NeeBo Capital Blogs – Page 27 – The Best Info For Factoring…

Let Factoring Help with Additional Funding Needs for Your Manufacturing Business

The conversion of raw materials to a finished product is done through the process we know as manufacturing. To be in this kind of business, the entrepreneur must have the acumen to predict market demands, have access to a regular supply of raw materials, conduct quality control procedures, and ensure the quality of the resulting product.

These requirements would need sufficient funds all the time to stay in business. That’s why a business such as this cannot afford to have cash flow problems. Ironically, this business is one of those who do run into fund shortage and end up in bankruptcy. If you’re into the manufacture of products, it’s time you think about engaging the services of a factoring company.

Your Best Financial Management Solution

Maybe you tried alternatives to fund your company in the past in the forms of investors, credit cards, friends, other lenders or bank loans to no avail. This is understandable because while your business has growth potential, there are other circumstances which prevent these alternatives from sustaining your business consistently. Investors may grow impatience over the return on their investment, friends might need the money more than you do, and credit cards, other lenders, and bank loans will charge you interest rates that may well be more than what your revenue can pay up.

Factoring will not put you through embarrassing or desperate financial situations. In fact, factoring is perhaps the best financial management solution that you can turn to when your manufacturing business faces a cash flow crisis. Your invoices are your collateral to get the funding you badly need. The factoring company buys these invoices and collects the payments from your customers. Compare that arrangement with a bank, for instance, and you know at once that the convenience of being approved immediately or even obtaining the loan within a week is not going to happen.

Why Factoring Cannot Be Topped By Other Lending Institutions

Here are the benefits of factoring which no other lending institution can top:

Fast, quick, and easy access to cash: no credit history or background investigation as a requirement for approval.

No addition to the business balance sheet as a liability because the funds are not considered loans. That said, there also no loan payments or loan interests to pay.
There are maximum or minimum requirements regarding the amount of funds that the company receives since the business owner selects what invoices to factor and the how often factoring is done.

An improvement in the company’s credit line means there is an increase in the business revenue and therefore an increase in the company’s access to more funds.

There is no demand on the part of the factoring company on how the cash advance should be spent and the business is not required by the factoring company to buy assets or equipment.

Increase profits and fund the growth of the company.

The creditworthiness of a company’s customers and not the company’s financial condition is the determining factor in approval by a factoring company.

Collection of payments to the company is done by the factoring company.

How Your Business Can Avail Of Cash Flow Funding

Given all these benefits, consider the services of a factoring company like NeeBo Capital. From financing production, supply chain, purchase order, commodities, and contracts, to asset-based lending such as financing real estate, A/R, inventory, and equipment, to other lending options such as merchant card services, credit insurance, equipment leasing, merchant cash advance, franchise financing, and restructuring of payables, NeeBo Capital can provide all these with professionalism, reliability, and quality service.

Numerous service industries – gas and oil, aviation brokerage, food service, cable ads and marketing, financial recruiting, freight and trucking, fitness equipment development, contractors and installers, and agriculture and dairy, among others – have benefited and continue to benefit from the services provided by NeeBo Capital to them. Visit www.neebocapital.com and out how your manufacturing business can avail of a first-rate cash flow funding service.

4 Types of Unsecured Business Loans for New Sub Contractors

If you are a sub-contractor, then you have to make sure you have the skills, the equipment, and the contacts of general contractors so that you have a steady supply of income. Usually, you don’t go into the business for yourself unless you have already developed the skills you need for the jobs you want to do, and you also have made numerous contacts with general contractors who are aware of how great of a worker/company you are. You should also have saved enough money to secure the equipment needed to perform your tasks. If you don’t have enough money, then it’s possible to get some funding from lending institutions that offer unsecured loans for sub-contractors.

