NeeBo Capital Blogs – Page 25 – The Best Info For Factoring…

How to Get Better AR Factoring Term Sheets

If you’ve been turned down by banks on several occasions, an accounts receivable factoring company can be a lifesaver. But you may not like it when you get the AR factoring term sheets they offer. You can do yourself (and your business) a favor by negotiating the term sheet so that you can get a price concession while providing them with what they need to justify their investment.

Here are some tips you need to keep in mind:

Find a Factoring Company that Specializes in your Industry

Each industry has its own regulations, customs, and realities, so you need a factoring company that fully understands how your particular industry operates. That saves everyone a lot of time, and you don’t have to explain why some things are practiced in your industry.

If a lender is already familiar with your industry, then you stand a better chance of getting better terms. The factoring company already knows the risks involved and they will be more likely to offer a better price.

Understand What a Factoring Company is Looking For in a Client

Essentially, a factoring company wants a client who offers them a very low risk with high rewards for their investment. The variables they are looking for will include:

Good invoice practices
A history of delivering good work
An acceptable record in making profits
Reputable customers
Increasing funding requirements due to growth

Offer a Profile or Summary of your Company

Whether or not a factoring company requires this document, you ought to submit one anyway. It’s not really a lengthy document, as a single page should suffice. The information in the summary should be concise, and of course it has to be factual. It has to answer the following questions:

What is your company all about? What does it do?
What are your invoicing procedures?
What are your funding requirements?
What is the outlook for your company in particular, and your industry in general?

The point of the summary is to put your company in a positive light. You can then lower the perceived risk of financing your company by providing the info they need. Don’t include false information, and don’t exaggerate. They will find out and that leads to worse rates.

Manage Your Expectations

One of the most important variables that a factoring company looks for is the volume of invoices you want to factor. When you increase the volume, you can then pay less for every dollar you get in financing. A low risk company with a low volume of invoices may actually have to pay higher rates than a medium risk company with a high volume of invoices.

In short, you can’t just demand better AR factoring term sheets as a matter of course. Factoring companies have their own guidelines, and making unreasonable demands may simply cause you to lose the financing assistance you need. Your responsibility is to make sure that you present the evidence factoring companies want to justify better terms.

4 Tips to Keep in Mind When Applying for Apparel AR Factoring Line

In 2009, 61% of all factoring business focused on the apparel industry. While in other industries the factoring process may still carry some stigma (why were you denied a bank loan?), in the apparel industry it’s SOP. That’s because an apparel AR factoring line is expressly suited to how the industry works.

As a distributor to clothing retail stores, for example, you have to pay your suppliers right away. But clothing retail stores often wait up to 90 days before they pay you in full. Some make later payments than that, and others even have the gall to return the merchandise because it was unsold.

Using accounts receivable factoring can help alleviate these problems, and it will provide new opportunities for you as well.

Here are some tips you need to keep in mind:

Study all the terms involved in the agreement. Factoring usually means getting an advance on the accounts receivable, and then getting the rest when the clothing store pays in full. So you need to take note of how much money you can get, and how soon. Keep tabs on all expenses and fees. What is the cut of the factoring company? Is there a setup fee? What happens if the retail store pays late? How long will the factoring agreement last? Every hypothetical situation should be spelled out for you, so that you can avoid any nasty surprises later on.
See if the factoring company can do credit assessments for you. Factoring companies are more interested in the credit-worthiness of your retailers, instead of your own. After all, it’s their ability to pay is what’s at stake for the factoring company. If a factoring company refuses a retail store, make note of it. The retail store may be on the brink of bankruptcy, or it may have a habit of not paying companies like yours.
Perhaps your factoring company can take most of the risk for you. If you are just starting out, you may ask for a deal wherein the factoring company assumes most of the risk of non-payment. As a newbie in the industry, you won’t be familiar with the clothing stores which have excellent reputations for paying in full on time. While this kind of deal may be more expensive for you, it may help you in the long run to know which stores to work with in the future.
You can even have the factoring company do your collections for you. You are essentially outsourcing this particular task. Now you don’t have to bother with setting up a credit and collection department of your own.

Business is booming for clothing stores today, and sales have gone up by 5% in 2013. If you are part of the apparel industry, you need to put in some effort so that you can get piece of the action. With an apparel AR factoring line, you can take advantage of opportunities now, instead of waiting for 90 days.

