NeeBo Capital Blogs – Page 24 – The Best Info For Factoring…

Surprising Factoring Statistics You Need to Know

There are a lot of beliefs floating around the Internet these days about factoring and just how useful it is. But many of these beliefs are simply not very accurate. To cut through all the misinformation, here are the real facts about factoring which are backed by factoring statistics.

Factoring is increasingly becoming more popular all over the world. According to the latest factoring statistics,the world factoring total for 2013 stood at more than $3 TRILLION dollars. The use of factoring has increased in recent years, and there seems to be no sign of reversal in the coming years. In some countries, the use of factoring has increased tremendously. It increased by 49% in Morocco, by 55% in Colombia, and by a whopping 253% in Peru.
Factoring is more popular in some countries than in the US. Admittedly, the US does account for a lot of factoring volume, with a revenue of about $114 billion. China’s factoring volume is close to $530 billion.

Europe accounts for about 60% of all the factoring volume in the world, and several countries there do more factoring business than in the US. In the UK, factoring is a $419 billion industry. In France it’s $273 billion, in Italy it’s $242 billion, and in Germany it’s $233 billion.

Factoring can help save companies. First of all, only about half of all companies are still open and running after 4 or 5 years. And do you know why companies fold up? There are many possible reasons, but the #1 reason is usually because the company couldn’t manage the cash flow situation properly.

What These Numbers Mean

The conclusion from all these factoring statistics is that many companies could have lasted much longer if they managed their cash flow situation properly, and factoring is meant to help them do just that. In other words, perhaps the companies that failed would still be standing today if they took advantage of factoring.

Factoring, after all, isn’t a loan. That means there’s no risk of losing even more money and losing collateral in the process. It makes use of your accounts receivable and turns them into ready cash.

It’s a rather ironic solution to your cash flow problem, because it’s these invoices that are causing problems with your cash flow in the first place.

When you have a lot of these invoices and you have them in large amounts, this means that you have money except that these aren’t in your hands yet. You’ve delivered a product or a service, and in return your payment will come later. So you don’t have your money YET but your creditors, your employees and your utility providers want their money now. This is the very definition of a cash flow problem. And factoring solves this.

A lot of businesses all over the world have figured this out. With factoring, you get an advance on all these “promissory notes” so that you then have the ready cash to get your business running smoothly. It’s that simple and that easy. And in some cases, it’s the help you need that can prevent your business from turning into a failed business.

Where to Get Working Capital for Construction Sub-Contractors

On the face of it, the cost of factoring or purchase order financing can be rather high, compared to the cost of a typical business loan from a bank. But the need for working capital for construction subcontractors is oftentimes urgent, and bank loans take a long time to process. That means alternative sources of funding must be sought.

Subcontractors are always in need of working capital. Here are some of the problems peculiar to the construction industry:

You won’t be paid for the job until it is completed. Right away, you know you need the working capital in order to take on the job. Without the capital, you absolutely won’t be able to fulfill the contract.
The raw materials you need for the job are expensive. Steel, iron, glass, stone, cement—all these things aren’t cheap. You may take advantage of discounts by buying in bulk or by paying on COD terms. But that means you need to have access to your working capital.
You need to rent heavy equipment. As a subcontractor, you’ll rarely own heavy equipment outright. Usually, you don’t really own equipment like concrete mixers and cranes. That means you have to rent them, and again the rent is often required immediately.
You have to pay for labor. This is one expense that has to be met on time. You really can’t afford to be late on this particular expense. The average hourly rate for workers is $16.84 per hour, but some laborers may cost more than $28 per hour. Add the number of hours, and then multiply that by the number of days, and then multiply that by the number of workers you employ. The final tally can be exorbitant, and you have to pay regularly.
You may have to do extra work. This is a common problem in construction. Often a client will ask for changes and extra work, and expect minimal or even no additional cost. It can be infuriating for subcontractors, but what can you do? This is simply human nature at work. Clients are finicky, and they change their minds often. There’s nothing you can do about that.
Clients may go bankrupt. If you think you have money problems, you’re not alone. Unfortunately, lots of people have money problems of their own. The thing is, if you have money problems then it doesn’t concern the client. But if the client has money problems, then it concerns you because you’ll have trouble getting paid.