Here are a few common sources of capital:

Friends and family. Typically, the people who are likely to have faith in your ability to pay them back are the ones who know you best. You may be able to acquire some extra money from those close to you, especially if you demonstrate that you have already saved some money on your own. Unsecured loans may mean that you don’t have much to lose when you are unable to pay the loan, but demonstrating that you have already saved money as well can show that you are serious and determined to succeed.
Credit cards. This is a very convenient line of credit open to you, and credit card companies don’t usually care how you want to use the money. The advantage is that you can get the money you need immediately once you are approved, but keep in mind that the interest rate is higher than the usual bank rates. Your best bet here is to take advantage of teaser rates (usually zero per cent) and quickly accumulate enough work during that grace period. These grace periods always end, so you have to be as productive as possible during that time.
Signature loans. If you have a very good credit rating, then you can actually get an unsecured loan with nothing but your signature and your promise to pay back the loan. In this type of loan, you are borrowing money based on your reputation and history as a low credit risk. Some credit unions and even some banks may offer you an unsecured loan. If you do succeed in getting one, then you are to be congratulated, because usually the interest rates are not as high as what you would have to pay when you use your credit cards.
Peer-to-peer loans. There are websites that provide the means for investors to meet online with borrowers. You will have to post your loan request online, and hope that people who see it will help out. Some of the more notable websites are called crowdfunding websites, in which a “crowd” can contribute until you get the amount you need. The best ones for sub-contractors may include Crowdrise and Indiegogo, but you can do your own search online for the best crowdfunding sites.

As a future sub-contractor, part of your responsibility is to find enough jobs/contracts/projects to make a decent living. Getting unsecured loans for sub-contractors is a good test to see if you can make it on your own.

Best Sources of Working Capital for Medical Providers

Medical providers, from small clinics to major hospitals, offer one of the most important services in society. Yet they are still essentially a business, and as such they need working capital to ensure the smooth flow of daily operations. They need to pay for a workforce possessing specialized skills and knowledge; they need to purchase advanced equipment that grows more expensive each year; and they also need to spend for legal defense against claims of medical malpractice. But working capital may not always be available right away, because often they’re paid by insurance companies which have always been traditionally slow in paying.

Fortunately, when it comes to obtaining the working capital they need, medical providers have a number of options:

Loans. There are many types of loans for medical providers. Some are based on real estate and work like a mortgage, while others are based on equipment. If you are a medical provider, the lender evaluates your credit history and the viability of your healthcare facilities, and then loans you the money you need when you can offer something substantial as collateral.
Factoring. This is another way of using your assets (your accounts receivable) as way of obtaining the money you need more quickly. Essentially, instead of waiting for the insurance company to cough up the money, you get about 75% of it right away from the factor, with the rest to come when the insurance company finally pays you. This can also be an effective cost cutting measure for you, as your clinic doesn’t have to establish a collections department in order to get the payment. The factor does that for you.
Grants and donations. The government and private organizations may provide you a grant or donation. A San Francisco hospital can even receive as much as $100 million as a gift from wealthy donors, and so can a hospital in New York. Normally though, donations are not really sizeable and hospitals often provide direction on how even regular folks can make donations.
Selling Assets. Sometimes a hospital may sell a building or some land in order to obtain working capital. Even medical equipment may be sold as well.
Venture capitalism. This is a very common practice in the hi-tech industry in which a start-up sells a percentage of its shares for some quick money. Now venture capitalism has entered the healthcare industry as well, and some hospitals are selling shares to investors. Even some non-profit hospitals are generating interest from investors.
Joint ventures. This is when two different companies share risk and offer access to working capital, while reducing costs. The joint venture, however, has to comply with rather stringent antitrust government regulations.

Many medical providers seem to rely only on loans and grants in order to obtain the money they need. With some of the alternative methods of obtaining working capital for medical providers listed here, hopefully you can achieve greater success in getting the funding that your clinic or hospital badly needs.

