Tag: factoring companies

Factoring companies are a quick way for businesses to get cash from their outstanding accounts receivable.

Are Big Banks Giving Small Businesses Service or the Cold Shoulder?

Everyone naturally wants to feel their patronage is valued and welcomed when they do business with a firm. Grocery shoppers want to be appreciated when they check out; drivers want to be gratefully acknowledged when they have their car serviced at the shop, and so on. Businesses feel the same way when they conduct business with each other.

Small businesses have been feeling underappreciated as of late. Not by their customers. Not by the government’s Small Business Administration. Not even by the news media. No, they’re feeling that they are not getting the welcome and the services they feel that they are due from the firms and institutions they rely upon to grow and expand. They feel they’re being ignored by banks, especially by big banks.

It’s been shown time and again that small business is the real engine that drives the American economy. Small businesses combined generate more revenue and employ more people than big business. Yet when an individual small business owner goes into a big bank to ask for a loan or for financial assistance, it seems many walk away with frustration and anger rather than with money or help.

Are big banks giving small businesses service or the cold shoulder?

First, here are some numbers. Small businesses are investing to meet growing demand for their products and services in a strong economy. Borrowing by these companies has reached recent highs. Big banks report they have loaned record amounts to small businesses, continuing a trend since the end of the last recession. Forbes has even run a helpful article identifying the top 10 big banks loaning the most to small businesses. So everything is fine and dandy, right? Yet horror stories still abound about how big banks seemingly give small businesses the back of their hands on a regular basis.

Both scenarios can’t be true. It can’t be a boom time for big bank small business loans, yet, in the same instance, be a time when small businesses bewail about bad treatment at the hands of big banks. But that seems to be the case.

Small Businesses Don’t Receive What They Need from Big Banks for Many Reasons

Rather than provide anecdotal stories that reflect individual experiences, let’s look at some firm reasons why a small business owner may not get what he or she wants at a big bank. In other words, why might you be turned down for a loan even though, according to published reports, big banks are loaning more than ever to small businesses?

Credit Score/Credit History – Credit score and past credit history are the first things banks look at. If your score is too low or your history reflects a slowness to pay, this will put any potential loan in jeopardy from the start.

Little or No Collateral – No matter if a bank is big or small, it’s not extending a loan for its health. It expects something in return, preferably more money coming back in than it lent out. If it can’t be repaid, then it expects some type of collateral it can take instead to settle the loan. If you can’t offer collateral to secure a loan or what you have to offer isn’t worth much, your chances for a loan are greatly diminished.

Risk – Nothing lasts forever. But a small business may not even last a year. That means a big bank loan to a small business involves increased risk, and risk is something banks are quite averse to. They prefer a sure bet. If they do not view your small business as a sure bet but rather a risky proposition, your chances at a loan start to quickly dwindle.

Interest Rates – You can’t get something for nothing. A bank may charge a higher interest rate to recoup a riskier loan. Of course, that higher interest rate may, in turn, make it harder for the borrower to repay, causing either the small business or the bank to walk away.

Not Enough Return – Related to the above. A bank is a business like any other. They have owners and stockholders who expect to turn a profit. A small business loan, even at a high interest rate, may not provide enough return (profit) to cover its costs to the bank. In that case, the bank may figure, “Why bother?”

You – It’s not personal. But you may not have made a good enough presentation, provided enough information or just not been convincing or confident enough to overcome the bank’s reluctance to engage in what it views as a risky activity.

You Have Options Even if You’ve Been Denied a Traditional Small Business Loan

So what can you do when you walk into a big bank looking for a loan and encounter each of these points? It’s on your shoulders to address each of them and to show the bank you have a sound and workable business plan, that your plan will result in a strong and growing business that will be able to satisfy its customers, pay its employees and vendors, and repay the bank in a reasonable period of time at a minimal cost to the bank.

Of course, unless you’ve come up with a product or service that sells itself – like a cure for baldness or a way to turn straw into gold – that’s often easier said than done. No one ever said running a small business was a cakewalk… not even a baker.

Be Mindful About the Dangers and Risks of Alternative Small Business Funding

There are alternative methods of small business funding if you do not wish to engage with a big bank or have already done so and have been turned down. However, some of these alternative sources often have hidden or high costs associated with them that may make using such a source more expensive or more trouble than it’s worth. For instance, online small business loans/ cash advances can provide fast money, but often at a high price.

