Small Business Factoring

David Castro asked:


The biggest reason that small businesses fail is a lack of adequate cash flow. When the economy is good and sales are high, this isn’t usually a problem. However, the economy is not always strong, and sales are not always high. During these down times, the cash flow can slow, and cash reserves begin to dwindle. Or you may be enjoying the good economic times, and decide that it is time to expand your business. When this happens, you need to make sure you have a plan for obtaining small business financing.

For well established businesses with a good credit record, finding small business financing is not usually a problem. If this describes your business, you probably already have a relationship with a bank. You should be able to talk to the loan manager at your bank, and it is just a matter of structuring the financing in a way that is acceptable. If you do not already have a relationship with a local bank, it is an easy thing to do. Most banks are more than willing to work with successful businesses.

However, not all businesses are well established, and not all businesses have a solid credit history. For those businesses, obtaining small business financing can be a bit more problematic. There are, however, lenders that are willing to work with business that have struggled financially. They specialize in lending money to businesses that might not qualify for financing with a bank.

For businesses that are already operating, many lenders only require the past several months credit card transaction records as proof that the business is generating income. The lender then “buys” a portion of your credit card sales as repayment for the loan. When you take out a loan, the agreed upon portion of credit card sales will go to the lender until the loan is repaid in its entirety.

Because there are so many lenders in the small business financing industry, it is important that you do your homework. Make sure you completely understand the terms of the loan before you sign any loan agreements. Read the agreement thoroughly, and if there are any parts you do not understand, ask for clarification. It is a good practice to have your attorney or CPA examine any documents. They are trained to read legal and financial documents, and they may be able to spot any problems before the agreement goes into effect. While it is important to keep your cash flow healthy, signing a bad loan agreement can hamper your business growth for years to come.

Taking out small business financing is a normal part of business. Do not look at the need to take out a loan as a sign of bad business or failure. It is a necessary part of doing business. Sometimes it is the difference between keeping your business running during a slow time, or closing your doors before you even have a good chance to succeed. When given that choice, a loan seems like a very good idea.



For Commercial Finance Loans – Accounts Receivable Financing * Business Equipment Leasing * PO Finance * Commercial Property Mortgage – IMM Financial has been in the Commercial Finance Business serving companies just like yours for over 14 years. Put our experience to work for you. We are the Cashflow Specialists.

Kristin Gabriel asked:


Operating a small business means keeping accurate and timely financial records. Why? Because your financial picture allows you to determine your success each month. Good record keeping also provides you with the information you need to evaluate your financial situation.

One thing many small business owners think is that they have to hire an outside accountant to run the business. This is not necessarily ture. Consider the fact that you could save money if you or someone in your company or family were to keep the books, rather than a costly outside accountant. An accurate set of financial records in-house will minimize costs of paying an accountant and enable you to have more control of your business finances.

For example, what if your clients are late paying you one month, and you need more money to pay bills? Then you would know right away that you might consider factoring, a solution that could provide funds in about 24 hours. Invoice factoring, or accounts receivable factoring, has been around for 4,000 years, but single invoice factoring is a great new way to provide short-term working capital for growth.

You might not always get paid right away for a product or service that you have already delivered, so factoring could be the answer. Today it is harder than ever before to secure alternative financing through banks or venture capitalists. Accounts receivable factoring, also known as spot factoring, is a fast way to turn your receivables into cash rather than waiting up to 90 days for an invoice to be paid.

It works like this. A factoring company will take a long look at your client’s credit, instead of yours, then if approved, you will get paid in around 24 hours. Fees for this service vary. Factoring companies collect the funds from the customer.

Financial tips for operarting a small business includes the fact that it is important to keep your records including canceled checks and other business documents in an orderly and safe place. It’s important to place your receipts in the proper categories during the year, so it will be easier at taxtime.

Small businesses aren’t required to keep a formal set of books, but make sure you choose the best record keeping system. Here are a few more tips:

- Employee compensation records — make sure you keep tabs on what you pay your employees and when raises, bonuses or commission checks are due.

- Expense summary — keep records of your monthly business expenses.

- Bank statements — when you receive your statements every month, be sure to prepare a bank reconciliation document to help you balance your checkbook.