The Best Working Capital Loans

There are many possible reasons why a business may want to secure a loan. Sometimes a loan can help a company grow, as it is used to purchase new equipment, pay for a new office, or even to train new employees. It may be used to take advantage of a unique business option with a small window of opportunity, like when a college football merchandise company expands its offerings when the team secures a trip to the college football national championship.

The Need for Working Capital

But sometimes a company just needs a loan for working capital. Working capital is the asset you use (usually cash) to meet continuous operational requirements. A restaurant, for example, will need working capital in order to pay the salary of their waiters and cooks, the rent and the utility bills, the daily ingredients used for the meals they serve to diners, and repairs for the kitchen appliances. During peak season such as the holidays, a restaurant may have an overflowing business and consequently, a large amount of cash. But during the off season, it may not generate enough revenue to cover even their operational costs. A restaurant may be able to continue operating if it has enough cash reserves. But if it doesn’t, then a loan is necessary to make sure that the restaurant is still able to operate.

That’s where a working capital loan comes in. The loan can’t be used to purchase long term assets such as a new kitchen appliance so that the restaurant can expand its menu. Instead, it is used to pay salaries and to clear up accounts payable. The best working capital loans are those that are easy to get and sufficient to cover a company’s needs during the lean season. It should also not come with high interest rates if possible, and the payment terms should be flexible.

Cash Advances

A cash advance is a type of working capital loan in which a business receives a lump sum of money from the lender, to be used as a cash reserve for operational expenses. In exchange for the loan, the lender takes a percentage of the daily credit card receipts until the loan (plus the fee for the loan) is paid off. The advantage of this type of loan is that the payment amount expected each month depends on credit card receipts, so even if the restaurant earns less on a given month, it doesn’t put them at risk of not being able to pay their loan.

Factoring

With factoring, the business (such as a clinic or a construction company) sells its accounts receivable to a factoring company for about 80% of its value upfront, with the rest (minus the factor’s fees) coming in when the invoices are paid off. The great thing about factoring your invoices is that you don’t need a good credit rating because the factor will only assess the credit rating of your clients.

If you’re looking for a cash advance or a factoring agreement, then it pays if you spend just a bit of time to compare different sources. That way, you’ll be able to find the best source of working capital loans for your specific situation.

Purchase Order Loans for Canadian Businesses

Knowing where to find corporate financial leverage is one of the more important things businesses should understand if they want to survive tough economic times. The reality is that running is a business is far from easy, and at certain times of the business cycle, they would need to leverage on debt instruments and other financial tools. A study published in Statistics Canada highlights how, in a period of 3 decades, corporate financial leverage has increased by almost 50% for both Canada and the United States. This data is very telling, and it suggests that businesses are really using debt instruments more and more.

Understanding purchase order loans

While there are many debt instruments that businesses can choose from, turning to purchase order loans is probably one of the easiest options. Purchase order loans for Canadian businesses allow you to take out a ‘loan’ or increase your working capital tremendously based on what purchase orders or invoices you have.

Unlike a typical loan where you borrow money from a bank, this is not a debt per se that you have to pay for after a certain time period, interest included. What you’re essentially doing is taking advantage of the invoices you have that have not yet been paid by your clients, and trading these invoices for the cash that you need right now.

The working capital advantage

Purchase order loans for Canadian businesses are important because they give you the working capital advantage. When all your capital is tied down on invoices that have a lot of value but give you nothing in terms of current liquidity, where will you get the money you need for your operational expenses?

Through purchase order financing, you get the working capital you need because you trade those invoices for cash. With this working capital, you can then fund operational expenses you need in order for the business to thrive and grow. This includes purchasing new equipment, investing in the training of your people, or simply completing a huge order that needs additional investment in shipping and transportation. You can’t let your lack of working capital bog you down because purchase order financing is readily available for you.

Who needs purchase order financing the most?

All kinds of businesses will reach a point in the cycle when working capital is a challenge and some intervention on financing needs to be done. But the types of businesses that need purchase order financing the most are those that regularly deliver large orders, such as manufacturers, distributors, and exporters.