Explore Other Credit Alternatives to Big Bank Loans

One alternative gaining traction is working with community development financial institutions (CDFIs) or community banks, which often have more flexible underwriting standards and a better understanding of local market conditions. These institutions may be more willing to approve loans to small businesses based on their operational strength rather than rigid credit thresholds. However, they still typically require a credit score of at least 600, and often greater than 650. Plus, CDFIs exist to help underserved populations and promote economic development. If your business has access to opportunity and financial services, it is unlikely to qualify for a CDFI loan. Furthermore, the process can be slow. So while CDFIs can help certain marginalized businesses, they still come with many of the same barriers big banks have,

Another approach is asset-based financing, where a business leverages existing receivables or inventory instead of taking on new debt. This is where invoice factoring comes into play, offering fast access to capital without the lengthy approval process required by many lenders. As credit standards tighten and approval rates shift, small business owners must adapt by exploring funding partners who align with their needs.

Streamline Your Funding with Invoice Factoring

If a bank doesn’t seem to want your business or to help, and credit-based options are not ideal, you may want to take a closer look at invoice factoring. What is invoice factoring and what makes it a great option for small businesses?

Basically, invoice factoring is a time-tested and proven way for a small business to get immediate funding on its outstanding customer invoices. For example, you may have a slow-pay customer who takes 60 to 90 days or more to settle an invoice for products or services rendered. This delay can cause a small struggling business many hardships as it awaits payment. By employing an invoice factoring company, the small business can receive immediate funding for all its outstanding invoices. Rather than waiting to collect payment from its customers, the small business can put that money to work straight away, either to grow, pay current workers, hire more workers, or settle invoices of its own. In turn, the customer sends invoice payments to the factoring company in the normal course of business.

Charter Capital USA has been providing fast, efficient invoice factoring services for more than 20 years. Our company understands the funding challenge small business owners face. We have the experience and know how to help small businesses overcome those financial challenges and improve cash flow. We are a partner you can trust. To learn more, talk to a factoring specialist.

September 9, 2019
Tired of Striking Out with Banks, Small Businesses Find Alternative Lenders’ Pitch More to Their Liking

In baseball, a player who bats below .200 is said to be hitting below the Mendoza Line, so named for a light-hitting shortstop for the 1970s Pittsburgh Pirates. That means the batter makes an out more than eight out of every 10 at bats. Sounds pretty futile, doesn’t it?

Small businesses often face a Mendoza Line of their own each time they apply for a loan. Nationally, banks reject small business loan applications 80 percent of the time, on average. So, each time an entrepreneur walks into a bank seeking capital to start or expand his or her business, they might as well be poor Mendoza batting against fireballing Nolan Ryan. The results are going to be about the same – another frustrating effort often ending in failure.

Mendoza was just plain out of luck and out of baseball after a few lackluster seasons. There’s just not much of a market for players that can barely hit their weight. Small business owners, however, have found other options for their lending woes. Thanks in part to the power of the Internet, these entrepreneurs have discovered new funding sources ready to go to bat for them instead of tossing curveball after curveball their way.

Online lending has proven to be a home run for capital-hungry small businesses. In fact, it’s been such a hit that 2018 was the biggest year yet for online lenders. Unlike standard brick-and-mortar banks, online lenders have proven much more willing to lend needed money to startups or young businesses looking to grow. While banks may okay only 20 percent of small business loans, online lenders are approving three times that amount, earning many appreciative fans in the small business community. Another advantage in their favor over traditional banks is a more simplified application process and a faster review/approval.

Peer-to-peer lending offers entrepreneurs another funding alternative. Investopedia defines peer-to-peer lending as “a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary.” You may have heard peer-to-peer lending also called social lending or crowdfunding.

This method of funding works a little like on online dating service. Only in this case, it’s a business and investor that hook up, rather than two lonely hearts. A small business looking for money puts a profile of itself on a peer-to-peer online platform. Interested investors can view these profiles and assess whether they want to lend money. The investor can lend all or only part of what a business needs. If the small company only gets a portion of what it’s seeking, it can keep its profile active online for other potential investors. The small business and the investor(s) must agree on repayment plans and interest rates. And, of course, the online platform that brought the two (or more) parties together also gets a slice for providing the service. As you can imagine, however, it’s certainly much easier and quicker to obtain funding this way.