How Your Business Can Benefit from Beverage Company Factoring

The Boston Beer Company is #13 on the Forbes List of America’s Best Small Companies, which is amazing when you consider that the company started out as a small home business. Today, it employs almost a thousand employees and its sales for 2013 was at $637 million. Now the company is worth more than $3 billion.

Its owner, Jim Koch is now a mentor and he readily gives out advice on how to succeed. And among the tips he gives out, the first one is about how crucial it is to have ready access to capital. If you are running a beverage company, you really need lots of financing in order to grow. But banks are notoriously tightfisted when it comes to lending to small business, which is why beverage company factoring has become more popular.

There are several ways to use beverage company factoring, as discussed below.

Working capital

If you own a beverage company, most of your working capital will either be tied down in your invoices or in your inventory. And sometimes this can be a problem, especially when you realize that your expenditures are increasing while your distributors delay giving you the payment for the goods you provide. And some of your expenses must be dealt with immediately. These will include your overhead and salaries for employees.

Some people in the brewing business resort to obtaining venture capital, but this can be a mistake. This is especially true when you know you are posed for success.

One famous example is when a particular brewing company considered raising a million dollars by selling a fourth of their business. They changed their mind and resorted to factoring instead. They got the million dollars they needed, but they had to pay a quarter of a million as the cost of factoring.

That may seem steep, but that brewing company grew and achieved $5 million in annual revenue. Today this company is worth a $20 million. If they had gone with their first option by accepting venture capital, they would have sold a $5 million piece of the pie for just 1 million dollars. So by going with factoring, the brewing company essentially gained a net of $3.75 million.

Growth

This is the other main reason why factoring can be crucial. If your brewing company puts out a product that is successful among consumers, then there will be a greater demand for your brew. But that means you have to have the facilities in order to meet that demand. Without it, your company may fizzle out.

With factoring, you may be able to finance the construction of new facilities or improve your current machines.

Remember, factoring is not a loan. You are essentially paying for the privilege of getting your own money in advance.

Time is of the essence in the brewing industry, and you always have to be ahead of the competition. With factoring, you no longer have to wait 90 days to use the money owed to you. You can use that money now.

Apparel PO Funding Can Help You Take Advantage of Economic Growth

While the apparel industry is not completely spared from the financial challenges that the entire world is experiencing now, forecasts for the industry are generally optimistic for this year. In fact, according to a report filed by the Business Survey Committee of the Institute for Supply Management, the apparel industry is growing, and it is expected to continue growing for the foreseeable future. So, as a player in this industry, you should really consider apparel PO funding so that you can take advantage of this growth.

The State of the Apparel Industry

The report surveyed purchasing and supply executives in the country, and according to them the apparel industry may see even better days ahead.

Apparel can expect a growth of revenue for 2014.
Companies are operating today at an average of 82.3 percent of normal capacity. This is an increase from the average of 80.3 percent reported in December 2013. Apparel is the leading industry that report operating capacity levels much higher than the average.
Apparel is one of the industries that can expect increases in production capacity for the year.

However, if you are in the apparel distribution business then you also need to be aware of one important nugget mentioned in the report: The apparel industry should also brace itself for an increase in capital expenditures for 2014.

How Apparel PO Funding Can Help

The problem for many in the apparel business these days is that banks are still wary of lending money to them. This is especially true if you are a small business asking for a small loan, and not a megacorporation asking for a multi million dollar loan.

Sometimes businesses have turned to using credit cards for their working capital. But in most cases this is insufficient. The money you can get is often not enough, and then you still have to pay horrendous interest rates as a result.

That’s where apparel purchase order financing comes in. The process in its essence is simple. Let’s say you are an apparel distribution company, and you get a large order amounting to $200,000. This is great news obviously, but then, you have to pay your suppliers up front. If you don’t have the capital, then you may be forced to refuse the order.

On the other hand, you can use the purchase order to get the capital you need. The lender can advance you a percentage of that PO, or perhaps they even may be willing to advance you your capital needs as long as you meet certain milestones. When the buyer then receives the goods it ordered, the payment comes first to the lender, who takes its cut before the rest is passed on to you.

Advantages of PO Financing

Right away, you can see how PO financing can really help you. Without it, you may not be able to meet the requirements of the purchase order, and so you will have to forego all those potential profits. And since banks aren’t all that helpful, you stand a much better chance with purchase order financing lenders. The approval rate is much higher, and the process is much faster.