What you need to do as a subcontractor is to add all these expenses along with the cost of the working capital for construction sub-contractors. When you subtract all your expenses from the amount of money you receive as payment, what’s left for all your hard work? In most cases, the expense of the financing is worth it, especially when you consider that completing an order can generate more contracts in the future. In the end, lacking the working capital may be disastrous, and only the infusion of quick capital can save your business.

The Main Advantages of Textile PO Funding

If you are in the textile business, then chances are you are familiar with factoring. It’s become the norm in the industry, although nowadays large banks have gotten involved as well. But now you don’t have to rely solely on your invoices to get the advance you need for your working capital. You can also use your purchase order as well.

Essentially, the textile PO funding company will treat the purchase order as a sign of an eventual payment, similar to an invoice. The only difference is that in this case you can get the money far in advance.

Here are its advantages:

First of all, getting a textile PO funding can be much easier than getting a loan from a bank. This is especially true if you have a low credit rating. With PO funding, the focus is on the customer who made the purchase order. Does it have the ability to make the payments for the order? And does it have a good history of actually making payments?

What will be required of you is some proof that you can actually fulfill the purchase order according to the specified terms. Can you meet the quantity and quality specified? Can you meet the deadline?

The application process for PO funding is also very speedy. This is necessary, because purchase orders have deadlines and you don’t want to waste time. Going through bank loan applications can take forever, and it’s especially frustrating when they often end in a denial. That’s also another plus here: the approval rate for PO funding is much higher.
When you don’t have the working capital to meet the requirements of the purchase order, the PO funding can provide that money. That’s one of the most common problems with invoice factoring. What if you don’t have enough accounts receivable to fund the next projects? With a purchase order funding, that’s not a problem anymore. Invoice factoring involves getting advance on a payment from customers; PO funding is getting the working capital you need so that you can actually get an invoice from your customer.
Some of your suppliers may be from overseas, and the regulations can be tricky. But many PO funders have an international presence, and they are very familiar and experienced in dealing with overseas manufacturers.

How PO Funding Works

Let’s cite an example to explain how it works. Let’s say you have an order for $200,000 worth of garments. Now you need to fulfill this order by getting materials from various suppliers. If the costs amount to $100,000 then you may get that money from the lender. When the retail chain pays you in full, you get your profits minus the cut from the lender, which is usually anywhere between 3-6%. Even at 6%, you’d still make a profit, one that you probably wouldn’t have made if you didn’t opt for PO funding in the first place.

Are You Looking for a Local AR Factoring Company? Here’s What You Need to Know

You run a business but now you’re running out of working capital. Your suppliers need to be paid on delivery, your utility bills are due, and you are wondering where to get the money to pay your employees. Meanwhile, your customers only pay 90 days after you’ve delivered their order. How are you supposed to keep your business afloat for the next 90 days?

For most people, the most obvious answer is to go to a bank and ask for a loan. But banks today are no longer as cooperative. And even if they were, often the application process takes too long.

If you need the money immediately, your best option is to partner with a local AR factoring company. Applying for this kind of financing takes a short period of time and the approval rate is much higher. Setting it up takes only a week or two. You give them your accounts receivable, and in return you get about 80% of the value of the invoices right away. You get the rest when your customer has paid in full and the factoring company takes its cut.

The number of factoring companies is increasing, and this gives you a bit of leeway on your choices. But how do you select the right local AR factoring company for your needs? Here are some variables you need to look for:

Experience. You need a factoring company with experience, especially if you yourself are new to this method of financing. You want a company which already knows the intricacies of this funding method, and you want someone to guide you through.
Specialty. Even a factoring company which claims to be familiar with all types of industries will prefer one or two specific industries. You want a company which already knows the peculiar rules and customs of the niche you are in. If you are running a medical clinic, for example, you want a factoring company with extensive experience with insurance carriers.
Size of client companies they usually work with. Factoring companies are more comfortable with small businesses, while others may prefer bigger corporations. You can confirm how the factoring company works by asking for references. Specifically, you want a reference which is the same size as your company and is also connected to your industry.
What are the terms of the contract? How large is the advance? What is their limit? How much do they charge in terms of percentage, setup fees, and fees for late-paying customers? These are questions you need to ask before making a decision.

To avoid confusion, you may want to refrain from applying to a dozen different factoring companies. Instead, pick the top three among the bunch according to the variables listed here. You can then compare them against each other so that you can determine which one is the best for your needs.