Since Mendoza seldom got on base, he wasn’t much of a base-stealing or scoring risk to opposing teams. But online lending and peer-to-peer lending do have risks which you should be aware of before trying them.

With online loans, fees and interest rates generally tend to be much higher than for traditional loans from a bank. Plus, there are often more fees attached to the online loan than loans from other sources.

Many online loans have set repayment provisions, and these provisions could wind up making the loan more of a hindrance down the road than a help. If you are expecting a traditional once-a-month payment plan, for example, you may be surprised to learn the online lender you’ve taken a loan from actually requires payment every week, or in the worst cases, even daily.

Finally, there is the security issue. News reports come out almost daily about online scams of all kinds. Just because someone has put up a website advertising online loans does not automatically mean it’s a legitimate firm. There’s the possibility it’s a fly-by-night outfit looking to steal your information and good name for their own nefarious uses or a lead gatherer who will then sell it to online lenders.

As for peer-to-peer lending, interest rates may prove problematic. These rates can often reach more than 30 percent, especially for companies the investors view as risky. After all, a peer-to-peer loan is an unsecured loan for the investor, which means no collateral for repayment should the borrower default. Investors want some assurance they won’t lose everything in case of default, and that’s accomplished partially through high interest rates.

When looking for capital via online or alternative funding sources such as peer-to-peer lending, it’s best not to immediately swing for the fences. Do plenty of research beforehand. A good hitter studies that night’s starting pitcher looking for clues as to each pitch’s speed, movement and location before stepping up to the plate. Make sure you have a solid grasp of your true needs and of the risks and benefits of these non-traditional funding sources before pursuing a loan. You may find these choices a great resource for your business… or you may discover you’re better off taking your chances with a traditional bank. The one thing you don’t want to do is desperately flail away and make a costly out or error that will end your season and perhaps even your business.

A better play might be to consider another form of raising needed money for expanding a business, adding employees, buying new equipment and improving cash flow. This option is called invoice factoring. Invoice factoring allows you to “sell” your accounts receivable invoices to a factoring company. The factoring company pays you upfront for outstanding invoices, giving you the cash you need today to run your business, and eliminating the worry and hassle of slow pay collections. That’s now the invoice factoring company’s concern, leaving you free to run your business.

Invoice factoring is a convenient alternative to a traditional bank loan or fee-laden online loans and risky crowdfunding. Each of these sources require a long-term contract. Factoring, however, gives you the money you need when you need it with no long-term obligations. You can also get cash quicker through invoice factoring – usually within a day or two. If you would like to learn more about how invoice factoring works and how it can step up to the plate for your business, simply call toll-free 1-877-960-1818 or email [email protected]. You may find it a great addition to your lineup.

March 8, 2019
Merchant Cash Advances vs Invoice Factoring – Which is Best?

A Merchant Cash Advance (MCA) seems attractive. You get the large sum of money you need to keep your company running, and the lenders take an agreed upon amount from your bank account for so many weeks until the loan is paid. But beware, the reality is that MCAs are a sale of a share of your company’s future profits.

What is a Merchant Cash Advance?

For many companies, a Merchant Cash Advance (MCA) might initially appear as the quick cash solution they’ve been searching for. These advances, provided by merchant cash advance companies, promise an upfront sum of money. However, they’re tied to a portion of your company’s future credit card sales. Essentially, it’s financing based on future promises rather than concrete achievements. And while the idea of immediate capital is enticing, it’s crucial to understand the terrain. MCAs often come attached with high interest rates. So, if your company’s sales don’t meet the optimistic projections, you could be navigating a tough road of unexpectedly hefty payments.

Why Choose Invoice Factoring as a Financing Option

In the vast world of financing, companies might find themselves drawn to the promises made by merchant cash advance providers. But a more detailed look could illuminate the undeniable benefits of invoice factoring. Unlike the somewhat speculative nature of MCAs, invoice factoring companies offer advances grounded in the here and now: your unpaid invoices. This means your company is leaning on tangible, completed sales. Such an approach not only guarantees more predictable rates but also avoids the looming shadows of MCAs’ high interest rates. The process of applying for invoice factoring? It’s as efficient as MCAs, but without the dicey risks of penalties should sales predictions fall short. To put it plainly, invoice factoring lets companies maximize the value of their current invoices, ensuring a smooth cash flow that’s not at the mercy of tomorrow’s sales forecasts. So before your company gets too enamored with MCAs, it’s wise to stack up the benefits side by side. You might find that invoice factoring presents a clearer, steadier route to financing.