In Canada, statistics show that in 2009, 86% of Canada’s exporters were small businesses. These small businesses also accounted for $68 billion in exports. And while a large multinational company would most likely have very deep pockets and a lot of assets, a small business would need purchase order financing to ensure that these orders are delivered. This is why small businesses tend to need purchase order financing a whole lot more.

Unsecured Working Capital Lines of Credit

If you need working capital to make sure that your daily operations go smoothly, an alternative to loans is a line of credit. This is when you are allowed to borrow a certain amount of money, but you only take the money you really need and leave the rest in your credit line until such time you’ll need it. This saves you from having to pay interest on money you didn’t need or didn’t use. After all, why borrow $100,000 when you only need $50,000 for your working capital? Of course, it is even better if you can actually get unsecured working capital lines—meaning you don’t have to put up any asset as collateral.

Unsecured Bank Lines of Credit (UBLs)

Of all the working capital lines of credit a company can get, the unsecured bank line is perhaps the most sought after, and is also the most difficult to get. Most banks offer lines of credit, but very rarely do they offer them without asking for some form of security. The terms of these UBLs usually range from 1% to 6% above the prime rate.

The requirements for unsecured bank lines may differ depending on the bank, although there are some common requirements. All part owners with at least a 20% share of the company must have spectacular personal credit. The company must be in business for 2 years, although most banks may require companies to be in business for a lot longer. You may also need to have revenues ranging from $400K to $500K in your last taxable year.

Some industries are considered high risk, which makes them virtually ineligible for UBLs. These include real estate companies and retail shops. Restaurants are also considered high risk by banks, so much so that getting a bank loan or a line of credit for a restaurant is difficult even when you offer collateral.

Once you get your UBL, the line of credit cap is usually about ten to fifteen per cent of your gross revenues, and very rarely does the cap exceed $100,000.

Credit Cards

Credit cards are actually a form of unsecured lines of credit, and they can also be used for working capital. Credit card financing is a much more expensive than UBLs, but if you use them as unsecured working capital lines the right way you may be better off than not having them at all.

Here are some tips to keep in mind:

· Keep your business and personal credit separate. This helps you build your company’s credit rating, and it also doesn’t out your own personal credit rating at risk.

· Don’t use your credit card frequently. Excessive credit card use can have negative effects on your company’s business score, and that can hurt your future financing options.

· Try to get a lot of available credit. This protects you and your company, and it also gives you more options for obtaining financing.

· Your company’s credit rating is an asset, so make sure you take care of it just like any asset you have.

Getting Unsecured Bank Loans in Canada

With the way things are in the country right now, many people who think that they can get an unsecured loan from a bank aren’t really thinking at all. It’s more accurate to say that they’re dreaming an impossible dream. In today’s lending environment, getting unsecured bank loans in Canada is virtually impossible.

What is an Unsecured Bank Loan?

Most loans today—especially from Canadian banks—are secured loans. That means there’s some form of collateral involved. For example, when you get a mortgage or a home-equity loan you use your house as collateral. This means that if for some reason you are unable to pay the loan then the lender is legally allowed to take possession of the collateral (your home) to help pay back what you owe. It’s the same principle that applies to car loans and pawnshops.

With an unsecured loan, there’s simply no collateral at all. All you can offer is your word that you will pay back the loan on time. And that’s why getting unsecured bank loans in Canada is next to impossible; banks will not take that sort of risk. While it is theoretically possible to apply for an unsecured bank loan by proving that you have a stable income, that you have a superb credit history, and that you carry very little debt, in reality these aren’t enough.

The Remote Possibility of Getting an Unsecured Loan

Perhaps the one possible way to get an unsecured loan from a Canadian bank is to have a long history with that bank during which they made a lot of money with that relationship. For example, you have a long history with a particular bank of borrowing money from them and then paying the loan on time. Not only must you be able to prove that you have a steady income, but must have a spectacular credit rating as well. Today, even that scenario isn’t a sure thing, unless the bank also recognizes that you will also be borrowing money from them a lot more in the future.