Business Can Get Better with AR Factoring in California

It was only a few years ago when the California economy was in the dumps. It went through a budget crisis, but now it seems like things are getting better. The state doesn’t have a budget debt anymore, and the tax receipts for 2014 are exceeding expectations by producing a surplus. That was mainly because of the boost in the stock market with successful Silicon Valley IPOs, along with a program of higher sales and income taxes. Even housing prices have gone up.

Optimism about the Future

Even small business operators are becoming quite optimistic about the future. In the latest Small Business Monitor survey, about half of the businesses plan on making capital investments over the next few months, which is a significant improvement from the business outlook in the spring of 2013 when only 36% felt that way. The optimism may be due to the increase in employee productivity reported by 85% of businesses.

Solving Cash Flow Problems

About 37% of California businesses report having problems with their cash flow, but that is a considerable improvement from the 77% of businesses in early 2013. While banks are still a bit leery in making loans for small businesses, alternative financing methods have become more popular. AR factoring in California, for example, is becoming more common.

Accounts receivables factoring is not a loan. Getting a bank loan today has become really difficult, and other lending alternatives may still have similar requirements. In general, you’ll need a stellar credit history and significant collateral. With AR factoring in California, your credit history is largely irrelevant. It’s actually more important for the factoring company to evaluate the stability of your customers. You simple have to demonstrate that your business is stable, and that you have good invoice practices. The approval process for this financing method is refreshingly quick.

The AR Factoring Process

Most of the time, your business may suffer cash flow problems because your suppliers and employees demand immediate payment, while your own customers take 90 days to pay for the goods and services they receive from your company. That’s not exactly a system that will encourage a healthy cash flow, right?

But that problem can be alleviated or even solved by AR factoring. The essence of this financing method is simple. You submit the accounts receivable to the factoring company, and in return you receive about 80% of the value of the invoice. You get this money in advance, often within just a couple of days. Then when your customer pays in full, the factoring company takes its fees and then wires the remaining balance to you.

Survival and Growth

With the money you get in advance, you can then pay for all the operational expense you need to cover so that your business will stay afloat. And when you do manage to get your head above the water, you can even use this money to take advantage of business opportunities.

California is set to see better days ahead, and with financing, you can make the most of this forecast as well.

Factoring: The Best Way of Obtaining Fast Working Capital for Medical Companies

According to a May 2014 article published on the CBS News website, banks have become more willing to lend money once again. They have started to ease their restrictions on their loans, and now they experiencing a higher demand for their lending services. One report also noted that large banks are approaching record approval rates for loans to small businesses. But a closer examination of the facts reveals that these sky high approval rates are still only 19.4%.

That means that if you are starting your own medical clinic, you stand at least a 4 out of 5 chance of getting your loan application denied. And even if you do get the loan you need, you may find that the entire process proceeds at a snail’s pace. It’s not exactly a quick way to obtain working capital.

Getting a line of credit or a working capital loan can also be difficult. Even if you are a doctor, you can only qualify if you have considerable assets and you can offer well-documented financial statements. For most medical clinics today, these standards are still too high.

But some of the more popular alternative quick ways to get cash may also be inappropriate for medical companies because they offer very limited amounts of cash. These options include using a credit card and a payday loan. These are simply not enough for a clinic, especially when you need upgrades for your medical equipment. Even a loan from friends and family may not suffice.

But there is still one way of getting fast working capital for medical companies: factoring.

How Factoring Gets You Working Capital Quickly

There are several distinctive features about invoice factoring that allows for fast working capital for medical companies:

The entire application process takes a very short time. It may take only a couple of weeks. In addition, the approval rate for this kind of financing can be among the highest compared to other sources of working capital.
The speed is because there are very few requirements. Your clinics should be free of any taxation or legal problems, and the insurance carriers of your patients should have a good track record when it comes to paying medical bills. The factoring company will also evaluate your billing system to see if it’s up to standards.
You no longer have to wait for the insurance companies to pay. That’s how factoring works. The factoring company takes the invoices, and then gives you a percentage (from 70% to 80%) in advance.

Using your Working Capital

That gives you the working capital you need for your operational expenses. You can now pay your employees, take care of overhead bills, and make payments for your medical equipment. You can also replenish the medical paraphernalia you need on a daily basis, like gloves and face masks. You can also pay for your own malpractice insurance as well. If you want, you can also remodel your office to make it more welcoming for your patient.

Start Your Own Clinic with the Help of Medical A/R Lender

Starting your own clinic can be a very complicated process, and as a doctor you really need to be well-versed in the business side of things before you even get started. There are simply too many risks, and many of the problems you will face at the start may distract you from your primary objective: to help people.

