundreds of pages of paperwork is not feasible for struggling small businesses. And realistically, most American small businesses will not qualify for ARC loans based on the stringent guidelines. Applicants must meet the SBA’s requirements, which include demonstrating that the small business in question has been operating for “…at least two years and been profitable in at least one of the last two years. They also have to be experiencing clear financial hardship, as illustrated by a sharp drop in sales, staff, or working capital,” according to CNNMoney.com. SBA assistant administrator for communications, Jonathan Swain states, “The way I would characterize (ARC) is that it is one tool in the tool box. It is a very small loan program for a very targeted, very specific situation, as a result of the economy.”

The end result is that the SBA’s program is not accessible to most American small businesses. For those that actually do qualify, the process is cumbersome and lengthy. Small businesses are seeing customer demands increase, and, without the accessible small business financing necessary to meet those demands, those companies will continue to struggle and many will fail. Naturally, many entrepreneurs are looking elsewhere for their small business lending needs, and they’re finding that traditional lending sources are no longer the gold standard for small business financing.

Accounts receivable factoring services are accessible, affordable, safe, and fast, making them an ideal alternative for those who don’t qualify for ARC or are in the midst of the months-long approval and funding process. Once considered a short-term form of financial assistance, many small businesses are now using accounts receivable factoring services (commonly called “invoice factoring services”) for all of their financing needs. In particular, reputable companies providing online invoice factoring services, such as those affiliated with Factors Against Fraud and the International Factoring Association, are bridging the gap for American small businesses.

Invoice factoring is a simple process through which the small business sells its accounts receivable (outstanding invoices) to the factoring company at a slight discount. The factoring company provides funding, typically within a matter of days. Aside from the funding accessibility, small businesses enjoy several other benefits of choosing invoice factoring: no loans to repay, improved credit, accounts receivable management and billing services, access to advanced credit-screening processes for customers, and significant accounts receivable savings.

American entrepreneurs want fast, reliable, affordable small business financing, and in growing numbers, they’re now finding it through online accounts receivable factoring services.

Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.

In an October 25, 2010 article, computing.co.uk reports that retailer Tommy Hilfiger has recently opted to use e-invoicing, one of the standard tools used by online accounts receivable factoring service providers worldwide. According to computing.co.uk’s account: “The retailer said the solution will enable it to reduce the cost of its cross-border and domestic trading by automating customer invoicing processes. Tommy Hilfiger’s accounts receivable department processes on average 33,000 invoices per month from

4,000 customers. The retailer said that it wanted to improve profits by ensuring that all invoices are processed so they are paid on time and in full. An end-to-end audit of accounts receivable processes found that invoices cost about €1 (89p) each to print and post internationally and additional costs were incurred through lost receipts and time taken to rectify errors and chase up receipts.”

Computing.co.uk further reports that Frederick Kolff, vice president of credit management at Tommy Hilfiger, had the following to say about the move to e-invoicing:“As a result, our invoicing costs are reduced and our DSO [days sales outstanding] will improve. Equally important to us is that we can have a positive impact on the environment from e-invoicing owing to the huge amount of paper we will save.”

Electronic invoicing systems save time, money, and resources while reducing companies’ environmental impact dramatically. Of course, most small businesses do not have the resources necessary for effective e-invoicing. Accounts receivable factoring providers, however, use these very systems every day.

By switching from a traditional, in-house accounts receivable department to utilizing invoice factoring services, small businesses can reap the benefits of e-invoicing while also enjoying the significant advantages of accounts receivable factoring:

• Invoice payments in about two days,
• Accounts receivable management assistance,
• Limited credit risk,
• Collections assistance,
• Documentation and report generation and maintenance,
• And a marked reduction in accounts receivable costs.

February 8, 2011

Calabasas, CA

Fast A/R Funding

Calabasas, CA-based accounts receivable factoring leader, Fast A/R Funding, is pleased to announce their new online social media presence at www.facebook.com/fastARfunding. Through Facebook’s uniquely interconnected social media network, Fast A/R Funding will bring industry-relevant information and networking to their current and potential clients.

Featuring an auto-updated, subscription-ready RSS feed of the company blog and current news articles, Fast A/R Funding’s Facebook page also includes an open forum on the “Wall” for small business networking and information sharing. The various tabs on Fast A/R Funding’s Facebook page offer extensive information about small business financing through accounts receivable factoring services. Additionally, the page offers multiple links to www.fastarfunding.comand information on the application and funding processes.

The Fast A/R Funding Facebook page is accessible to the public. To receive regular updates, subscribe to the RSS blog and news feeds, or join in on the conversation, Facebook members need only to click the “like” button on any tab of Fast A/R Funding’s page.

Fast A/R Funding is the industry leader in online accounts receivable factoring services. Offering small business financing without debt creation, Fast A/R Funding typically provides approvals in 24 hours and funding in 48 through their secure online processes. For more information, visit www.fastarfunding.comor email info@fastarfunding.com..

A Tuesday, November 2, 2010 news article by Ann Saphir of www.reuters.com reports that financing to American small businesses was up in September based on year-to-date comparisons. She writes, “Small U.S. businesses stepped up borrowing in September, data released by PayNet Inc on Monday showed, suggesting the recovery is gaining steam even before the Federal Reserve Bank embarks on an expected new round of monetary stimulus.”

