Factoring for Small Business

The Small Biz Cash Crunch Continues

2011-03-28T06:37:00.000-07:00

by Keith Mabe

As the economy slowly recovers, large companies continue to shore up their cash flow constraints by delaying payments to small business suppliers. At the same time, vendors to these same small businesses continue to demand faster payment. The result is putting small businesses out of business.

This strong-arm tactic by larger companies is squeezing the small supplier’s cash flow. Since small businesses have little bargaining power when dealing with their larger customers, they are often forced to accept more lengthy terms. This problem comes on the heels of another: Vendors (many in a cash-crunch themselves) are demanding prompt if not faster payments. This is creating a vicious cash-flow crunch cycle from customer to supplier to vendor, pushing many small businesses to the breaking point.

Making matters worse, in a credit clampdown that went too far, bank lending to small and mid-sized businesses has continued to dwindle. The SBA’s own data states that from June 2009 to June 2010, the value of outstanding loans to U.S. small businesses plunged $43 billion, a drop of more than 6 percent. This lack of lending has had a devastating impact on small businesses that were already strapped for cash, putting many of them out of business.

As business owners are continuing to struggle with cash flow during this economic recovery, financial relief seems to be scarce. However, Accounts Receivable Factoring is an often overlooked choice to help businesses manage their cash flow. This form of financing (also known as Invoice Factoring) is a financial tool that allows businesses to capitalize on the power of their outstanding Accounts Receivable. Factoring is a valuable mechanism to turn a business’ invoices into immediate cash, enabling them to fund business operations.

Although not widely understood, a factoring firm provides funds to a business based upon its Accounts Receivable. Most invoices billed to credit worthy customers can qualify. Banks, on the other hand, must consider increasingly stringent criteria before qualifying a borrower for any type of funding. In most cases, when considering assisting a business based strictly upon its accounts receivable, factoring companies can provide funds when a commercial bank cannot.

The reason many businesses employ factoring is to ensure the continuous flow of cash to the business without sacrificing equity or incurring debt. Essentially, businesses that use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect an invoice, but when companies factor their accounts receivable, they get their money faster and easily are able to avoid the cash-crunch.

Is the Recession Truly Over?

2010-10-20T05:54:00.000-07:00

by Keith Mabe

According to The National Bureau of Economic Research (NBER) the Great Recession ended in June 2009, but does that mean “back to business as usual”?

The recession that began in December 2007 and lasted 18 months is the longest and deepest downturn for the U.S. economy since the Great Depression. Fears of a double-dip recession are still alive, especially when unemployment remains high and the housing market continues to be in a slump. Why does there seem to be a huge gap between what the NBER offers and what seems apparent today?

Perhaps this question has already been answered, but no one was listening. Robert Pollin, an economics professor at University of Massachusetts-Amherst states, “The single most important reason for the failure of the recovery to take hold thus far is that private credit markets are locked up, especially for small businesses.” The reality for many small businesses that may have qualified for credit under the old norm is that they do not qualify for credit under the new norm.

We pointed out this paradox in our own August 27th article “$40B in Small Biz Loans Disappears”. How can the recovery be sustained if small businesses cannot access the working capital needed to support renewed growth? Small business is the life-blood of a strong economy. So as long as small business is challenged by access to working capital, then we can expect a challenging economic recovery as well as a hindered job market growth.

It is critical that businesses acquire a funding source that is readily available and dependable. Factoring (also known as Accounts Receivable Financing) is an often overlooked choice for businesses trying to participate in the recovery. This form of financing is not widely known, but allows businesses to capitalize on the power of their outstanding invoices. Factoring can be a valuable mechanism to turn business invoices into immediate cash, enabling them to fund business operations.

