Category: Small Business Finance

Non-Notification Factoring – NEW

Neebo Capital now offers non-notification factoring, below  in this article we describe Non-Notification Factoring:

not notification factoring

Non-notification factoring, can help your company retain clients and grow cashflow.

 

The majority of factoring occurs with the full knowledge of the customer.

If you’ve obtained a mortgage from your local bank, chances are that at some point you’ve also received a letter from them saying that your mortgage was now being handled by one of the bigger banks.

Non-notification factoring occurs when the invoices are sold to a factoring company without the knowledge of the customer.

This service can benefit companies in three ways.

1. It preserves trust

 

Personal service has become incredibly important in our impersonal world. And the big banks, in particular, have earned the well-deserved reputation that they don’t care about anything except paying huge salaries who head their institutions. They certainly aren’t interested in the ordinary people whose mortgages or other accounts they hold.

 

That attitude has disenfranchised their customers. Smart business people do the opposite. They do all that they can to maintain the faith that their clients have in them.

 

And that being the case, if customers of smaller lending institutions were aware that their business had been passed to a different company, one which was out of their reach, then they might be tempted to take their custom elsewhere.

 

So, by keeping the changes in the ownership of the loans confidential, firms can prevent that from happening. In order for that trust to be maintained, however, it’s essential, that customers are still able to get the help and support they need from their local lending company.

 

 

2. It preserves the brand.

 

Think of laundry soap, for example. Consumers like choice. If all of detergents had labels that identified them as being from the same company, there would only be a few to choose from. But, by branding each of them separately, customers can pick the one they prefer.

 

The same idea holds true when firms sell their invoices to a third-party without the knowledge of the customer. Factoring companies typically buy accounts from many different businesses.

 

But, if customers became aware that in actual fact their invoices were in the hands of only a few companies, then they would feel that their ability to choose had been eroded. In effect, they would be unable to see the difference between dealing with one company or another.

 

 

3. It preserves loyalty.

 

Customers prefer to use their local bank branch because they want to support firms in their communities, and also because they like to make friends with those with whom they do business.

 

If they ever thought that the majority of their financial obligations were now under the roof of some other business that is out of their town, or out of their state, then they could be made to feel that the branch had betrayed them.

 

And that means they would be more likely to move their accounts to another business that they felt would be loyal to them.

 

 

Although banks and other business need to earn a profit in order to remain viable, they also need to recognize the importance of serving the customers they have.

 

If they breach that trust and limit their choice, then they will also lose their loyalty.

 

Non-notification factoring, if handled correctly, can help your company to achieve all three.

 

Temporary Employment Agencies Factoring: Financing Solution That Can Help Grow the Business

temp Factoring

Cash flow problems can be one of the most familiar problems for a lot of temporary employment agencies. And a solution that businesses often resort to is the use of temporary employment agencies factoring. Sure you have lots of clients whose companies are financially capable and are good with credit. But the thing is, these companies are slow on payments due to maybe a longer billing cycle or probably because of some sort of corporate red tape; but that of course is outside your concern.

On the other hand, while you are waiting for your receivables to fully liquidate, you have to make your own payments to your staff and suppliers.  This is where the equation gets all muddled up. You have money that you have yet to collect, but you have dues now that you have to settle. So where do you get your money to cover your current dues?

 

Temporary Employment Agencies Factoring: Quick Cash for Dire Needs

 

Generating cash for your business is not easy. Sure, there are lots of ways to do so, but not all of those ways are applicable to your business. An option to get some funding is to take out a traditional loan; however, if you are a newbie in the business, you may not yet qualify for this kind of loans. But the good news is, it doesn’t end with traditional financing. Instead you may opt to go to a lender or a factor.

They offer short term solutions to companies suffering from financial constraints by buying accounts receivables. However, they’ll buy it at a rate that’s lower than the actual amount of the invoices. On the upside, it will give you some instant funding that can help make you pay your current dues as a temporary employment agency.

 

Is Factoring the Right Financing Option for Temporary Employment Agencies?