For purchase order finance options, visit our site by clicking here

What You Need to Know Before Joining an Account Receivable Financing Broker Program

In business, a broker is usually a middleman who facilitates transactions between a buyer and a seller, or a borrower and a lender. A stock broker helps clients buy and sell stocks; a real estate broker helps the home buyer and home seller negotiate a deal; a mortgage broker can help home buyers get the best mortgage terms; and a loan broker helps clients obtain loans.

What is an Account Receivable Financing Broker?

An account receivable financing broker is a special type of broker who arranges for funding for a client by using the client’s accounts receivables. AR financing is not really a loan; it’s more like an exchange.

The client submits their account receivables to the factoring company, and in return it gets about 80% of the value of the invoices right away instead of waiting 90 days. The balance of the fee (minus the factoring company’s fees) will be sent to the client once the client’s customer pays in full.

If you plan to become a factoring broker, you may then apply to be part of a factoring company’s account receivable financing broker program. You can then refer clients to the factoring company, and in return you get a commission. Since many account receivable funding cases are continuous, you receive a commission during the lifespan of the relationship between the factor and the client business.

Why Are Factoring Brokers Important?

For client businesses, your work as a broker can be crucial because so many businesses today need working capital. With banks becoming more tightfisted with their loans, small businesses need alternative forms of financing. Many businesses today are still unaware of factoring and how it works. As a broker, you can help your clients understand how account receivable financing works, and you can guide them through the application process.

For factoring companies, brokers serve as roving sales agents for its financing services. They can help businesses become more aware of the factoring company’s available financing, and brokers can help drum up more business.

What to Look for in a Program

As a broker, of course you will be checking out the commission rates. But that’s not all you should check out in an account receivable financing broker program. You need to make sure that that they offer attractive terms and services to potential clients, so that clients not only choose the factoring company but also choose to extend the arrangement.

You need to check the following variables:

What is the funding limit? This should be high enough to cover the needs of the clients.
In which industries does the factoring company specialize in?
How easy is the application and how high is the approval process?
What is the percentage of the advance? Some factors advance 70% of the value of the invoices, while others offers as much as 90% of the value.
What are the fees involved. Factoring companies charge a percentage of the value of the invoices. Some factors require setup fees, and they may also charge extra for late- payingcustomers.
How good is the customer support?

As a broker, your job is to present the factoring company as a viable source of financing. At the same time, you also need to figure out how your factoring company can best help your clients. To sign up as a broker click here

Smart Account Receivable Financing Ideas

As a small business owner, one of your primary responsibilities is to make sure you always have the necessary working capital you need to keep your business running. But that’s easier said than done.

There will always be something you overlooked. You may have expenses which you did not anticipate or underestimated. And then suddenly you find yourself not having enough cash on hand to pay your employees and suppliers.

This means it’s time for you to get an infusion of money. Banks are no longer your only option, and that’s a good thing. Even now, bank loans are still very essentially a fifty-fifty proposition. Bank loan applications also take too long as well, and you need to put up valuable assets as collateral.

For all these reasons, alternative forms of funding such as account receivable financing have become more popular.

But before you start, here are some of the more crucial account receivable financing good ideas you should keep in mind:

Make sure you consider all your options. Not every business will prosper from account receivable financing. There are other alternatives you can look over. For example, if most of your customers pay with their credit cards, you may want to consider a merchant cash advance instead.
Choose the right company to deal with. It’s tempting to just go along with the first institution that provides you with the cash you need, but this may not be all that wise. At the very least, you need to compare how much they charge for the money they advance to you. It’s a competitive business, and some financiers may offer very attractive rates.

But perhaps one of the most important account receivable financing good ideas is to obtain a proper reference. Make sure that the reference is roughly the same size of your company, and it is in the same industry. Talk to that reference, so that you can have a very clear idea of what’s in store for you. Are there hidden fees, how does the financier work? Did the cash advance really work? These are crucial questions you need to ask.

Fill out the application properly. Submit all the documents they ask for, and don’t leave out anything. That will simply delay the application process. And on the application form, don’t leave out any field blank.

It may be very convenient for you to omit any detail that may make your company look bad in order to increase your chances of getting the funding, but this is a mistake. Always be factual, and do not exaggerate the truth. These factoring companies will find out the truth sooner or later.

With account receivable financing, you may also be able to receive other forms of assistance that are crucial to your business. Check them all out because in this economy, every business needs all the help it can get.

Qualifying for a Purchase Order Loan for Apparel Companies

Businesses today are scrambling for loans and other types of financing, and that’s because banks are now very tight-fisted. But if you are an apparel company that’s been awarded a huge merchandise order, then you have another source of ready working capital. You may be able to get the funding from institutions that provide a purchase order loan for apparel companies.

