Category: Whats Trending

Factoring for Technology Companies

Factoring for Technology CompaniesFactoring for technology companies is becoming more popular, because many technology entrepreneurs won’t allow the lack of working capital to prevent them from growing. They look to Alabama and feel that they can do just as well.

Alibaba, the Chinese ecommerce firm, has just debuted on Wall Street, and it was a whopper. The technology company raised $29.7 billion, which made it the largest IPO of all time. The previous record holder was Visa back in 2008, and it raised only $17.9 billion.

Alibaba achieved a market cap of more than $228 billion, and that has made it the 4th most valuable tech company in the world. The only companies ahead of it are Apple ($611 billion), Google ($400 billion), and Microsoft ($384 billion). Alibaba is now more valuable than Facebook.

With such a dramatic entrance, many other tech companies are dreaming of a big IPO payoff as well. Perhaps you too are dreaming of this, or maybe you just want to be moderately successful first. But whether you are aiming high or have more reasonable expectations, you will undoubtedly need capital and lots of it. If an IPO is not practical for you, then you need other arrangements.

Bank Loans

This is perhaps the most obvious way of getting financing, but it has its share of drawbacks as well. The loan application process takes too much time, and even the chances of getting a loan is 50-50 at best. Banks require a lot of security, and for many tech companies the problem is that they may not have the assets to use as collateral.

And if you already have borrowed from a bank, you need to go through another long process if you want to get more money.

Venture Capitalism

Here, you raise capital by selling chunks of your company to venture capitalists. But this can be very expensive in the long run. For example, if your company is worth a million dollars, you have to sell 10% of it to get $100,000 in capital. But when your efforts to grow your business succeed and now your company is worth $3 million, that 10% is now worth $300,000. You essentially paid $200,000 to get $100,000 for your working capital.

And if you sell a large chunk of your company, you may end up losing control of it in the end.

Factoring

With factoring for technology companies, the benefits are quite significant. The application process is much quicker. The chances of getting finance are also quite good, because your credit is irrelevant to the factor. The most important consideration is that your customers are credit-worthy.

If they are, then the factor advances you anywhere from 70% to 85% of value of the invoices almost immediately. You then get the rest of your money (minus the fee of the factor) when your customers finally pay in full. You can then use this money to pay overhead and payroll, or invest in research or better equipment.

With factoring for technology companies, you can make sure that your company is still yours. You don’t have to explain to a bank about your overall business strategy, and you don’t have to risk losing control of your business.

Why Should I Let a Factor Purchase My Invoices?

Why Should I Let a Factor Purchase My InvoicesAs a small business owner, every now and then I would need an extra infusion of cash. Sometimes it’s about needing working capital to cover expenses such as overhead and payroll, as well as paying for supplies. Other times I need the money to fund my company’s growth by taking advantage of certain business opportunities which require money upfront. For example, a certain piece of expensive equipment becomes available at a considerable discount. The financing can get me that equipment to boost my business.

But nowadays, I don’t go to the bank anymore if I need to borrow money. I just let a factoring company purchase my invoices. It’s not just an alternative form of financing, but it’s actually one of the main forms of financing for me.

So why do I let a factor purchase my invoices? Take a look:

  1. I can get the money I need. Banks are nice, and they can actually help when you start a business. But the problem is that many banks are not really all that happy to lend money to small businesses these days. The rejection rate is appalling, and what’s frustrating is that you waste a lot of time in the process.
  2. I can get financing more quickly. Banks take a long time to decide whether to give you money or not because they have to check your company’s finances. They use this info to set how much they will lend you and at what rate. With that kind of speed, you can take advantage of many more opportunities than before.
  3. But with factors, the process is much quicker. At first you’ll probably need about a week to set up a factoring system. But after that, you’ll need as little as 24 hours and you’ll get your money.
  4. I can get only the money I need. The worst part of taking out a loan is that often you borrow more money than you actually need. This means that you’re paying interest for something you didn’t have to. It’s just plain wasteful.
  5. But a factor will only purchase my invoices. I choose which invoices to give to them, and the factor agrees to buy them when they confirm that the customer has a reputation of paying back on time on a regular basis.
  6. I can get the extra services that I need. When I have a factor purchase my invoices, I get several additional benefits than just an infusion of cash. For example, I no longer have my own collection department, because the factor does the collecting for me. It saves me a lot of headaches, since I don’t have to oversee and pay collectors. With all these benefits, it helps me to sleep better at night, knowing that I can get extra cash flow for my business whenever I need it.
  8. The factors also investigate new customers to see if they pay up consistently. I don’t have to do it on my own. And now I also don’t have to risk offering credit to new business customers who may not pay me at all.

