Category: Small Business Finance

The Benefits of Invoice Factoring for Technology Staffing Firms

There are many types of IT staffing firms. Some technology staffing firms provide temporary personnel for companies involved in short term projects. They don’t want to hire a permanent worker because after the project is completed they won’t need that particular worker anymore.

Other tech companies find that some jobs simply have high turnover. They need tech staffing firms to make sure that they always have someone reliable in that position.

Then there are IT staffing firms which act as recruiters for tech companies. They don’t get paid until the people they recruit are hired. Some tech companies don’t want to deal with the pre-hiring costs, and they use tech staffing companies to find or train good people.

All these types of firms will need lots of working capital in order to operate effectively. Since banks are not always reliable sources of business loans—they take too long, they need lots of collateral, and they don’t often approve of loans in the end—invoice factoring for technology staffing firms has become very popular.

How Factoring Works

Invoice factoring for technology staffing firms is very simple. As a staffing firm, you provide workers for tech companies. You have an invoice for this service, and you sell these invoices to a factor. The factor gives you 70% to 85% of the value of the invoice, so that you don’t have to wait 30 days to get most of your money. You only have to wait 30 days for the rest of the payment. When the customer pays in full, the factor gets back the money they advance to you and then they take their cut. You then get the rest of the payment.

The Difficulties for Tech Staffing Firms

There are many reasons why tech staffing firms are always in need of working capital.

  • Many IT people who work for staffing firms are actually looking for permanent jobs. This is natural, since on average a permanent worker earns considerably more than a worker for a staffing firm. They can work for a tech company for a while even as the company sees if they are a good fit. If that’s the case, they make an offer for the worker so that they leave the staffing firm.
  • This means that staffing firms are always looking for new talent.
  • It’s hard to find new talent, because the best in the field know that they are in such high demand among tech companies. Usually, a good tech worker is already employed, and getting them to work for a staffing company can be hard.
  • To entice some IT workers, staffing firms may offer more reasonable wages and they may want to look for more “exciting” jobs, such as working for a video game company or for a Hollywood firm. All these efforts will cost money.
  • You need to make sure that you have topnotch recruiters. These are the people who approach IT talent, and they need to have the ability to convince talented people to work on a per project basis.
  • With invoice factoring for technology staffing firms, you can make sure that your recruiters and the people they recruit are all paid well so they will want to work for you.

How Does Food and Beverage Factoring Work?

How Does Food and Beverage Factoring WorkThere are many reasons why food and beverage companies often need an infusion of capital. They have to adapt to constantly changing markets, comply with ever stringent food safety and marketing regulations, and pay increasing labor costs. But banks are no longer reliable when it comes to loans, and that means alternative forms of financing. For many small and mid-sized companies involved in food and beverage business factoring is perhaps their best option.

How Does It Work?

The way food and beverage factoring works is very simple. First you need to find a factor to help you, and preferably you get a factor with extensive experience in the food and beverage industry. You then negotiate how much you get in advance for your invoices, and how much you pay for the factoring service.

Once the details of the agreement are set, you then have your additional capital. You just submit the invoices to the factoring company, and in return you get more or less 80% of the value of the invoice almost immediately. The factor then takes over the administration of the invoices, and they also handle the collection as well. When the customers finally pay in full, you get the rest of your payment, after the factor deducts the fees for its factoring services. This is usually in the 2% to 4% range.

It really is that simple.

Benefits of Factoring

With food and beverage factoring, your own credit doesn’t matter. So if you were denied a bank loan due to your poor credit, in factoring that’s irrelevant. Only the credit of your customers is relevant. So if you deal with reputable companies in the industry, then you can use their excellent credit to boost your own working capital. With factoring, the entire application process may take no longer than a week or two, and the chances of getting your money are very high.

There are other benefits in addition to getting more working capital. Factors investigate your potential customers, so you will now know which companies are credit-worthy. You’ll know which ones pay fully and on time. You no longer have to investigate them yourself.

You also save yourself the trouble of hiring people to collect your payments. Your factor does this for you as well, so that you can concentrate on coming up with new and exciting food and beverage products that can boost sales.

Conclusion

Food and beverage factoring is now one of the more popular forms of financing, simply because banks are not always eager to grant borrowers a loan. They have too many requirements such as collateral, and their loan application process is simply too time-consuming. Often they even need to know what you want to use the money for.

With factoring, you can use the money in whatever way you see fit, and you don’t have to pay any monthly loan payments. Factoring is not a loan at all, and that means your own credit isn’t affected as well.