The Strategic Choice Between Invoice Factoring and Merchant Cash Advances

Navigating the financing options available to small business owners, particularly within sectors with longer payment cycles, demands a strategic approach to ensure both immediate cash flow needs and long-term financial stability are addressed. When considering merchant cash advances (MCAs) versus invoice factoring, it’s crucial to understand how each impacts your business’s bottom line. MCAs, while offering a lump sum of cash based on future credit and debit card sales, often come with stringent repayment terms, including daily or weekly deductions from your sales, which can significantly affect your working capital. This form of financing may seem attractive for businesses in need of immediate cash, but the higher costs and risk of non-payment due to fluctuating sales underscore the importance of considering alternative funding sources.

On the other hand, invoice factoring presents a compelling financing option for small business owners seeking to enhance their cash flow without the burden of traditional loans or the unpredictability of MCAs. By selling your unpaid invoices to factoring companies, you receive advance funds, often within one business day, giving you the working capital you need to operate and grow without waiting for clients to pay. Unlike MCAs, invoice factoring provides flexibility with repayment terms and doesn’t hinge on your daily credit card sales, making it a better alternative for managing your accounts receivable efficiently. Moreover, the application process for factoring is straightforward, with a focus on your invoices’ value rather than your business’s credit score, offering a financing solution that supports business development and allows you to take advantage of opportunities without the looming pressure of repaying a lump sum plus fees and interest.

Merchant Cash Advances vs. Invoice Factoring

Invoice factoring makes more sense for businesses that don’t deal with a high volume of credit card transactions. For instance, trucking businesses will typically find freight factoring to be more accessible, while security guard firms can tap into security factoring.

With invoice factoring, the advance you receive on your invoices is based on actual sales rather than a prediction of future sales. This means your business will benefit from the same quick cash flow and simplified approval process as an MCA with significantly less risk.

Since merchant cash advances use a prediction rather than an actual dollar amount, you may be forced to make huge payments if your sales don’t meet your projections (usually with much higher interest rates than invoice factoring rates). Payments may even continue beyond the period in which you generate revenue, which could pose a larger problem. In contrast to merchant cash advance brokers, who charge you both the payment amount and a crippling interest rate, invoice factoring companies only charge a small percentage of the invoice amount (the factoring fee).

You may also be able to benefit from the back-office services provided by invoice factoring companies, including billing and collections since they purchase your unpaid invoices and collect payments directly from your customers.

Make sure you understand the short- and long-term implications of taking out a merchant cash advance before you commit. In desperate situations, their interest rates may seem worthwhile but be aware that anything that looks too good to be true, usually is.

At Charter Capital, we help trucking companies grow with freight factoring and customer-focused services.

Give us a call at 1-877-960-1818.

February 27, 2018
How a Factoring Company Can Aid Small Business Success

Small Business Success:

It’s hard enough to grow a small business, even in a successful economy. However, with small business invoice factoring, payments for your unpaid customer invoices can help solve urgent cash flow issues.

If you are a high-risk business—or a company that works in industries with generally low profit margins—generating positive business cash flow and increasing your revenue can be very stressful, especially when you are trying to grow your business. Even companies in a low-risk environment need revenue at all times. After providing a service or selling a product, companies will generate business accounts receivable for each of their customers, and send some type of invoice to the client.

Unfortunately, many businesses will not receive payments for their goods and services right away. It is highly common for payments to arrive weeks—even months—after the customer has been billed. This can be incredibly stressful for any business, as funding is essential to success.

This is where factoring can come in.

Factoring is basically the sale of accounts receivable to a third-party factoring company. The company buys the invoice for a large percentage of the balance due, which immediately provides the needed funds to support the business. Once the invoice has been paid in full, the factoring company pays the remainder of the balance to the business, minus a small processing fee, known as a factoring fee.

An example of factoring in action is freight bill factoring. This is the process of selling the accounts receivable owned by a commercial freight company to a freight bill factoring company. This is beneficial, as it can help trucking companies avoid debt and liability. It is also much more beneficial than choosing to finance a short-term loan, asset-based lending, opening a line of credit, or investing in venture capital. Increasing a business’s debt can only hurt a growing business; with freight companies in particular, the cost of operation is constant.