But if you are having cash flow problems when your clinic is already up and running, then you can easily get help from a medical A/R lender.

Accounts receivable financing is one of the best ways to obtain the additional funding you need to cover your operational expenses. That’s because the vast majority of patients don’t pay out of pocket. They have insurance companies to do that, and insurance companies are notoriously slow at paying out claims.

In addition, they also have a tendency to pay much less than what you actually bill at the start—if they pay at all.

The Factoring Process

While going to a bank has always been a popular option for additional financing, medical accounts receivable factoring is becoming more common. The process is quite simple.

The first thing you need to do is to find an experienced medical A/R lender. The health care industry has its own peculiar ways, and a generic factoring company will not be familiar with how things actually work with a medical clinic. By choosing a lender who’s already acquainted with the medical profession, you no longer have to explain the finer nuances of the industry. In fact, you may even learn a few things from the lender.
Setting up the factoring involves a much faster process, and that includes the getting the approval for the funding. An experienced factoring company already knows which insurance companies are reliable, and all it needs to know is that your practice is stable. You shouldn’t have any serious tax or legal issues, and your accounts receivables shouldn’t have any liens on them.
Your practice then submits regular billings to the insurance companies (including Medicare and Medicaid) while copies are forwarded to the lender. This can be done by the factor themselves.
You then receive the advance. This varies depending on the factoring company and the state of your practice. In general, the advance ranges from 70% to as much as 85% of the value of the billings. You can get this advance very quickly in a matter of days instead of having to wait months.
Once the insurance companies pay, the factoring company sends you the balance, minus their factoring fees.

Distinct Advantages of Accounts Receivable Factoring

The benefits you can get for your clinic are obvious right from the start. You can get the funding you need much more quickly, and that can cover operational expenses and even equipment upgrades. And with an experienced medical factoring company, you can focus your attention on growing your practice and taking care of your patients instead of worrying about where to get financing.

The Risks of International PO Funding for Lenders

Many financial experts advise that international PO funding should only be a last resort for small businesses, even though it offers several advantages such as a quicker approval process. That’s primarily because the cost of the financing is almost always higher than the cost of a traditional business loan from a bank.

The higher cost of purchase order financing is not because lenders are taking advantage of a company’s desperate need for immediate funds. It’s simply because the entire process involves a lot of risks for the lender, such as:

The purchase order may be bogus. Several schools, for example, have already been targeted by scammers making fake purchase orders. One man was arrested in Louisiana for making fake purchase orders using the name of a local parish school in 2013. In December of the same year, Texas A&M also issued out an alert that invalid purchase orders misrepresenting the university have been used.
There may be a problem regarding the transfer of the receivable to the lender. It could be that there are laws prohibiting the transfer or there may be a third party making a claim on it.
There may be a dispute concerning the goods or services. For example, the buyer may claim that the goods or services provided by the supplier did not meet the requirements specified in the purchase order. There are many ways in which these disputes can originate, and such disputes can be complicated and time-consuming to resolve.
The buyer may also decide to get a discount. There are several reasons why a buyer won’t pay the full amount of the invoice, aside from dissatisfaction with the quality of the goods and services. The buyer may pay less because in the past the supplier was not able to meet the requirements of the buyer. It may avail of a discount by returning goods it was not able to sell. It may even hold back part of the fee as a way to induce continuation of the business relationship in the future.
There’s also the possibility that the buyer will pay the supplier directly instead of paying the lender.
And then of course, there’s also the risk that the buyer may be late or worse, default on their payments. The buyer may be unable to pay because it is experiencing financial troubles of its own.

Remember, this is international PO funding, and that makes the entire process much more complicated and riskier. With the parties involved located in different countries, the verification process becomes even more difficult. What’s more, different countries have different laws and rules. Keeping track of all these regulations means more work, hence the higher fees.

But the fact that the lender is still offering your business the working capital it needs is always better than nothing. Even with the high financing costs, it’s still better than not having the money you need to operate your business. Lacking capital will cost you more in the long run, and it may even spell the end for your business altogether.

Green Product Company Working Capital: What You Need to Know

Despite the shrill protests of those who believe that religious tracts are actually science textbooks, climate change is a reality. And the cause of climate change, according to 97% of scientists, is mankind’s activities.