 

The Many Benefits of Medical Business Receivable Funding

If you’re setting up a medical clinic, then you absolutely will need a bank loan unless you have enough capital to take care of all your expenses in the next 6 months. But because of the nature of the current health care system, more and more doctors are turning to medical business receivable funding.

With this funding option, doctors don’t have to wait for a very long time until the insurance company gives them their payments. That’s because, with medical business receivable funding, they can get a large chunk (as much as 80%) of the value of the receivable – in advance. Then when the insurance company pays the lender, the doctor gets the rest of the payment minus the fee the lender charges.

There are several reasons why receivable funding has become very popular in the health care industry:

  1. Doctors get the funding they need quickly. Banks take a very long time to approve a loan, and sometimes they may not provide a loan at all. But clinics need lots of working capital, all the time. There are payroll and overhead expenses, and those needs are immediate. Clinics also need to buy the latest medical equipment to provide the best care for their patients and to compete with other clinics and hospitals in the area.
  2. Doctors are spared from dealing with insurance companies. Dealing with insurance companies is one of the frustrating things about running your own clinic. Doctors often have to deal with insurance companies who just won’t pay the amount they billed. And then sometimes the doctors have to deal with a lot of paperwork. Even filling out information in the reimbursement forms is pretty tedious.

Many doctors are fed up with such requirements that they are saying no to insurance altogether. But with medical business receivable funding, you spare yourself from unnecessary headaches. That’s because it’s the lender who will collect the payments from the insurance companies.

  1. There’s no reason to hire staff or third-party billing systems for collections. This is another way for a doctor to save money. Dealing with insurance companies often means having to hire staff just for that purpose. But collecting the payment is part of the funding company’s services. So not only do doctors get the money they need, but they get this service as part of the package.
  2. Doctors will know in advance which insurance providers to turn down. Dealing with the insurance company sometimes result in underpayment. There are some insurance companies who won’t pay what the doctor charges them. Since the doctor believes that they didn’t get the money to which they were entitled, they may then react to this by no longer accepting patients who use that particular insurance company.

But with medical business receivable funding, insurance companies are investigated in advance. Also, a finance company that specializes in medical funding often has a list of insurance companies known to pay late or underpay. The doctor can then decide right away which insurance companies to refuse so that they don’t have to be underpaid.

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A Working Capital Loan Will Generally Not Affect Working Capital

If you don’t have enough working capital to meet payroll or pay your suppliers, then as a business owner you’re going to have a problem. A working capital loan can help but it really doesn’t improve your working capital at all. In fact, a working capital loan will generally not affect working capital.

Clarifying the Issue of “Working Capital”

If the title of this article doesn’t make sense, then let’s clarify the issue. Working capital is actually a technical term, and it’s defined as your current assets minus your current liabilities. Your current assets don’t count any fixed assets, but rather those items (such as invoices and inventory) which can be easily converted into cash. Your current liabilities are those which you need to pay for in the near future, so any long term loans don’t count.

So if you get a working capital loan, you get cash which makes it a current asset. At the same time, your current liabilities increase by the same amount. So there’s really no difference at all when it comes to your working capital.

However, keeping track of your working capital can be important. For example, you can tell that something’s wrong if your working capital is decreasing over time. It can also tell you if you are making good use of your assets.

If your working capital is negative (your current assets is less than your current liabilities) then you need to get more working capital right away. But if you have too much working capital (such as if your current assets are more than twice the value of current liabilities) then you may not be investing your extra cash properly or you have too much inventory.

So What Affects Working Capital?

So if a working capital loan will generally not affect working capital, what will?

  • Your net income. This is your standard source of working capital. You exchange your inventory for a price that’s higher than the cost it took to manufacture it. Since the cost (liability) is less than the price (asset) you will get more working capital.
  • You bought fixed assets. If you buy fixed assets like equipment, then you use your cash which is a current asset for something that’s not a current asset. This is one of the uses of working capital.
  • You paid off a long term debt. This is another use of working capital, as a long term debt is not a current liability.
  • You have a long term debt. This is one way of increasing working capital, because the loan doesn’t have to be paid in the near future.
  • You sold a fixed asset. Perhaps you sold some equipment you no longer use, or a building you no longer need. This also increases your working capital.

Working capital is meant to be used. You need enough to operate and grow, but having too much means you’re not using it properly.

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Is AR Financing Considered as Debt?

Nowadays, suppliers are always demanding for immediate payment. On the other hand, your clients are only looking to make payments after 30 – 90 days. If your business is facing issues with cash flow because of the aforementioned situation, you may want to check out accounts receivable financing. Is AR financing considered as debt? Well, it may or may not be, depending on the situation.