 

Temp agencies have lots of expenses that cannot be put off; so it is of utmost importance that they have a steady influx of funds. For a temp agency to run, it needs to pay for advertising, utilities and more so, it needs to make prompt payments to their employees. So for immediate funding needs, taking out a business loan the traditional way is not going to be a practical option, since approval for this kind of loan takes too long. That is why factoring is the ideal choice for businesses such as temporary employment agencies.

 

Lenders or factors also do not require a company to put up a whole array of hard assets to be used as collateral. Oftentimes, they only require the invoices that borrowers want to sell plus probably the employees’ corresponding timesheets. If they get approved for invoice factoring, the lender will deposit the funds into the company’s bank account and will soon be made available to fund the company’s monthly obligations. Temporary employment agencies factoring allows the company to pay their dues to its billers and employees without having to take out a new loan.

Interested in  Factoring:  Click here

Asset Based Lending In Canada

This article is mainly about Asset Based Lending, what it is, how it works,  and how it can help your business.

Asset Based Lending In Canada. Canadian Asset Based Lending
asset-based lending is similar to borrowing against the equity in your home. It is used by businesses to get capital fast.

Although the factoring of invoices can provide the immediate injection of cash that your company needs, there may be times when selling them at a discount is not cost effective.

For example, if you happen to be in a very competitive industry, then your profit margin may be too low to use this method. And so while the non-payment of your invoices would cause a hardship, so would settling for less than their full value.

In this situation, you may find that a loan is the best option for you.

 

Normally, when we think of loans, we do so with respect to purchasing something.

 

Let’s say that you need to replace some equipment. In that case, you might need to borrow enough money to buy it.

 

But let’s say that instead, you need some extra cash in order to meet a scheduled expense, such as the company’s payroll. In that instance, there would be no new asset to use as collateral.

In such circumstances, asset-based lending comes into its own because you can use some of the assets that you already have as security for that loan. It’s similar to borrowing against the equity in your home.

The repayment of that loan is made through your cash flow.

There are a couple of different types of assets that can be used for loans of this type.

One is your inventory. Now there’s nothing to say that all over your resources need to be used. You only need to enough to cover the size of the loan. And so you needn’t feel as though you’re losing control of your company.

Remember that this is a short-term fix.

 

Another asset that you could use is publicly-traded stock. Larger companies do this on a regular basis.

There are however, two situations that can have an impact on the ability of the company to use this option.

The first is the market price of the stock. When it’s high, more money can be borrowed than when it’s low.

The second is the interest rates, and sometimes the two are related. Higher rates mean that the loan costs more. But, the markets usually react when rate go up because it reduces the amount of money that’s available to buy stocks from all companies, not just yours.

 

And so, if you depend on the market price of your stock for your asset based loans, then you may not be able to borrow as much as you need.

 

There’s a second reason why you might want to obtain an asset based loan, and that is so that you can take advantage of an unusually large order. It could be that you simply lack the resources to obtain the materials that you would need to fill your customer’s request.

 

 

The last reason why an asset based loan might come in handy is if there is a delay in the payment of one or more of your larger invoices. Where margins are tight, you could find that a shortage of cash would impede the firm’s ability to trade at all.

 

A Bird in the Hand is Worth Two in the Bush

factoring invoices, factoring company
Accounts receivable financing is like that. It gives you ready cash now and removes the risk that you might not be able to obtain the full amount at some later date.

There is a story behind this famous English idiom which dates back to the 17th century.

The gist is that a sure thing right now beats a promise of better things in the future.

 Accounts receivable financing is like that. It gives you ready cash now and removes the risk that you might not be able to obtain the full amount at some later date. And it’s that uncertainty that can disrupt your company’s strategies.

All bank loans require some form of collateral. In most cases, it’s the item itself for which the money is advanced. So if take out a mortgage so that you can buy a house, then the house itself is the security. If it’s for a car or a boat, then the same principle applies.

 

The title on the item, that piece of paper that shows that you are the rightful owner, is held by the bank so that if you are unable to repay the load, then can sell that security and get their money back.