It can be crippling to wait for a payment or, even worse, face the reality of paying back a loan with high interest rates. For a small business, invoice factoring is a cash advance option that provides almost immediate cash flow, has a higher approval rate, and saves you time because the factoring company collects payments from your customers instead of you needing to follow up on unpaid invoices.

Utilizing a factoring company is a practical move for businesses of all types. However, small businesses need the assistance of invoice factoring companies the most. Small businesses are least likely to have funds in reserve and are at the highest risk of bankruptcy or being forced into taking out small business loans. In 2015, less than 15% of small business loans were approved, which indicates that taking out a small business loan may not be a viable option in the first place. Hiring a factoring company can only help a small company stay afloat during their critical periods of growth.

If you are looking for quick cash flow for your business but need an alternative to a small business loan, contact Charter Capital today to find out more about how our small business invoice factoring services can help you.

September 9, 2016
Fixing the Problems Facing Small Business is Good Business

If you’ve watched television, listened to talk radio or read a newspaper in recent days, you might have noticed it’s election season. And of course, as with every election, candidates from every political party are making lots of promises about the economy, taxes, the middle class and jobs. Some candidates have elaborate 10-point plans. Others offer little more than glittering generalities. But there’s one area most candidates consistently overlook, and it’s one area that can have the greatest impact on the economy, the middle class and job creation: small business.

Where the Jobs Are

When a large company lays off hundreds of workers or implements a hiring freeze, that makes the news. It’s a dramatic scene to see people walking out of a tall office building or huge factory carrying their belongings, headed for the unemployment line. But when small businesses stop hiring, there’s scant mention, even though statistics show it’s small businesses, not large ones, where you find the most jobs.

Many Americans don’t realize that small businesses (companies employing 500 or fewer workers) make up an astounding 99.7 percent of all businesses in America, according to the Small Business Administration. More than half of all U.S. workers are employed by small businesses, and these firms create two out of every three new jobs each year.

So, in order to fix the economy and provide more jobs, shouldn’t politicians focus on small businesses first?

Problems Facing Small Businesses Today

Warren Buffett is one person who definitely understands the important role small businesses play in the American economy. Wait, isn’t Buffett, chairman and CEO of Berkshire Hathaway, one of the biggest big businessmen in the country? Yes, he is. But Buffett has used his unique knowledge of how to build successful businesses to identify several problems keeping smaller firms from growing.

Joined by two other prominent business leaders – Lloyd Blankfein, chairman and CEO of Goldman Sachs, and Michael Bloomberg, founder of Bloomberg LP and former mayor of New York – and Harvard business professor Michael Porter, Berkshire Hathaway recently opined in USA Today that four areas are currently hampering small business across the country.

Capital: Unlike large public companies that issue stocks to raise capital, small businesses rely on banks for funding and loans to grow. Thanks to increased regulation, banks are becoming more hesitant to issue loans, and when they do, it’s often for less than the small business needs. Buffet and partners contend that more lenient and generous loan practices would lead to more small business hiring, investment and growth, both for the firms involved and the economy as a whole.

Regulation: Small business owners are experts in the products and services they provide. But these entrepreneurs have to spend more time complying with government regulations and less time growing their companies. While regulations serve to protect the consumer and the environment, they also create complexities that stifle small business innovation. Buffet and his partners call for a streamlining of regulations, to make it easier for businesses to understand and comply, as well as to help small business to open faster and expand more quickly.

Skills: Many small businesses, particularly those in the manufacturing sector, report a gap between the skills needed from employees and the skills currently available in the workforce. Buffet and company urge government, higher education and employer cooperation in worker development. Targeted community college curriculums, training programs and internships could close the skills gap.

Technology: While technology is one area where prices traditionally fall as innovation creates more efficient systems, technology still represents a major investment hurdle for small businesses. Technology can lead to greater productivity, but in order to access it, companies need funding to buy it and workers with the skills to use it.

Addressing these issues won’t be an easy undertaking. But coming up with workable solutions to each of these four problems would go a long way to providing a path to growth, jobs and a healthier economy.