In general terms, factoring or AR financing is the process of converting your accounts receivable into cash through a third party company known as the factor. The factor may pay as much as 90 percent of the invoice value, and then proceeds in collecting payments from your customers for a fee. The remaining balance will be paid to you once the customers render full payment.

In this business, you may avail either the recourse or the non-recourse factoring. Knowing the differences between the two options is important because choosing one or the other may lead to the prosperity or the bankruptcy of your business.

Recourse Factoring

If you avail of a recourse factoring agreement, you are basically using your accounts receivable as collateral. Although factors are in the business of buying your invoices, they also reduce their risk by having a recourse option. In a nutshell, if your client fails to pay after the agreed amount of time, you will be the one shouldering the bills.

When this occurs, your accounts receivable may be considered as debt by your factor. Therefore, be very careful in entering a factoring agreement because according to the International Factoring Association, 79 percent of factors offer recourse factoring. You do not want your profits to turn into debt just because you did not read the fine print carefully.

To lure businesses to acquire their services, factoring companies offer credit checks to all your current and prospective customers so that you will only extend credit to clients who have excellent credit ratings. Furthermore, recourse factoring is the cheaper option between the two options since factors assume lesser risks.

Non–Recourse Factoring

If you opted for a non-recourse factoring, you are selling your accounts receivable to the factor. In this course, your business is freed from any form of debt because the factoring company completely assumes the risks.

Of course, factoring companies need to make up for carrying the risk so therefore, the discount rate will be greater. In other words, payment for your invoices will be significantly lesser compared to the recourse option.

Choosing this type of factoring option is recommended if your business relies on a few huge corporations. Although you may lose a significant amount of money if you convert your accounts receivable to cash through this route, you are protecting your business from bankruptcy. Should recession hit and one of your biggest customers becomes insolvent, you can be sure that your company will not pay the price.

Summary

With clients taking a considerable amount of time before making full payment, factoring is a legitimate option to address cash flow issues. Recourse factoring will pay you more for your invoices but if your customers fail to forward payment, your accounts receivable may be considered as debt by your factor. On the other hand, selecting the non-recourse option will pay you smaller but the factor will assume all the risks.

Understanding the differences between the two options can spell the difference between your business sinking or swimming.

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Potential Problems When Dealing with a Flooring Factoring Company

Need working capital for your flooring company? Click above
Need working capital for your flooring company?
Click above

One of the most basic rules when it comes to availing factoring services is that you should partner with a factor which has an extensive experience in your niche or industry. So this means that if you are a flooring subcontractor, you need to approach a flooring factoring company. It sounds simple enough but the reality isn’t exactly in black and white.

Here are some challenges you will face when searching for a flooring factoring company:

  1. There aren’t all that many factoring companies specializing in the subcontractor niche. Forget about factoring companies which specifically focus on flooring companies. You’d have a difficult time finding a factoring service for any type of subcontractor business. Factoring companies that provide services for flooring companies are extremely rare, so if you find one which has an extensive experience in the flooring subcontractor niche, you can count your blessings.

While you may find a factoring company who may be willing to help you out, their inexperience in your particular industry can make matters more complicated. The contracting industry is complicated, and explaining the details will definitely not be easy.

  1. What happens if you issue “applications for payment” or payment notices? Inexperienced factors may find it strange if you don’t use invoices at all, but many flooring companies like yours issue applications for payments in lieu of invoices. Since factoring companies use invoices as collateral, by not using an invoice you may have very confused factors which will need a lot of clarification before they can set up a factoring arrangement for your company.

An experienced flooring factoring company, on the other hand, knows precisely why you may want to issue payment notices as a way of reminding people that you need to be paid. What’s more, they also know how to use these payment notices in lieu of traditional invoices as basis to forward you the working capital you need.

  1. Some main contractors absolutely refuse to deal with factoring companies. In most cases a generic factoring company sends a notice to all your customers that the payments should go directly to them instead of to you. This is SOP, and in some industries (such as the apparel industry) everyone accepts this.

But this is not the case in the contracting industry. The main contractor tends to be someone who likes to deal with subcontractors on a personal basis. The inclusion of a factoring company may be seen as an intrusion, and they may not appreciate having someone they don’t know telling them when and how to pay for your flooring services. There’s a very good chance that this main contractor may no longer use your services in the future if you insist on using a factoring company.

But with a factoring company that has extensive experience in this industry, problems like this has a solution. The entire factoring service can be kept confidential, so that the arrangement can still continue without letting your main contractors know about the arrangement.