 

Sometimes, banks will loan what they decide is the value of the item, regardless of how much you have paid for it. And in the case of a house, they normally require you to have some skin in it, to the tune of about 20% of the purchase price. In that way, they feel that you are more likely to honor your commitment because if you failed to do so, then you would lose not only the house, but your money as well.

 

I’ve reminded you of how bank loans work in order to help you understand the benefit of using accounts receivable financing instead. Instead of borrowing against your invoices, you can sell them instead. In other words, it’s a sale, rather than a loan. That means you won’t have to pay it back, ever.

The accounts are sold at a discount. The seller gets ready cash, and the buyer makes a profit on the debts when they are fully paid. It can be a win/win for both parties.

If the debts are old, then the value of the accounts is likely to be less than if they were current. That’s because they tend to be more difficult to collect. Each company will have its own policies for this, and you should check with yours beforehand.

 

The “bird in hand” is cash today. The “two in the bush” are found in the hope that you might be able to collect the full amount in the future.

 

Let me ask you something.      Is it worth the risk?

 

Rather than write off the outstanding debt now and receive nothing, wouldn’t you rather get something for it instead? Wouldn’t you prefer to shift that risk onto another firm?

 

When you’re bills aren’t paid, it’s difficult to concentrate on the really important things. But, if you sell your accounts receivable, that will free up your mind for what matters the most.

Factoring for Opportunities

 

I want you to imagine for a moment that everything is going exactly the way you had hoped in your business.

Factoring Opportunities
Firms need to have the flexibility to draw on additional funds so that they can take advantage of the opportunities as they arise.

Your order book is full. Your cash flow is healthy. Your customers are happy. Even your employees are happy.

Then, a prospect approaches you. He’s impressed with your innovation He has seen the quality of your work. He likes the fact that you always deliver on time. And now he wants to give you a contract that is too big for your current operation.

What do you do?

Your first thought might be to approach a competitor and join forces.

But, let’s add a wrinkle to that scenario.

Suppose that the contract is so sensitive that your prospective customer is willing to give it to only one company? In other words, you won’t get it all if you need to recruit another firm to help you out?

These examples are just two of many of the kinds of opportunities that may come your way.

Entrepreneurs from Eastern Europe, Ukraine, and south-east Asia have come to the West, not only to learn about business, but also to do it.

And as you know, the state of the economy in recent years has made it harder for companies to turn away business, even if it really isn’t what they are tooled up for or prefer to do.

So that means that firms need to have the flexibility to draw on additional funds so that they can take advantage of the opportunities as they arise.

That’s easier said than done, because traditional funding options normally aren’t accessible as quickly as they need to be in such situations.

Families tend to be strapped for cash. Banks have forgotten how to loan money to business, especially SMEs. Business angels or venture capital companies might be interested, but usually there needs to be an established relationship in place in order to raise money in a hurry.

And even when such an association exists, if they’ve already invested in you, it’s unlikely that they will be willing to advance another tranche to you, no matter how great the potential, because it will increase their exposure.

And so it’s really down to you.

To be sure, the best companies maintain a contingency fund. Five to ten percent of your annual costs is probably a reasonable sum to have in your reserves. But, that money is there to cover unforeseen expenses; not to use for an untested or unexpected opportunity.

And since you already know that no business deal is immune from contingencies in any case, why would you risk everything on one opportunity?

The sensible thing, of course, is to raise the cash you need in another way.

And that’s where factoring can come into its own. Instead of using it as a stop-gap to forestall unpleasant consequences, you could use the same service to enable you to capitalize on new business opportunities. And once you’ve taken advantage of one, you’ll be encouraged to compete for the others.

Factoring is a sensible way to keep the tax man away

BY: Chris Lanchech

I’m sure that you’ve heard the old saying that there are only two certainties in life: death and taxes. And to be sure, the only way to avoid the latter is to embrace the former.