Types of Construction Company Loans for Sub Contractors

Subcontractors inevitably need money to replenish their cash flow because the industry can be very volatile. There may be times when there are few projects, which may make it difficult to meet payroll. When there are too many projects, as a subcontractor you need lots of working capital to pay for supplies and equipment rental.

So where can you get the money you need to maintain business operations? Usually, there are several types of construction company loans for sub contractors.

  1. Bank loans. Most businesses often turn to banks when they need additional funding, and subcontractors are no exception. The problem is that often the bank will require a lot of collateral. It’s not uncommon for a bank to secure assets that are worth 2 or even 3 times the amount of the loan. Add the fact that bank loan approval rates are only about 20% and that loan applications can take a very long time to process, and it is quite obvious that this method may not the best option.
  2. There are other problems too. As a subcontractor, you’d have to meet monthly payments, and that can be a problem when you have a time when business is slow. And if you need more money, you will have to renegotiate the loan.
  3. Asset-based lending. If you have some real estate you can use as collateral, then you may get construction company loans for sub contractors. Stock and even the cash value of life insurance can also serve as collateral. The accounts receivables less the accounts payable can also be used as security, but many banks don’t like progress billings which are common in the construction industry.
  4. Here, the problem is that often a subcontractor doesn’t have the assets needed for loans.
  5. Factoring. This is a form of financing which isn’t really a loan at all. In this method, the factor company buys the invoice from you, and then gives you anywhere from 70 to 80 per cent of the value in advance. When the invoice is paid, you get the rest of the money after the factor has deducted its fees. With this method, you won’t have to make monthly payments and you can choose the invoice to factor so that you get the money you need. Factoring has a very high approval rate, and the process can be very quick. Once the factoring line has been set up, you can get your advance in just 24 hours.
  6. All these construction company loans for sub contractors have their pros and cons, and it’s up to you to choose which one is best for you.
  7. For example, let’s say you have a single invoice totaling $120,000. Your agreement with the factor has you paying 2.5% of the total as a fee for the first 30 days and you receive 80% in advance. That means you get $96,000 right away instead of having to wait thirty days for the contractor to pay in full. When the contractor does pay in full, the factor keeps the $3,000 as their fee and you get your $21,000.

The Truth About 24 Hr Business Funding

Have you ever tried borrowing money for your small business? If so, then you don’t need anybody to tell you what a harrowing experience it can be.

If you take advantage of 24 hr business funding, expect that you’ll pay for the privilege of getting your loan approved quickly. At best, these loans will charge you anywhere from 20% to almost 40% interest on an annual basis.
If you take advantage of 24 hr business funding, expect that you’ll pay for the privilege of getting your loan approved quickly. At best, these loans will charge you anywhere from 20% to almost 40% interest on an annual basis.

It’s a very time consuming process. Finding a suitable lender among a horde of banks and loan providers is hard enough, and usually there’s a ton of paperwork involved. Your company and your personal finances will be checked thoroughly, and between that investigation and red tape, it will take an eternity to complete the process.

But now you have another option: 24 hr business funding.

What Is It?

24 hr business funding can mean lot of things, so when you see a website offering this kind of service, you have to make sure that you and the lender are on the same page. A 24 hr business funding could mean that you can apply for a loan outside of normal business hours, for example.