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How PO Funding International Lenders Can Solve Your Worries

Exporting can be a somewhat daunting endeavor, even though the foreign markets represent a great opportunity for tremendous growth. It can increase your sales and profits. It can offer you an expanded and diversified customer base. And it even offers some sort of stability to help you deal with the US economic situation. But you can only get these benefits if you know how to do it properly.

Nonetheless, more businesses in the US are taking the chance. In a 2010 small business survey, 52% of the respondents had sold goods or services outside the US. In 2013, it grew to 64%.

But it is not without its challenges. There are always some concerns, and for companies who export goods and services abroad here are a few of the more common problems which PO funding international lenders can help resolve:

  1. You’re not sure about getting paid. This is crucial, especially if you are relying on that payment to cover operational costs. While 69% of exporters ship their goods when they receive the full payment in advance, only 43% ship on a 30-day open account. Only 17% offer extended payment terms to customers overseas. Only 2% of exporters report that their banks would advance funds to them upon shipping the goods.

Accepting only advance payments can make sure you get the money you need to use as working capital, but this can severely limit the number of customers you get abroad. There aren’t that many overseas companies that can pay in advance, outside huge multinationals.

But with PO funding international, you can get the money right away. The funding company provides you with the working capital you need, so that you can cover the expenses involved in the deal. You get a percentage of the amount of the purchase order up front. This process is very quick, as it may only take two weeks or so.

  1. You’re not entirely sure what to do. Some people ask their embassy personnel for some guidance, but that doesn’t always work out well. But a PO funding international company will have the experience to guide you through the process. They’ll know all about the rules and regulations involved. They can offer you the advice you need to make sure that you do everything right, because after all this transaction involves their money too.
  2. You don’t want to carry more debt. More debt means your credit may be at risk. But this doesn’t apply to purchase order funding, because technically it’s not a loan at all. It’s not a loan, but rather a cash advance.

Selling abroad is really one way of making sure that your business growth is steady and assured. It can be a very confusing process, but with the purchase order funding you’ll get the cash flow you need to make it work.

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How Janitorial Factoring Services Can Help Your Business

. If you need more working capital, contact Neebo Capital
. If you need more working capital, contact Neebo Capital

If you are running your own janitorial services, you don’t need anyone to tell you why you need some sort of available cash on a regular basis. You already know that. But what you may not know is that a bank is not your only option when it comes to getting the cash you need. In fact, a bank loan may not be your best option at all.

Why a Bank Loan May Not Suffice

There are several reasons why banks are not exactly reliable lenders these days. That’s because the economic recession has spooked them, to such a degree that many banks are somewhat “risk-averse” when it comes to loans. While they have improved their tight-fistedness lately, you better have one heck of collateral to put up if you want a loan, and you better have a damn good credit rating.

Then there’s the fact that bank loan applications take a long time to process. You know that you need the money now, but they don’t know that or they don’t care. They will proceed in their own good time.

Why Factoring?

If you want a convenient solution to your problem, then factoring may be your best option. The application is extremely simple and quick, and you know right way if your application has been approved. What’s more, you have a much better chance of getting approved.

So how does factoring work? The concept is very easy. You have accounts receivables, but you will receive the payment due to you in 30 to 90 days. Depending on the circumstances and the company, you get about 80% of the money due to you much more quickly. You may even get your money in a week or even in a few days. Then you get the balance when the invoice is fully paid, and the factor gives you the rest minus their fees.

A Look at Janitorial Factoring Services

But the above is simply a generic description of how factoring works. What you really need is a factoring service that’s geared specifically for janitorial companies. Janitorial factoring services offer several advantages over those generic factoring services. That’s because the factors have already worked with businesses in the janitorial industry, and they know what to expect.

The advantages here include:

  • Relevant references. You’re not the first company in the janitorial industry to make use of their services. That means they can give you references which are in the janitorial industry, which can give you a much clearer idea if the factor can really help your business.
  • The process is geared to match standard janitorial industry practices. You don’t have to explain to these factors why some things are done in a particular way in the janitorial industry. The factor already knows this which makes the entire process much more efficient. The two of you are on the same page already.
  • They can do investigative work for you. These factors are already familiar with some of the companies that require janitorial services. That means when you have a new client, your factor can tell you if they are a good company that actually pays their bills or not.

If you own or manage a janitorial company and you want ready and steady cash, then you need to go to a factor which specializes in helping companies like yours. The janitorial industry is always changing, and you need help to weather the storms that come your way. It’s as simple as that.