Factoring your invoices is a sensible way to keep the tax man off your back and to retain ownership of the business that you worked so hard to create.
Factoring your invoices is a sensible way to keep the tax man off your back and to retain ownership of the business that you worked so hard to create.

Not much of a choice.

But taxes have a way of coming due at the most inconvenient time. For some, it’s just after the busiest season of their year. From Thanksgiving to the middle of January, some firms can do 20% or more of their annual business. But, when the season ends, then what? Business often slumps for a couple of months at least.

And that can mean that when the tax bill arrives, you aren’t financially prepared for it.

 

I haven’t met anyone who likes to pay taxes.

Oh sure, you hear of people like Warren Buffett talking about how they ought to pay more tax, and how the government needs to change the law so that they will. But you’ll never catch any of them forgoing a legitimate tax deduction to do it.

And they’ll never donate anything to the federal government, either.

Donate? To pay the national debt? Yes. That’s what I said. It’s right there on your tax return.

You can check a box, and donate your refund to the federal debt.

Fat chance, I hear you say. And I agree with you. I mean, who in their right mind would do so?

 

My point is that apart from the odd billionaire who thinks that the law should be changed so they are forced to pay more, the rest of us, and no doubt that includes you, prefer to pay less. But the thing is that time and taxes wait for no man, and certainly no business.

The failure to pay taxes in the short term can give something as small as your town government the right to put a lien on your business, which can make them the owners, and not you, in the stroke of a pen.

And that means that you have to have an alternative method that you can draw upon quickly, in order to find the money you need to pay it when it does become due.

The risks are just too high to ignore it.

 

Factoring your invoices is a sensible way to keep the tax man off your back and to retain ownership of the business that you worked so hard to create.

It enables you to obtain the money you need sooner than you otherwise would expect to get it.

For example, let’s say that you have issued invoices worth $50K, and that you expect them to be paid in 90 days. You knew that your taxes would be due in a month or so, but you got so busy that the time slipped by before you knew it.

Then your accountant tells you that you have to pay it in 45 days. What do you do?

One option would be to

That would prevent a problem with the government.

Or, let’s say that you had a particularly good year, but you earned more money at the end than at the beginning. And that meant that instead of holding some of what you earned in reserve for your taxes later, you had to use it to keep the company going during those lean months.

But now, because of your unexpectedly high earnings, you have more tax to pay than you were able to prepare for.

One way to deal with that problem is to use factoring to cover the difference. Even with the interest rates at historic lows, you’ll find that the discount at which you sell your invoices will be considerably less than the interest you would pay on a loan.

Not only that, but you’ll avoid taking on any new debt.

And that has to be a bonus for you.

 

An Introduction to Factoring Invoices

By: Chris Lanchech

Factoring invoices is one of the things any business will need to continue operations and growth despite seeing financial instability caused by slow overturns and residual returns. It can be very difficult for your business to progress while you are still waiting for your clients to pay. Wouldn’t it be great if all your clients could pay you immediately? That might seem impossible but with factoring you can make it happen.

 

What is Factoring?

Factoring, also referred by some as invoice discounting, works much like a regular loan except in this case you are considering your invoice or accounts receivable as the ledger. The factoring company will consider your invoice and upon reaching an agreement will lend you the amount that you will be paid by your clients. Consider the example below:

An IT company was requested by a marketing company to develop a dynamic website and overall the payment was to be for $150,000. The IT company, needing resources to start with, factors the invoice with a factoring company. They lend the IT Company 80% of the accounts receivable (in this case it will be $120,000). They will only give the remaining 20% when the client pays the IT Company. The $150,000 that the IT company receives will then be paid to the factoring company, less the fees that the company will have to pay, such as interest fees and administration fees.

Is It Beneficial to You?

Every small or growing business requires liquid cash if they desire to move forward. A business cannot rely solely on their own minimal funds while working towards their accounts receivable, lest they fall into stale debt.

First of all, one has to consider the fact that factoring invoices yield more immediate cash. Most factoring companies lend up to 80% up-front. Banks will usually only agree to give you 50-60%. This means that you can get more resources to get cash flow back in order.