Alternative Financing Options Can Help Solve Some of These Problems

Small businesses already have one unique avenue for financing and funding help. Cash flow is always a concern for any company, but more so for smaller businesses, which as mentioned above, have less access to capital than their big business counterparts. Getting every dollar for services rendered is critical.

When an invoice is unpaid or is slow to be paid, it denies the small business owner money to re-employ elsewhere and to grow. Invoice factoring is one means available that can speed payments and improve a company’s cash flow. Basically put, an small business owner can factor an unpaid invoice to a third party and receive immediate funding that can be put to use then and there to grow the business, hire new workers or invest in new technology. Invoice factoring is one painless means available right now that can address the issues Buffet and his partners bring up to fix the problems now facing small businesses across the country.

Calvin Coolidge once said, “The chief business of the American people is business.” And when small businesses prosper, the American people prosper.

August 11, 2016
Can Telecommuting Work for Small Business

Telecommuting – allowing employees to work all or at least a portion of their week from home – isn’t a new idea. However, it’s a growing trend that offers small businesses and workers alike many mutually beneficial advantages, but can cause several problems as well.

A History of Telecommuting

Interestingly enough, working from home was the norm until the Industrial Revolution. The farmer worked his fields. The cobbler lived behind or above his shop, as did the merchant, the tailor and the miller. Only with the advent of the modern factory did workers actually “go” to work somewhere other than where they lived.

Telecommuting as we know it today – letting large groups of people work regularly from home rather than the office – took off in the 1990s after the passage of the Clean Air Act. Employers say it was a way to comply with the act – to give workers extra flexibility and to save money on expensive office space.

In the 2010s, many companies of all sizes utilized telecommuting in at least some form. Both employer and employee have reported many benefits from adopting the practice, but it has caused enough problems and concerns that some firms have actually cut back on its use. If your small business is thinking about allowing employees to telecommute.

Here Are A Few Key Advantages And Disadvantages You Should Consider Before Doing So.

Advantages

Increased productivity – Studies have shown worker productivity frequently increases when employees are allowed to telecommute. Workers report fewer interruptions during the workday, enabling them to accomplish more tasks in less time than at the office, where frequent, lengthy and often unnecessary meetings disrupt the workflow.

Greater flexibility and attendance – Linked with productivity, workers have greater flexibility in their workdays. While, at first, small business owners may wonder how this helps them, they quickly realize employees can better take care of personal tasks (such as cable TV repairs or car repairs) that interrupt their work and cause them to miss days. While working from home they are less likely to call in sick because of an ill child or spouse, as they can now more easily take care of them while continuing to work.

Lower costs – Obviously workers save commuting costs as well as wardrobe expenses, but businesses also see monetary savings as well in terms of having to rent less office space and lower utility bills.

Disadvantages

Work/Life distractions – Let’s face it, not everyone is cut out for telecommuting. It takes discipline to concentrate on work when it’s a sunny day outside. While in an office, the worker is stuck at a desk. However, at home, with no one watching over them, some people may not be able to resist the temptation to go sit by the pool when they should be focusing on the important tasks at hand. If your small business is considering adopting telecommuting, one key question to ask is, “Can this employee handle the distractions?”

Lack of supervision – Tied into the distractions aspect comes supervision. As some workers may not be cut out for telecommuting, some managers or small business owners may not be as well. Telecommuting requires a minimalist “hands-off” management style that gives employees greater reign over what they do and when they do it. It requires confidence and trust from the manager that the telecommuting employee can work with minimal supervision and complete the assigned tasks on a deadline. “Hands-on” managers and owners will have trouble with telecommuting because the employee will be out of sight.

If you’re considering allowing telecommuting, in addition to asking if the employee can handle working from home, you need to ask yourself if you and your managers can deal with it as well.

Dependence on technology – When employees work from home, you will no longer be able to walk to a person’s desk and ask how a project is coming along. You can’t call a meeting at a moment’s notice and have everyone walk into the conference room. You will now be dependent on technology – phones, internet, email, etc. – to contact your employees and to get projects and updates from them – and they from you.

If you’re considering allowing telecommuting, you need to have a system in place to enable quick and efficient communications so that you can reach your employees when you need to and they can reach you when necessary.

Will Telecommuting Work for You? Only You Can Answer That

Many companies have seen great success after adopting telecommuting. Others have been disappointed in the results and have stopped the practice. Each situation is, of course, unique. Whether telecommuting will work for your small business is only something you can decide. As with any business decision, it’s one that should be made with careful consideration as to the advantages and disadvantages both to you and to your employees.