There are many ways in which modern society have harmed the environment. We pollute the air with noxious fumes from our factories. We cut down trees excessively, and we don’t plant new ones to ultimately replace them. We pollute our waters and soil with trash and toxins, and we use and discard the world’s resources at unsustainable levels.

Most people like the idea of helping out in some way by buying green products. As a business owner, you may find yourself liking the idea of selling green products, but that means you may have to drastically make changes to your facilities and procedures.

These changes won’t come cheap. Green product company working capital can be high.

A Green Company

To be green, a product has to have at least one of these characteristics:

Durable. They don’t have to be replaced as often as regular products. This then reduces the need to obtain raw materials and use energy to keep remaking these products.
Low-maintenance. You don’t need a lot of effort or new products to take care of it.
Energy-efficient. It doesn’t consume as much fuel or electricity to run.
Toxin–free. It should contain no toxic compounds, produce toxic by-products, or produce or contain chemicals that deplete the ozone layer.
Made from recycled materials. Some products, for example, are made from scrap metal or from wood salvaged from discarded ships and furniture.
Obtained from local suppliers or from local resources. This reduces the need for the product to travel great distances—saves on the consumption of fuel and CO₂ emissions.
Biodegradable. It breaks down swiftly and safely by natural means.
Recyclable. It can easily be reused into making something else.

Green Procedures and Facilities

Sometimes a product can be considered green because the way it was made did not harm the environment as much as typical manufacturing procedures and facilities. These may not consume as much power, water, and other resources. When you build your products, you may also try to lessen the harmful impact on the environment by using facilities that don’t leech toxic wastes into the water or soil. You can have facilities built which don’t consume as much power for heating and cooling. You may also use tools that are considered “green” as well. You can also lessen or even eliminate the use of harmful chemicals such as pesticides.

Obtaining Working Capital

One way of increasing the chances of getting green product company working capital is by emphasizing the “green-ness” of your products and processes. Green is now a byword in business, and it is good business to emphasize your company’s efforts in helping the environment. And it makes a lot of sense. After all, you and your children live on Earth too and you should do your part in taking care of it.

Advantages of Freight Broker Factoring

Freight brokers are among the businesses that are commonly denied credit by traditional lenders such as banks. That’s because they rarely have any collateral to speak of. A freight broker is a middleman, who brings together the shippers who want to deliver their freight and the carriers who have the equipment to make the deliveries.

Unfortunately, the freight business does come with an imbalance of sorts for the freight broker. Many carriers tend to demand their money immediately, while shippers usually wait a few months after making the delivery to pay their bills in full. And sometimes the shippers default entirely, and a typical freight broker doesn’t have the financial resources to pursue collection and initiate legal action.

Why Freight Brokers Can’t Get New Loans

Most lenders today demand some sort of collateral if they are to give a loan to small businesses. That leaves freight brokers without any other recourse to get additional funding for operational expenses. This is especially true if:

Their sales history and previous earnings do not warrant additional borrowing in the eyes of lenders;
They are a start-up company with no financing base;
They have uneven or seasonal sales patterns;
They have bad credit, which makes them ineligible for standard loans.

A freight broker doesn’t really have any collateral—except perhaps their accounts receivable. And that’s where freight broker factoring comes in. As a freight broker you only need two things to be eligible for additional funding. First, your accounts receivable is not currently used as collateral, and second, your shippers have excellent credit.

Advantages of Freight Broker Factoring

Once you partner with a factoring company that’s familiar with your industry, you’ll find that there are many benefits to this business relationship. Of course, the primary benefit is that you no longer have to wait as long to get your money from the shippers. Factoring involves getting an advance on the amount of the invoice (usually about 80% of the value or so), and then you get the rest minus the factor’s fees, when the shipper pays in full. You may even have the option to convert the invoices to a line of credit.

Getting approval for this kind of financing is easy, and setting it up takes only a week or so. With this setup, you can considerably reduce your overhead expenses regarding your collections.

An experienced factor in the freight industry can also provide a lot of extra services. It can pay your carriers and the drivers directly. You may even receive a credit check performed by the factoring company on your new customers, so that you’ll only extend credit for shippers who are prompt at paying their bills.

With this new source of funding, you can take advantage of the spectacular growth projected for the freight industry. According to the U.S. Freight Transportation Forecast to 2024, overall freight revenue is expected to rise by 63.6% in the next ten years. That means the freight industry will be a $1.3 trillion business by 2024.