Funds obtained from a factoring provider can be used for the same business purposes that one might use cash borrowed from a traditional business lender such as a commercial bank. Instead of incurring debt by borrowing from a traditional lender, business accounts receivable can be converted immediately to cash under a factoring arrangement, essentially, leaving the business debt free. In many cases, under an inter-creditor agreement, a factoring provider can provide funds to a business already indebted to a commercial lender.

Factoring allows the small business owner to retain control of their company and gives them the ability to grow quickly or at a moderate pace. It is all about control and cash flow management. Savvy business owners use the extra cash to take quick-pay discounts from suppliers by paying early. With the right financial strategy, factoring can also provide long term cash flow management, not just a quick fix.
Factoring has become an important small business financial tool in the midst of this uncertain economic environment, as it has proven to be a cost effective alternative for working capital to fuel business growth and to timely pay sensitive cash obligations.

$40B in Small Biz Loans Disappears

2010-09-02T07:44:00.000-07:00

by Keith Mabe

According to bank reports recently submitted to the Federal Financial Institutions Examination Council, in the last two years, $40 billion worth of small business bank loans has disappeared.

At a time when small businesses are struggling with cash flow, access to funding has become more challenging. At the “Addressing the Financial Needs of Small Businesses” forum in July, Federal Reserve Chairman Ben Bernanke explained that a weaker demand for financing from small businesses (who are worried about taking on additional debt during tough economic times) and a dwindling supply of available credit have contributed to the decrease in access to bank financing.

The whole situation puts banks in a precarious position: On the one hand, bank regulators are telling banks to tighten lending standards, while on the other hand banks are being told to increase their small businesses lending. Invariably, if businesses need financing for growth, there are increasingly fewer conventional sources available today. Challenges from slow accounts receivable cycle or recovering from unforeseen circumstances can put a business in a serious cash crunch quickly. Fortunately, there are alternative providers of working capital funds, such as commercial finance companies that specialize in factoring or funding business accounts receivable.

Cash obtained from a factoring provider can be used for the same business purposes that one might use cash borrowed from a traditional business lender such as a commercial bank. As opposed to incurring a debt by borrowing from a traditional lender, ones business accounts receivable can be converted immediately to cash under a factoring arrangement, essentially, leaving the business debt free. In many cases, under an intercreditor agreement, a factoring provider can provide funds to a business already indebted to a commercial lender.

Factoring has become even more prevalently used in the midst of this uncertain financial environment, as it has proven to be a cost effective alternative for working capital to fuel business growth and timely pay sensitive cash obligations.

Factoring: Funding small business growth

2010-07-28T12:18:00.001-07:00

In the current banking environment, factoring may be a cost effective solution to obtain necessary working capital for small business growth.

Cash obtained from factoring invoices can be used as a short term working capital funding source to pay for labor or suppliers in order to deliver products or services.

Given current economic conditions, banks are still less likely open new lines of credit or increase current credit limits due to significantly tighter credit criteria. What’s more, banks are viewing businesses with significant growth as being at high risk of successfully executing such growth. Because of this, many small businesses with growth opportunities are not getting loans or lines of credit they need.

Factoring can be a valuable tool to support business growth. For example: A service business has an opportunity to add a new client that requires adding new employees. The company can receive factored funds upon issuing the invoice and, in turn, use the funds for the payroll used to support the additional business. There are many other examples, but the theme is the same: Cash from factoring is used to pay for labor, materials, or inventory in conjunction with completing delivery and issuing an invoice to the customer.

Ultimately, if businesses need financing for growth, there are not as many opportunities available today. A slow accounts receivable cycle or recovering from unforeseen circumstances can put a business in a cash crunch quickly. There may be many reasons for businesses to consider factoring, especially if traditional bank financing is the least desirable option.

PRESS RELEASE: Factoring Company Funds Small Businesses Crucial to Supply Chain

2009-11-20T06:44:00.000-08:00

Charter Capital is offering non-loan working capital financing through an accounts receivable factoring program supporting a wider range of small business suppliers than those currently approved by Wal-Mart’s “Supplier Alliance Program.”