Alternate Sources of Unsecured Loans

In the likely possibility that you are denied from getting an unsecured loan from a bank, there are still other sources to get the money you need without a need for any collateral. You can use your business credit card or even your own credit card to get a cash advance. Credit cards are probably the most commonly used type of unsecured loans. Another method is to take advantage of invoice factoring. If you have accounts receivable, a factor can give you as much as 90% of the value of the invoice upfront. Once your client pays the invoice in full, you get the rest of the amount minus the factor’s fees. Finally, you can ask money from your friends and family. With this option, you may be able to get a loan without any interest at all!

Securing Working Capital for California Businesses

The search for working capital for California businesses continues as it has always been, but in recent years it seems that banks simply aren’t cooperating as much as they used to. Not only do they often reject loan applications much more frequently nowadays, but even if they eventually grant a loan the process takes too long. When a California business realizes that it doesn’t have enough cash reserves to pay rent and utilities, payroll and the purchase of raw materials, a standard loan application just won’t do.

Fortunately, working capital for California businesses can be secured with alternate methods that are becoming more popular lately such as:

1. Vendor financing. Your own suppliers may be able to help you hold on to your working capital, if they agree to extend payment terms for a longer period, such as extending from 30 days to 60 or even 90 days.

2. Social lending. Also known as peer to peer lending, these websites match up lenders with borrowers for a fee. These are generally for small amounts, averaging around $7,000 and rarely exceeding $25,000. The terms are usually for three years, with interest rates ranging from 9% to almost 20%.

3. Credit unions. These are member-owned financial co-ops, and you have to be a member to get a loan. These are great alternatives to banks, since they don’t really rely on credit scores but instead try to evaluate the borrower’s track record or business model. In California, credit union loans are growing at a significant rate.

4. Unsecured loans. Perhaps the most popular type of unsecured loans is by using a credit card to provide the working capital a company needs. There’s also a version called a “signature loan” based on a person’s credit history. Essentially, the borrower gives a personal guarantee that they will service the loan.

5. Pre-settlement lawsuit financing. If your current working capital difficulties are due to an ongoing civil suit, a loan provider who thinks you’ll eventually get some money in a settlement may offer you a percentage of the expected settlement (10% is common) for a larger percentage (such as 40%) of the reward you get. The advantage here is that if you don’t get any reward in the suit, you don’t have to pay back the advance.

6. Merchant cash advance. You get the cash today, and in return you pay a percentage of your credit card sales to the lender until the debt is paid plus interest. The big advantage here is that there’s no risk of being unable to miss a payment, because a month with low credit card sales mean a lower monthly payment. There’s even a California version that limits annual interest rates to about 12%.

7. Factoring. With factoring, you get a big chunk of your accounts receivable (about 80% is common) immediately so you can use it as working capital instead of waiting for your client to pay in 60 to 90 days.

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Asset Based Loans for Small Businesses

Many small businesses these days have realized that a traditional bank loan is hardly the best option to get the financing they need. Today, you can’t just go to your local bank and apply for a loan unless you have a well-established company with a great credit history. If you’re a startup business, you’re likely to be rejected when you apply for a traditional loan. That means you have to be a little more creative in securing your finances. Non-traditional ways of raising money are now becoming much more common, including peer to peer loans, nonbank loans, cash advances, and leasebacks.

Asset based loans for small businesses are also becoming more popular. Even when mortgages (which are a type of asset based loan) aren’t considered, by 2008 asset based loans increased to $600 billion, and today that figure is even higher. In 2013 alone, more than $20.5 billion in asset-based loans were written in the US. Companies which made use of this method of securing finance include the tech giant Dell, the beauty product company Revlon, and the retailer titan J.C. Penney.