June 24, 2015
Is Invoice Factoring right for your business?
In today’s economy, business owners are all too familiar with the struggle to find the necessary capital to meet their operating needs or to finance business growth. While traditional small business financing options (such as business loans and lines of credit) are increasingly difficult to attain, invoice factoring has significantly less stringent approval requirements. This is why many business owners, especially owners of small businesses and startups, turn to invoice factoring companies for a financing solution. Is invoice factoring right for your company?

Accounts Receivable Factoring Boosts Business Growth

What is Invoice Factoring?

Invoice Factoring (also known as accounts receivable factoring) is the selling of outstanding invoices (accounts receivable) at a discount to a factoring company that provides immediate cash to your business. Your business receives a percentage of the invoice value upfront (known as the factoring advance), and the factoring company will take care of collecting the invoices for you. The factor will refund your business the remaining balance once all your clients have paid (minus a small factoring fee known as the discount rate).

Usually, the value assigned to the receivables depends on their age (i.e., a more current invoice will be worth more). Generally, invoice factoring is also known as accounts receivable financing, accounts receivable factoring, or accounts receivable funding.

How Does Factoring Work?

With invoice factoring, you are selling control of your invoices (accounts receivable), either in part or in full. The process works as follows:
1. In the normal course of business, you provide goods or services to your customers.
2. Your company invoices your clients for the goods or services they receive.
3. A factoring company purchases your open invoices. Once the invoices are verified as valid, the factoring company pays you a percentage of the invoiced amount immediately. This percentage is typically between 80 and 90%.
4. Customer payments are made directly to the factoring company. When necessary, the factoring company will chase invoice payments.
5. Once the factor has received all the payments from your clients, they will pay you the remaining invoice value, minus a small fee known as the factoring fee.
The Benefits of Invoice Factoring

Immediate increase in working capital: Factoring releases the cash a business typically has tied up in accounts receivable and makes it available for paying expenses or for funding growth.

Predictable cash flow: Eliminate the burden of waiting for payments from customers. Instead of waiting 30-90 days, a business can factor in its unpaid invoices and get paid immediately.

No new debt: Since factoring is not a loan, it doesn’t appear on the balance sheet as debt, nor does it negatively affect your credit score. Instead, it appears as more cash and fewer accounts receivable.

Offer better credit terms: Offer customers better payment terms without creating business cash flow problems. Normally, when a business factors their customers’ invoices, they receive cash right away regardless of the terms granted to their clients.

Go after big accounts: Offer credit terms demanded by large, slow-paying corporations without depleting cash.

Take advantage of supplier early-pay discounts: Most vendors offer discounts for early payment. With the predictable cash flow provided by factoring, a business can take advantage of early-pay discounts, improve its credit rating, and offset the cost of factoring all at the same time.

Spend more time focusing on growth and less time managing receivables: Since factoring companies are experts in accounts receivable management, they provide the capability for business owners to spend less time managing receivables and more time managing their business. Small business invoice factoring services free up the time and capital you need to grow your business.

Back office support: The cost of factoring is bound to be a topic of discussion for any company owner looking to enter a factoring partnership. However, the benefits of factoring (such as back office support) easily make the accounts receivable factoring rate seem like a small price to pay. Businesses can reduce the overhead costs associated with managing accounts receivable and the processing of payments. These are services that are usually included with invoice factoring services.

As all business owners are acutely aware, an uninterrupted source of cash is the most vital element in the survival of a business. It shows where a company may be headed. Instead of hoping everything will work out, business owners can enhance their cash flow with Invoice Factoring. When cash flow becomes predictable and controllable, the business is better positioned for continued business success. In today’s lending environment, where traditional financing sources are continuing to fade, invoice factoring presents a welcome alternative.

Taking the plunge into invoice factoring could mean the difference between the successful growth of a business and remaining stagnant. You should first consider all your options, and then spend the extra time needed to examine the factoring companies you are considering working with. Carefully review contracts and work hard to negotiate discounts. In the end, using invoice factoring can provide immediate cash flow to meet your business needs.

If you think invoice factoring might be the right financing solution for your business, or if you have more questions before you take the leap, contact Charter Capital today to learn more about how we can help you.
August 5, 2013