- Summary of receipts — keep a record of gross income that is totaled daily, weekly or monthly, and keep track of where the funds came from.

- Disbursements record — this is a check register or expense journal that shows payments of bills where you record all the transactions in which you paid out cash or checks.

- Asset purchases — keep a listing for equipment, vehicles, or real estate that is used in your business.



For Commercial Finance Loans – Factoring Loans * Equipment Financing * Purchase Order Finance * Commercial Mortgage – IMM Financial has been in the Commercial Finance Business serving companies just like yours for over 14 years. Put our experience to work for you. We are the Cashflow Specialists.

Marco Terry asked:


Do you own a growing business that needs financing? If you are like most business owners, whenever your business needs money you head over to the bank. Unfortunately, as most small business owners soon find out, most banks do not lend money to businesses unless they have significant collateral and a history of successful operations. This presents quite a challenge for business owners.

When banks are not an option, small business owners turn to what is known as the alternative financing funding market. Although the financing options discussed in this article fall under the alternative financing category, they are actually quite widely used and should be considered mainstream. Most major companies (including public companies) have used this alternative financing at one time or another during their growth history.

Most of the tools described in this article can only be used by businesses that are already in operation, and whose main requirement is working capital. Although startups can benefit from these tools, the companies will need to be in operation for a little while and have a growing list of clients.

General Invoice Factoring

Invoice factoring (also known as accounts receivable factoring) is ideal for business owners who cannot afford to wait 30 to 90 days to get paid by their clients. It allows a business to sell invoices from commercial customers to a financing company for immediate payment. The financing company buys the invoices at a discount and waits for the customer to pay.

The main advantage of factoring your invoices is that the financing company makes its decision using the credit of the payer, rather than yours. That means that if you own a small company that is doing business with a large credit worthy company, you are almost certain to have the transaction approved. Another advantage of factoring is that it does not have set limits like lines of credit.. The level of financing is limited only by the amount you sell to credit worthy clients. General factors can work with most industries, although there are two main industry subspecialties – freight bill factoring and medical factoring.

Freight Bill Invoice Factoring

Trucking companies tend to be very cash hungry businesses. The owners need money to pay their drivers, pay gasoline and pay suppliers. However, most trucking companies also work with a high volume of freight invoices from credit worthy clients. That makes freight bill factoring an ideal solution for their cash flow issues. Just like in general factoring, the factoring company buys the freight invoices from the trucking company for immediate cash.. Furthermore, the risk for these types of transactions is lower than in general factoring. This means that trucking companies can qualify for preferential financing terms.

Medical Factoring

Most medical industry businesses (doctor’s offices, hospitals, medical testing centers and medical supply companies) make the bulk of their earnings by billing 3rd party insurance companies, Medicare and Medicaid. Unfortunately, insurance companies are notorious for paying their invoices in 30 to 90 days, creating cash flow problems at the medical office. Factoring medical offices is a subspecialty of general factoring. Given the complexities of the insurance industry, it usually requires the participation of a factoring company with extensive industry experience.

Generally speaking, the medical factoring company will provide you with financing based on your NET collectables rather then your gross collectables. They will also need to be part of the billing process, to ensure that they finance the right amounts. Due to its complexity, medical factoring is only accessible to medical businesses making at least $100,000 a month. However, if your business qualifies for it, you will find that it is a great tool to streamline your cash flow and grow.

Purchase Order Funding

Most distributors and import/export companies tend to be very cash hungry businesses, in part because of how the sales process works. Usually, the process starts when the distributor gets a purchase order (PO) from a client. They then purchase the items from their supplier, who then drop ships it to the end customer. This works well as long as the company has enough money to pay the suppliers and wait for their clients to pay for the product. However, sometimes a payment can take up to 60 or 90 days to arrive, creating a big cash flow challenge for the distributor. Other times, the company may become too successful and get a purchase order that is too big for them to finance. In these instances, the company should consider purchase order funding financing. With PO financing, a finance company handles your supplier payments and ensures that the goods are properly delivered. Once the client pays for the product, the transaction is settled and all parties are paid. PO funding is a product that truly allows you to grow your company – sometimes exponentially – while using someone else’s money.



Small Business Factoring * Equipment Leasing * Commercial Mortgage