This is great news for small businesses, demonstrating a strong move toward recovery. States Saphir, “The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S small businesses, rose 16 percent in September from a year earlier… and is now at the highest level in almost two years.”

With small companies representing the vast majority of new hiring, the increase in borrowing by these companies indicates that we are, indeed, on the path to economic recovery. PayNet founder and president William Phelan states, “This doesn't point to anything but a robust recovery. These small businesses are people who see the demand in the economy every day, and they are alert to react very quickly to that demand." This means more hiring and more jobs. Phelan says, “I think we'll see jobs start to happen over the next six months or so.”

More lending activity and job growth bring new opportunities for small businesses. Gone are the blanket hiring and spending freezes of recent years. Small businesses can prepare to meet the increased demand that will accompany a recovering economy by managing their small business financing through accounts receivable factoring.

Using accounts receivable factoring enables companies to sell their invoices to a factoring company in exchange for payment within just days as opposed to waiting 30 to 90 days for a customer’s payment. This enables small businesses to meet payroll, increase marketing efforts, purchase new equipment, and plan ahead for economic recovery. It also saves small businesses time and money by decreasing in-house accounts receivable work and expenses.

Although lending is increasing, small business loans still create debt. Accounts receivable factoring services are not loans. There is no interest to pay and no debt created. In fact, accounts receivable factoring is actually a balance sheet asset, which can, in turn, improve companies’ credit history all while providing an accessible, reliable form of small business financing.

Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.

Over the past few decades, and the last ten years in particular, American businesses have been reaping the benefits of outsourcing. Small businesses have done away with internal departments for things like payroll and IT. They hire outside accounting firms and use personnel agencies instead of having full-time accountants or human resource representatives. Essentially, American businesses are outsourcing those tasks least relevant to their business’ purposes, and they’re saving money doing it.

While there is certainly a balance to be struck between in-house work and outsourcing, it does make sense to have employees work primarily on those tasks most related to a business’ core competencies. This frees employees up to focus on work that actually benefits the company financially while still ensuring that the behind-the-scenes work gets done properly. For many American companies, accounts receivable management is excessively time consuming and costly, and yet few consider it something that can be outsourced. While the task is obviously essential to the operation of any business, it’s not necessarily one that needs to be done in-house. Accounts receivable factoring services provide an option for outsourcing collections and accounts receivable management.

Why Use Accounts Receivable Factoring?
In accounts receivable factoring, small businesses sell their invoices (accounts receivable) to an invoice factoring company at a discount. The factoring company then pays the small business in just days. The obvious benefit here is that the small business has its money right away instead of waiting 30 to 90 days for a customer’s payment. However, fast payments are really only part of the story.

The secondary benefits of outsourcing accounts receivable by using invoice factoring can also have a tremendously positive impact on a small business’ finances. Invoice factoring companies help manage accounts receivable and collect on invoices for their clients. They work with their clients to keep and maintain records, limit risk, communicate with debtors, and manage billing. The end result is a massive reduction in the number of hours, employees, and resources needed for in-house accounts receivable work.

Additionally, invoice factoring companies have extensive resources not available to most small businesses, enabling them to do more than run simple credit checks. They use their access to not only determine the creditworthiness of potential customers, but to help their clients make more informed decisions about terms and limits when extending credit. Additionally, factoring companies have the skills and tools to analyze what they find when researching those potential customers and when managing clients’ accounts receivable.

Outsourcing accounts receivable by employing an invoice factoring company is an effective, cost-efficient method of small business financing. It allows companies to focus on their main business objectives while getting more out of their accounts receivable with fewer staff using fewer resources in fewer hours. The end result is a healthier bottom line and a more focused, streamlined accounts receivable process.

Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.

In October, CNNMoney.com reported that American small business owners are overwhelmingly dissatisfied with their banks: “Small business owners are less than pleased with their relationships with their banks, especially big banks, according to a study from consumer satisfaction research firm, J.D. Power and Associates… Main Street businesses' overall satisfaction with and loyalty to their banks is declining, according to the U.S. Small Business Banking Satisfaction Study released…[October 2010]. Satisfaction is now at 711 on a 1,000-point scale, down from 718 in 2009. What's more, small businesses are the least satisfied of the financial services customers J.D. Power surveyed.”

As the economy improves, those “Main Street” businesses need small business financing to meet increasing levels of customer demand. But now, they are hesitant to head to the bank looking for small business financing. CNNMoney reports, “Small business owners value having an account manager who understands their business well, communicates often, and is easily accessible at both the bank itself and online. They also want to know in advance about possible fees.”

Dissatisfied with the lack of service, funding, and transparency in their banks, many entrepreneurs seeking small business financing are turning to accounts receivable factoring services for their funding needs. Accounts receivable factoring services (often called “invoice factoring services”) are a reliable form of small business financing that increases cash flow without creating debt. And because invoice factoring approvals are based on the value of a company’s invoices and the creditworthiness of their customers, small business owners are able to access this financing much more readily than traditional small business loans.

In addition, invoice factoring services rendered through reliable firms, such as those affiliated with Factors Against Fraud and the International Factoring Association, provide the intangible benefits “Main Street” businesses no longer receive from their banks: individual service, easy account access, knowledgeable associates. What’s more, reputable online invoice factoring service companies often provide round-the-clock customer support by phone and online, making “banker’s hours” a constraint of the past.

Disclaimer: The information presented above is general and intended for educational purposes only. It is not a substitute for practical legal or accounting advice on any specific situation.