Or it can also mean that you can get approval for your loan application in just 24 hours. But your money will come in a week or two.

But of course there are also those that will give you the money you need in just 24 hours, and this is obviously the kind of 24 hr business funding you want to engage in.

How Do You Qualify?

If approval of the loan itself comes in 24 hours, then usually the finance company will need to check obvious signs that your business is in good shape to pay for the loan. They won’t check your business model or ask about how you are trying to improve your credit rating. They need hard data, such as about cash flow, revenue, and steady business checking account balances.

Some of these companies can be strict with their requirements. Keep in mind that computer programs usually decide whether you qualify for a loan and for how much. And you can’t really negotiate with a computer.

What are the Interest Rates?

Here is where it gets tricky. If you are tempted to use a loan broker to help you find the best deal, make sure that you’re not getting unfairly (although legally) overcharged. It’s not rare for a loan broker to add another 15% interest for themselves on top of the 30% the loan provider wants. But the most respectable brokers may pocket fees of 1% to 3%, which are paid by the lenders and not the borrowers.

If you take advantage of 24 hr business funding, expect that you’ll pay for the privilege of getting your loan approved quickly. At best, these loans will charge you anywhere from 20% to almost 40% interest on an annual basis.

You need to make sure that you understand the true APR you’re paying. You may end up paying more than an annual interest rate of 100%, especially if you don’t read the fine print. That’s why your best bet is to find a lender who is up front about the costs of the loan.

24 hr business funding can do a lot for your business. Just make sure you get in with your eyes wide open.

The Key Aspects in Manufacturing Asset Based Lending

Are you a manufacturer in need of working capital?
Call us at 1-888-382-3766

Asset based lending is a popular way for businesses to get the funding they need. Manufacturing asset based lending is common, and it represents a viable source of funding when banks are unable to offer an unsecured loan or line of credit.

Asset based lending is now a $200 billion market. Manufacturing asset based lending leads the pack, as it accounts for 31% of this market. Wholesalers follow at 28%, and then the retailers come next at 21%. This form of financing is not reserved for large companies either, as 71% of these companies have annual revenue of less than $50 million.

Two Types of Asset Based Lending

In general, asset based lending falls into two different types:

  1. Term loans. This is when you get the money you need, and then you have to pay on schedule. The amount is fixed for a specified period of time. Once you start paying on a term loan, the amounts you pay can’t be borrowed again. Usually, you secure a term loan with fixed assets such as your equipment or property. You then use the funds to finance your long-term needs and to acquire additional equipment.
  2. Revolving credit. With this type of finance, the amount you owe can fluctuate even on a daily basis. You can borrow money up to a specified amount, start to repay the money, and then borrow again as the need arises. Generally, you secure a revolving line of credit with your current assets. These are usually your inventory and your accounts receivable. Most of the time, the money will be used for funding working capital needs.

Explaining the Revolving Credit Model

This revolving credit is often an excellent way to maximize the availability of your working capital. While term loans are familiar to many, revolving credit may need to be explained.

But it’s actually simple. You offer your receivable and/or your inventory as collateral for the line of credit. Your credit limit will be determined by the value of the collateral. Once your receivables are paid, the cash is then forwarded to the lender as payment for the outstanding debt so that the balance is reduced. If you need more money, you just ask and you’ll get what you ask for as long as you don’t go over the credit limit. It’s like using a credit card.

The lender is in charge of the revolving line of credit, and also manages the collateral. This is to ensure that you get the optimum amount of credit anytime you need it. Your customers are not generally informed of this arrangement, so you continue to service your receivables and collect the payments. Your customers don’t have to know about this funding option.

Advantages of Asset Based Loans

In general, the main advantage here is that you get the additional funding you need quickly. Getting an unsecured loan is much more difficult. The revolving line of credit can provide a cushion for your working capital, and you don’t have to wait for the inventory to be sold and for the receivables to be paid in cash. With these term loans, you can then make long term plans for your company’s growth.

What is Manufacturer Purchase Order Finance?