The way a purchase order loan works is different from a regular loan. Generally, the purchase order is considered a form of asset. Here are some aspects that need to apply to your situation if you want to use a purchase order to get the loan you need.

Does the customer have the ability (and the willingness) to actually pay for the order? This is perhaps the most crucial question, and it shows how a purchase order loan is different from traditional loans. In traditional loans, the key question is whether you have the ability to pay back the loan. In a purchase order loan, the most important consideration is whether your customer can and will actually fork out the money. That’s why the best purchase orders are those made by a government agency and publicly traded corporations. The more reputable the customer is, the better it is for you. Different types of lending institutions will have different standards as to whether the customer is likely to pay.
Does your apparel company have the skill to do the work and complete the order? Not even a government agency will pay if you can’t deliver the goods according to the terms of the purchase order. You have to comply with the quality and quantity requirements, and there may also be a schedule involved. The best way to do this is to show that you already have the experience in fulfilling similar orders in a timely manner.
Is the payment schedule for the order quick enough? In the apparel business, normally the payment comes within 90 days (sometimes even within 30 days) after you’ve delivered the goods. But there are a few cases where the payment can be staggered for a longer amount of time. Some customers may even ask for a year to pay or even three years, as if they are paying for a car.
Are your profit margins sufficient? This is essentially the percentage of the selling price which goes to you as profit. For example, if you sell dresses for $100 each and you can make them for $75 each, then you have a 25% margin. Anything less than that may not sit well with the lender, although 20% margins may suffice if the customer is an extremely repeatable company and the payment schedule is short.
Are you asking for the right amount of money? Don’t expect a $100K order to result in a $100K loan. For a government contract, 85% of the order may be possible, and for private companies you may be able to get half of the order as a loan.
Are you dealing with the customer directly? Lenders really hate it when there’s a middleman involved.

A purchase order loan for apparel companies can be a huge boost that can fuel the growth of your business. It can even help make sure that you have the resources so that you can actually manufacture and deliver the goods. When you land a major purchase order or contract, check if you can use it to obtain the working capital you need for your business to thrive and grow.

Working Capital Lines for Apparel Companies

If you own an apparel company, the fact that many clothing retail stores pay for orders in 60 or even 90 day can be somewhat aggravating. Usually it means that all your working capital is tied up in your items or in the accounts receivable. But you often find yourself needing cash now to pay the salaries of your employees, to manufacture clothes, and to pay for overhead and utilities. Fortunately, it is possible (though not always likely) to obtain working capital lines for apparel companies.

How a Line of Credit Works

The way a line of credit works is simple, as it is much like using a credit card. You have a preapproved limit, and you can borrow any amount of money up to that limit. The lender usually has no say as to how you spend the money, unlike a mortgage or a car loan in which the money you get has to be used to buy a house or a car. You only pay interest for the amount of money you actually borrow, but there may be some fees even if you don’t use the line of credit at all. The fact that it is available for you to use has to be paid for. You also have to pay a minimum amount towards the loan each month, with the balance carried over and generating interest.

However, for a line of credit the amount you can borrow is often more than what a credit card will grant you, and the interest you have to pay is also lower with a line of credit.

Advantages of a Working Capital Line of Credit

A line of credit can be very useful, especially for your apparel company if the sales are unpredictable and there is a significant delay in the payment for your products. The line of credit offers you the money you need immediately, and you only borrow what you need. If a lot of money has come in, then you don’t have to borrow more than what is really necessary. But if the money is still all tied up, then you have the line of credit to use for your business expenditures.

Disadvantages of a Line of Credit

Keep in mind, however, that a backup plan is almost always crucial. Lines of credit can be very rare, and especially if you don’t have any collateral to offer. A line of credit is also very easy to abuse. The rules are very stringent as to who can avail of this type of financing. Often your apparel company has to be well-established already, with at least two years under its belt and revenues approaching half a million dollars. Your own credit history will also be investigated as well.

Your limit is also usually set to about 10 to 15 percent of your gross revenue, and if that’s not enough then you may want alternative methods of financing. Finally, often banks may review the terms of working capital lines for apparel companies and then decide not to renew the privilege. You should make sure that you have backup plans so that you don’t run out of money to keep your operations going.

Construction Sub-Contractors Working Capital for Different Types of Jobs

Sub-contractors have to spend money in order to make money. After all, if you are a subcontractor then you’re essentially a separate business; you’re not an employee of the general contractor. You also have to buy the equipment you need, and the construction sub-contractors working capital you need depends on the particular job you’re supposed to do.