November 19, 2009 – Taking its cue from big bank endorsement of Wal-Mart’s “Supplier Alliance Program”, Charter Capital (a specialized provider of
Factoring Services) has positioned itself to fund advances to an even wider range of suppliers challenged by the need to extend ever more generous payment terms to their customers like Wal-Mart, Costco and others.
Due to the increasing demand for business credit combined with the sharp decline in the availability of bank loans and increasingly delayed payment remittance from customers, Charter Capital has become a preferred alternative source of funds to small businesses with immediate working capital needs.
For a nominal discount fee, Charter Capital services the funding needs of a wide variety of small to mid-sized businesses (SMBs). Most SMBs at the heart of the US economic recovery still face significant cash flow challenges that Charter Capital is well prepared to meet.
Factoring is an often overlooked choice for growing businesses. This form of financing (also known as
Accounts Receivable Financing) is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. Factoring can be a valuable mechanism to turn a business’ invoices into immediate cash, enabling them to fund business operations.
Small businesses that need an immediate cash stimulus can turn to Charter Capital for an accounts receivable factoring program fits their needs. This factoring company is a direct source of funds and does not involve any third-party lenders.

About Charter Capital

Charter Capital is recognized as one of the hardest working independent providers of accounts receivable financing, invoice factoring and cash flow management solutions for small to mid-sized businesses. They offer a complete line of asset based funding and related financial services. In today's "credit crunch" economy, Charter Capital can be your alternative source for business financing.
Headquartered in Houston, Texas, Charter Capital provides accounts receivable financing and asset-based lending for major industries including freight and transportation, consulting firms, service providers, staffing firms, distributors and manufacturers, medical service providers.
To learn more about accounts receivable factoring call Charter Capital at 1-877-960-1818 or visit the website at http://www.blogger.com/index.html.
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Factoring Without the Fear

2009-10-23T08:01:00.000-07:00

Historically, factoring has not been well known especially among small business owners.

Factoring now accounts for more than $1 trillion a year in business funding. That is more than three times what it was in the early 1990s. Since then, factoring companies have become more reputable and service oriented while providing readily available funds to businesses that are challenged with cash flow issues.
Although factoring has not generally been well known in the past (except in a few specific markets like textiles and transportation) it has recently become a sought-after cash flow management tool for the small to midsized business (SMB) market across many industries. This is recently, in a large part, due to big companies slowing their payment to small businesses (see article “Big Companies Are Slowing Supplier Payments”) creating severe cash flow problems for these smaller suppliers.

For those unfamiliar with Factoring, it is the process of a business acquiring cash by selling its accounts receivable (invoices) at a discount to a factoring company. The discount, or cost to the business is equivalent to a prompt pay discount a business might otherwise offer to a customer account . The business receives the cash upfront from the factoring company and the factoring company takes responsibility for processing the receipts under lockbox control. It can take time to collect on an invoice, so when a company factors its accounts receivable, the company essentially gets its funds up front while the factor manages the process of collecting the payment remittances — saving the company time, money and positive cash flow.

Factoring allows the small business owner to retain control of their company and gives them the ability to grow quickly or at a moderate pace. It is all about control and cash flow management. More savvy business owners will work the factoring fee into the product or service provided. Others use the extra cash to take quick-pay discounts from suppliers by paying early. With the right financial strategy, factoring can also provide long term cash flow management, not just a quick fix.

As more and more small businesses discover the benefits of factoring, new industries are warming-up to the idea that there is a readily available source of cash hidden within their accounts receivable. In fact, factoring has become so much a normal part of business financing, that universities are now teaching it in relation to cash flow management.