US manufacturers constantly need working capital. They go to banks and ask for a loan or a line of credit, but often such efforts can be frustrating and futile. Even factoring, in which invoices are leveraged for funding, may not work when there are too few invoices. But manufacturer purchase order finance may just be the solution.

The Problem with the Manufacturing Industry

Manufacturing today, especially in the US, is still in the doldrums. The industry employment rate fell by 10% because of the recession, and its current employment is just half of what it was in 1979. While there are signs of new life brought about by exciting new technologies such as 3D printing, these advances just add to the additional expenditures. US manufacturers today are still using equipment that’s slowly becoming old and obsolete.

For manufacturers, the question of expenditures is crucial. There is payroll to meet, along with other operation expenses. The problem is compounded by the fact that their clients pay in 30 or 60 days. Often this means that a manufacturer may have trouble maintaining an adequate cash reserve for the purchase of supplies when a new project or purchase order comes in. It may even cause a manufacturer to refuse a purchase order that can bring in much needed revenue.

And that’s where manufacturer purchase order finance comes in.

How Purchase Order Finance Works

In this scenario, the manufacturer can take a new order even if they don’t have the money to pay for the supplies needed to complete it.

Once the finance company approves of your request for purchase order financing, they may reserve a percentage of the value of the order (such as 50 to 70%) for your working capital use. Your finance company may pay the suppliers themselves, or they may open a line of credit for you to use. Once your customer pays lender the amount they owe in full after you have delivered the order, you then get the rest of the payment owed to you, after the finance company has deducted its fees.

Requirements

The manufacturer may not need to have the best credit ratings and there’s no need for collateral, but the finance company will need to evaluate a few things first. The finance company will make sure that:

  1. You have enough of a profit margin on the order to make the financing worthwhile. Some finance companies, for example, will want to see at least 20% gross profit margins, while 30% is preferable.
  2. Your company has the ability to complete the order, according to the contract. You have to make enough products in the quality required by your client, according to the schedule specified. You need to have strong financials and you should have enough experience in the type of product requested. If you don’t have the experience, you may consider getting a sub-contractor to manufacture the product.
  3. Your customer has an excellent reputation. They should have a good history of paying on time, and the purchase order cannot be canceled.

With this type of funding, you can now accept more orders instead of turning them down.

need of working capital?
Call us at 1-888-382-3766

Construction Factoring Advantages and Disadvantages

How Easy Is It to Get Construction Working Capital Loans in Canada?
How Easy Is It to Get Construction Working Capital Loans in Canada?

Most businesses these days need additional working capital to guarantee a smooth flow of operations and to fuel their growth. This is especially true in the construction industry, where expenses can be rather exorbitant.

Since payments in this industry usually take up to three months, using revenue for working capital is often impractical. This is why factoring has become popular. But before you use it to fund your business, you should carefully consider the construction factoring advantages and disadvantages.

In factoring, you get a percentage of the value of the invoice from the factor in advance. This is usually about 80% of the value, although this can differ depending on the factor and the customer. You then receive the rest of the payment when the customer finally pays the factor, and you get the rest of your money after the fees of the factor have been taken out. This fee can be anywhere from 1.5% to 5%, again depending on the agreement.

Advantages of Construction Factoring

Construction factoring offers a lot of benefits, which is why it has become so popular.

  • Applying for the funding is easy and quick. It may take a week or two at the most to complete the process, and the likelihood of approval is very high. You don’t need excellent credit, and the invoices are used to obtain the funding. There’s no need for collateral.
  • You can finance operations and growth. This means that you can get the money you need fast enough to pay for payroll and overhead, and also pay for supplies and rental equipment needed for projects.
  • Credit investigations can reveal delinquent payers. This enables you to identify and choose clients who pay on time.
  • You don’t have to setup a payment collection department. This service is handled by the factor for the invoices you choose to factor.
  • You can decide how much money you need. You may be able decide which invoices are factored. When the advances from these invoices are sufficient for your needs, you can get the full amount from the other invoices. You can even factor just one invoice.
  • You can keep track of the invoices. Monitoring the invoices is also part of the service.
  • Once you already have a relationship with a factor, the next time you ask for a similar arrangement the process becomes much faster.