Air sealing and insulation. Your job is to keep the heat out during summer while ensuring there’s enough of it during winter. You may also be responsible for preventing moisture problems.
Blasting contractors. Your job is to remove ledge for the foundation or the utility trenches.
Carpenters. All kinds of woodworking fall into your sphere of responsibility.
Concrete contractors. This covers many different tasks, but essentially you work with concrete. If you run a concrete company, you’re also responsible for delivering supplies.
Drywall specialists. You have to install and finish the sheetrock.
Electricians. You need to install the electrical wiring within the wall, along with the service panel. Then you have to work on the power outlets and install appliances such celling fans, lights, and doorbells. You may also have to add the cable and Internet networks to your services.
Excavators. It’s your job to deal with the foundation of homes and buildings.
Flooring contractors. You may specialize in one or several types of flooring, such as hardwood, vinyl, or ceramic tiles.
Framers. You put in the sheet materials like plywood and lumber once the foundation is done.
HVAC. You have to install all the appliances for heating, ventilation, and air conditioning.
Landscaping. You will essentially work on gardens and lawns.
Masons. Your job is to build block foundations along with everything else with block or brick and mortar.
Painters. You need to know how to lay paint on various surfaces, such as wood or cement.
Paving contractors. You deal with walkways and driveways, as well as patios.
Plasterers. You’re responsible for installing lath and plaster.
Plumbers. Your job requires you to place the pipes in the walls then you have to install the plumbing and the water heater. The water treatment may also be part of your job.
Roofers. Your job involves all the aspects of installing the roof.
Septic system installers. You have to install the septic tank according to the instructions of the sanitation engineer.
Siding contractors. You install the siding and sometimes the exterior trim with synthetic materials.
Stair builders. Some stairs are custom jobs, and your job is to install these stairs.
Waterproofing contractors. You have to waterproof the foundation walls. This may involve insulation and drainage too.
Well drillers. It’s your job to drill and develop the well. You also have to connect the well to the plumbing, and water treatment systems may also be installed.

There are even some other types of jobs aside from the ones listed here, which is why homeowners aren’t really expected to deal directly with subcontractors. Building a home means a lot of different workers working together and if you are one of them then you need sufficient construction sub-contractors working capital so you can do your job properly and within schedule.

5 Facts about Asset Based Lending for Food and Beverage Companies

These days, it’s not always easy to establish or maintain a food and beverage company. If you own a business in this industry, then you have quite a challenge ahead of you. One of your constant problems will be to make sure that you have readily available resources to cover operational expenses and to take advantage of opportunities for growth. With banks nowadays no longer quite as forthcoming in offering unsecured loans, asset based lending for food and beverage companies have become much more common.

Here are some key facts you need to know:

What is asset based lending? Basically, you offer your company’s assets as a collateral or security for the loan. It’s a ready-made statement that says you actually have the means to pay back the loan.
What assets can you use as collateral? If you run a food and beverage company then you may have several assets you can use to secure the loan. You can use your inventory, your accounts receivable, the equipment you use to manufacture your goods, any land or buildings your company may own, or even special patents you own. Even a purchase order can be considered an asset.
How much can you borrow? That depends on the value of the asset you are putting up as collateral. To determine the value of that asset, it has to be appraised first. Then you can ask for a loan that’s considerably less than the worth of the asset. The more risk involved, the lower the amount you can borrow.
What are the advantages of asset based lending? Typically, the main advantage is that it is a very straightforward transaction. There really isn’t much of a delay, unlike other types of loans which can really take a lot of time to work out. You have a much higher chance of getting approved for the loan, and often you don’t get any restriction on how you wish to use the money you receive. Since you also offer security, the interest is often less than what other unsecured loans require. The interest is often lower than what credit card companies charge.
How likely are you to receive the loan? If your asset readily available, then your likelihood of being granted the loan is quite high. Unlike other types of loans, it may not matter as much if you have a poor credit rating. It may not matter if your company is doing poorly and that you don’t see any revenue for the next few months.

Asset based lending for food and beverage companies covers a broad spectrum of possibilities, so you have a great chance of finding a loan agreement that appropriately fits your requirements. With a purchase order, you can borrow half the value of the order at the very least. With your accounts receivable, you can look for a type of factoring that provides you the money you need much earlier than you expected. By leveraging your equipment, you may be able to operate more smoothly so that you finally make the sales and the profits you have been seeking.