 

Secure Your Business’s Finances

You might be wondering about the likelihood that your client turns bad and does not fulfill the agreement and your invoice is left unpaid. In this case most companies have insurance offer that remedies the problem. They will still give you the full amount of the loan and they will be the ones to chase after the client to get the payment owed.

 

If you are still starting with your business or if you are in need of steady cash flow to finance your company’s expansion then factoring or invoice discounting may be your best solution yet. The process yields higher immediate cash-payback than what banks offer and you can get approved in 3-5 business days.

Processing fees, interest rates, and miscellaneous fees are much lower than what you’d expect and you can even avail of insurance to protect you in case your client defaults on the payment. Getting your cash flow in a steady rate is crucial for your business’ growth and factoring invoices is a much better, faster, and efficient means of achieving this.

Credit Insurance Policies on Receivables

So you have a business and you sell to clients on credit terms. Maybe you should consider credit insurance policies on your receivables. Why?
Credit Insurance Policies on Receivables
The simple answer is to reduce risk, and strengthen your businesses financially in order to establish a stronger bankline in the future.

However the deeper answer has to do with your business and its potential loss. The saddest stories in the factoring world come from businesses who lose their largest accounts overnight.

These accounts can be large fortune 500 companies with sound financials.However one bad press release or shock to the economy can have a trickle effect and bring their business to a halt. A perfect example of one of these unforeseen chain reactions, was the filing of bankruptcy of one of the largest food processing companies in the industry.

All it took was one massive press release about the “pink slime” found in processed hamburger meat and The King of Prussia,  a PA-based food processor was devastated. Prior to the release the company processed about 500 million pounds of beef annually!

Now imagine if you are a suppler for this company with over $50,000 or $100,000+ in outstanding A/R. Prior to the pink slime press release you may have not been worried. The King of Prussia may have been one of your largest and secure accounts. However you now can see how quickly things can change in today business environment.

why should you buy credit insurance?

Had suppliers had credit insurance policies for their large customer “the king of Prussia” they would have recovered $0.80 to $0.90 cents for every dollar they were owed.

Sometimes – and this is the reason for credit insurance – there are unforeseen factors that influence the performance and survival of your customers.  Whether those are the court of public opinion, mismanagement, or a bad acquisition, companies go bankrupt, leaving you and your company paddling up shits creek.

Visit Neebo Capital for Credit Insurance Policies on Receivables

APR vs Discount Fee’s

Every now and then we get a business owner looking for the difference between APR (Annualized PERCENTAGE RATES) and Factoring Discount fees.
APR vs Discount Fee’s
As an analyst these questions can still confuse me. Business owners juggle many different financial tasks and terms. However there is a huge difference between factoring discount fees and annualized percentage rates.

The difference is complicated:

– Annualized percentage rates are dependent on a businesses risk over the year.

-Factoring discounts fee’s lower the risk to net 90 terms at the most.

*keep in mind if you try and compare an annualized rate with a short term rate(factoring discount fee), you must ALSO compare a company that can qualify for a long term loan and one that cannot. Those two companies are not the same, neither is the cost of funds.

Above is the definition, and as you can see trying to compare the two is like saying ducks and eagles are the same because they both fly. I say this because if you attempt to multiple a 30-day invoice fee by 12 you will not get a accurate number of the annualized percentage rate.

For example: When a factoring company funds your  30-day invoice with net 90-day terms, your invoice will be repaid between 25-45 days on average. This means the risk of the outstanding invoice is only over a short period of time.

This short term reflects the risk your company brings into the equation. Factoring companies accept this risk and offer a factoring discount fee.

On the other hand a bank will make a loan that they expect will be paid over a year or more, because they make calculations whether or not your business will be better over a period of time. If banks see any risks that your business cannot pay back the loan, the you get no loan!

Factoring companies will give your business funds within 24 hours to 3 days. Their lending is dependent on the creditworthiness of your customers.

Hope this helped
Chirs L.