Disadvantages of Construction Factoring

There are several possible drawbacks to this approach, however.

  • Perhaps the most significant drawback is that it will cost you more than what you would pay in interest with a typical bank loan. But that’s usually irrelevant if you can’t get a bank loan in the first place. Also, plenty of people use their credit cards for additional funding, and the interest rates on those are much higher.
  • Some customers may prefer to deal with you directly. This can be a problem for the construction industry, where networking is very common. This is exacerbated if you don’t choose a finance company that’s professional in their collection approach.

When evaluating construction factoring advantages and disadvantages, it’s easy to see that the good outweighs the bad. This explains the surge in popularity of construction factoring.

Need Expansion Capital? Call us at 1-888-382-3766

Factoring: A Loan That Will Not Affect Business Credit

Factoring: A Loan That Will Not Affect Business CreditWhen it comes to starting a business, you often use your own money as startup capital. But sooner or later you’ll need additional funding, and that usually means having to take out a from a bank or using your credit card. But these methods of funding can really mess up your credit, especially when you have problems paying on time. That’s why you’ll need factoring: a loan that will not affect your credit.

How Loans Can Help your Credit

For the most part taking a loan can help your credit. Your credit score reflects your ability to pay back a loan. The higher your score is, the more likely it is that you’ll pay back a loan in full and on time. And that’s why banks often prefer borrowers with excellent credit.

You don’t get an excellent credit score if you’ve never had a loan in the past. That’s because you don’t have a history of paying a loan on time. By taking out a loan, you therefore give yourself the opportunity to prove that you can pay back what you borrow. So if you don’t borrow, you don’t prove anything. It’s ironic, but a millionaire who has always dealt in cash will probably have poor credit.

How Loans Can Hurt Your Credit

Loans, however, can be risky for your credit. For one, you can’t take out too many loans. All your loan applications are noted, and when you apply to many credit card companies, for example, then your credit will take a beating.

Then there’s also the problem of paying back a loan on time. Once this becomes a problem for you, your credit score will tank as well. And when that happens, you may no longer be able to get any more loans.

Factoring and Loans

In a way, factoring is a loan. You get money in advance and then you pay for that service. It’s like paying interest.

But at the same time, factoring has nothing to do with your credit. That’s why you can avail factoring even if you have poor credit. Factors give you advance money in exchange for your invoices, and in return it gets its fees once those invoices are paid in full.

But there’s no actual loan when you deal with a factor. After all, you’re not borrowing money – you just get your money in advance. And you don’t pay the factor. Your client does, which is why your client’s credit is evaluated and not yours. And because your credit doesn’t matter, there’s no inquiry of your credit. With no inquiry, there’s no effect on your credit.

Alternative Funding Sources

Of course, factoring is not your only alternative to expensive credit card cash advances and hard to get business loans. There are other ways in which you can get more funding for your company. But you will find factoring can help you in ways that other funding methods can’t. And you can be sure that your credit rating won’t be affected in any way. That’s the beauty of factoring: a loan that will not affect your credit.

Need Expansion Capital? Call us at 1-888-382-3766

The Advantages of Working Capital Factoring Lines

Most small business owners appreciate the value of working capital. Having the funds to pay for rent, for utilities, office supplies, and payroll is essential. Business owners also use their working capital to pay suppliers so that they can have the raw materials needed to create the products that their customers want. Without working capital, their operations cannot continue and their business suffers. And that’s why working capital factoring lines are crucial for many businesses today.

You have several ways of getting the working capital you need. But here are some of the main reasons why working capital lines may be your best option:

  1. You can borrow only the amount you need. When you have your own business and you need a working capital loan, you need to borrow a specific amount of money. So that means you have to make an accurate estimate as to how much you need. For example, if you borrow $100,000 and it turns out that you actually needed $120,000 as working capital, then you’ll have to take out another loan. This can put you in a bad strait since loan applications tend to take a long time and the need for working capital is usually urgent.