Who are Offering Asset-based Loans?

There are many institutions offering asset-based loans and they include banks and other financial companies. Now even hedge funds are offering these types of loans.

Who Can Qualify for Asset-based Loans?

According to the Commercial Finance Association (the US asset-based lending and factoring trade association), asset based lending has been used by a wide range of industries. Manufacturers are number one in the total market with 31%, followed by wholesalers (28%) and retailers (17%).

In general, lenders who offer asset based loans tend to approve the loan applications of businesses whose assets can be turned into cash right away if the situation demands it. These companies include retailers, restaurants, and other businesses that commonly take credit-card payments. Some asset based loan providers are also willing to advance cash with heavy equipment (usually used in farming and in manufacturing), real estate, and even patents as collateral.

The Terms of Asset-based Loans

The lending rates for these types of loans are generally lower than the interest rates charged by most credit cards companies. However, the rates may be higher than those found on traditional bank loans. What asset based loan providers look for are assets such as invoices, which are easier to convert into cash. The easier it is to turn an asset put up as collateral into cash, the lower the interest rate charged. For account receivables, lenders may front up to 80% to 90% of the value, while they may only grant capital of up to 50% or 60% of the value of hard assets like real estate or equipment.

Advantages of Asset-based Loans

These loans are becoming much more popular because they offer unique advantages for small businesses. These include a higher chance of approval and a speedier process for obtaining the loan. An asset-based loan is also great for companies with poor credit rating, since the quality of the asset used as collateral is much more important. Some lenders may also offer extra services such as credit reviews for customers, as well as payment processing and collection.

For many businesses, getting asset based loans means putting their future revenue on the line so that they can get the money they need to operate and grow. It’s generally a good deal for companies especially those who are just starting out.

How to Find the 2014 Best Local Factoring Company for Your Needs

Neebo Capital provides cash flow in all 50 States and to over 140 different industries including Canada

As the year steadily marches on, many small businesses are beginning to realize that factoring may be a much better source of financing than bank loans. This development has been going on for years, and now a lot of factoring companies are eager to offer their services to small and medium sized businesses. Determining the 2014 best local factoring company can take some time, but you can accelerate the process by looking for these features:

1. A speedy application process with clear-cut instructions. A lot of companies use factoring companies because they can get the loan much more quickly than applying from a bank. Some factoring companies may be able to grant the financing in two weeks, but there are also others that will approve your request in a matter of days.

2. The best rates. Factors offer financing by immediately giving a percentage of the value of the accounts receivables so that the business doesn’t have to wait 60 or 90 days for the payment to arrive. Some factoring companies may advance 75% of the value of the accounts receivable, but others may advance 90% or even more. The 2014 best local factoring company would not only be able to advance a larger percentage, but will also charge the lowest rate on the remaining value of the accounts receivables. In addition, all their fees should be spelled out clearly in the factoring agreement, so that the client won’t be surprised with additional fees.

3. The best collection handlers. Some companies use factoring companies not as a way to increase cash flow, but simply because of the convenience afforded by the factor since they are the ones who will collect on your client. So in effect, you save money because you no longer have to hire people to collect the money from your client. But this can backfire if the factoring company’s collection methods run counter to the style of your business. For example, rude ways of collecting payments may only serve to worsen the relationship between the business and the customers. The best factoring companies, on the other hand, have perfected the ways of efficiently collecting from customers. The best examples of these are the experienced factoring companies who specialize in medical factoring. These factors know how to deal with Medicaid and private insurance carriers, and they know precisely what types of documents are needed to collect the payment.

4. Accurate risk assessment. Reputable factoring companies also excel in in assessing the credit risk of your company’s clients. They may also offer to do a credit rating review on your new customers. The best factors may even offer this service at no additional charge. By getting this information, you may be able to identify which customers deserve credit, and which ones are to be avoided.

Factoring can be a great asset to your business in many ways. But in the end, the right factoring company must first be chosen.