On the other hand, if you borrow $100,000 and it turns out you only need $70,000 then you’re paying interest on the $30,000 that you don’t need.

With a line of credit, you don’t have to worry about any of these. Your lender can give you, say, $200,000 line of credit and you can only get the amount you need at any given time, and they will just charge interest on the amount you use. So, even if you have a $200,000 line of credit, if you use $120,000, then you will only pay interest for this amount.

  1. There are no arbitrary limits to the working capital factoring line. You are limited only by your volume of sales. So that means if your accounts receivable have a value of $1 million, then you have a potential factoring line of $700,000 to $900,000 depending on your agreement with the factor.

In contrast, a bank line of credit has a ceiling, and you have to reapply if you want that ceiling raised because your current line of credit is unable to match your working capital needs.

  1. Applying for a factoring line is quick and easy. When you apply for a line of credit from a bank, the entire process can be interminable. This is not good, especially when you need working capital. And that’s if your application is approved. Too many banks nowadays seem to loan money only to those companies that seem not to need the money in the first place!

For factoring lines, the application and the setup can be very quick. A crucial requirement for working capital.

  1. The total fees you pay for the factoring services are much lower than what you have to pay in interest for credit card cash advances. Credit card companies can charge an outrageously high interest rate for the money you borrow.
  2. You don’t need a good credit to take advantage of factoring credit lines. This is in stark contrast to banks or credit card companies, which usually won’t provide a line of credit unless you have a high credit score.

So if you have some accounts receivable, you can deal with a factor and get your line of credit right away.

 

Construction Factoring for California Businesses

California has the 9th largest economy in the world, and Moody’s expects the state to do well in the near future. California added new jobs in 2013 at a faster rate than the country’s average. The housing market is recovering, and California added more construction jobs (31,500 new jobs) in 2013 than any other state. And this growth has fueled the need for construction factoring for California businesses.

The Need for Additional Financing

Contrary to popular belief, additional financing isn’t just a way for companies to stay afloat during the lean periods. The additional financing can make it possible for construction companies to take advantage of growth opportunities.

Construction companies may bid for contracts, but they must also make sure that they have the working capital they need in order to fulfill their contracts. Construction companies have many expenses to pay for. They need to meet payroll on a weekly basis, they have to buy various supplies, and they often have to rent expensive equipment.

The need to fulfill a contract is paramount, as your reputation will suffer or soar depending on your performance. It’s this risk which has prevented some construction companies to refrain from accepting some contracts in the first place. They feel that they don’t have the required working capital to fund these projects.

Banks Won’t Help

The problem is that banks are not exactly clamoring to help construction companies obtain the funding they need. After all, California lost more than 1.4 million jobs during the recession, and those jobs have not yet been recovered. Banks today are more cautious—their application process takes a very long time, the requirements are much more stringent for loans, the approval rates for loans are basically fifty-fifty, and you may only get a fraction of the amount you ask for.

Construction Factoring as a Viable Alternative

So what can you do? If you have completed some previous construction projects but your clients have not yet paid in full, you can use your accounts receivable to bolster your cash reserves so that you can fulfill new contracts. You don’t have to count that money out. Instead, you can get your money in advance so that you can use it for your working capital.

That’s how construction factoring works. The factor takes your invoice and then advances you about 80% of the value right away. The percentage may vary depending on your situation and your factor. The factor does your collections for you, which also relieves you of the need to set up your own collection department and thereby reducing your expenses. Once your previous client pays the factor in full, you get the rest of the payment minus the fee charged by the factor.

With construction factoring for California businesses, you can have the opportunity to grow your business at a faster rate than you ever had before. Unlike bank loans, factoring has a much higher approval rate, and the entire process to secure much needed funding is much faster. You will get the money you need quickly, and that will enable you to expand your business.