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Related News Articles:
Big Companies Are Slowing Supplier Payments
Economy Recovering – Bank Loans Sill Scarce
The Credit Crunch Is Still On
Finance Growth without a Loan
Improving Cash Flow in Tough Times
Forbes.com Article Endorses Factoring

Return to:
Small Business & Factoring News from Charter Capital

Big Companies Are Slowing Supplier Payments

2009-10-21T15:08:00.000-07:00

As the credit crunch continues to intensify, large companies are employing strategies to shore up their cash flow constraints by delaying payments to their suppliers.

In a recent article from the Wall Street Journal, "Big Firms Are Quick To Collect, Slow To Pay", corporations are attempting to beef-up their collections all while slowing down their accounts payable to 60 days or more. As revenues for large corporations continue to slow in an already weak economy, they are putting the cash flow burden on their suppliers.

Since many of the suppliers of larger companies are small to mid-market businesses, they may carry an additional burden due to the ever dwindling availability of bank loans or lines of credit. Also, small to mid-sized businesses have little bargaining power when dealing with their larger customers and are forced to accept more lengthy terms. This can have a devastating impact on suppliers that are already strapped for cash.

As business owners are already struggling with cash flow in today's economic environment, financial relief seems to be scarce. However, Accounts Receivable Financing is an often overlooked choice for businesses to manage their cash flow. This form of financing (also known as Factoring), is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. Factoring is a valuable mechanism to turn a business’ invoices into immediate cash, enabling them to fund business operations.

It is not widely understood, but a factoring firm provides funds to its clients based upon its clients’ accounts receivable. Most invoices billed to credit worthy customers can qualify. Banks, on the other hand, must consider more stringent criteria before qualifying a borrower for any type of funding. In most cases, when considering assisting a business based strictly upon its accounts receivable, factoring companies can provide funds when a commercial bank cannot.

Economy Recovering – Bank Loans Still Scarce

2009-10-21T15:06:00.000-07:00

With FDIC reserves plunging to $10.4 billion from $45 billion last fall and the number of troubled banks rising to 416 from 305 in the first quarter, more pressure is being put on banks to “shape up”.

Although the economy is showing clear signs of recovery, the banking sector may not rebound any time soon. It’s possible that the continued problems in the banking industry will substantially outlast the recession, resulting in a significantly suppressed availability of credit in a recovering economy.

With many banks struggling to keep their doors open, small business owners seeking financing, who are already finding limited options, are faced with desperate cash flow issues. As businesses attempt to recover along with the economy, they need financing solutions now. It is critical that businesses acquire a funding source that is readily available and dependable.

Accounts Receivable Financing is an often overlooked choice for growing businesses. This form of financing (also known as Factoring), is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. Factoring is a valuable mechanism to turn a business’ invoices into immediate cash, enabling them to fund business operations.

It is not widely understood, but a factoring firm provides funds to its clients based upon its clients’ accounts receivable. Most invoices billed to credit worthy customers can qualify. Banks, on the other hand, must consider more stringent criteria before qualifying a borrower for any type of funding. In most cases, when considering assisting a business based strictly upon its accounts receivable, factoring companies can provide funds when a commercial bank cannot.

The Credit Crunch Is Still On

2009-10-21T15:05:00.000-07:00

Just as lenders were starting to ease up a bit after some earnings surprises among companies and economic data that wasn’t as bad as it was earlier this year, an S&P report has indicated that $695 billion in debt will come due between now and 2014. This is sure to curtail lending while companies with upcoming principal payments face a difficult problem or the possibility of default.

In a cruel way, the credit crunch has been pummeling those that are least able to cope with its effects. Small businesses have been hit incredibly hard by the lack of readily available funds from banks in order to stay operational. While many large companies have squeezed their suppliers by paying their invoices later in order to stretch their cash flow, companies providing goods on credit have no come back if the company they are supplying goes under.

Even in a credit crunch economy, there are many ways to maintain a positive cash flow when dealing with Accounts Receivable issues. One increasingly popular way is called Accounts Receivable Financing (also known as Invoice Factoring). This financial tool allows businesses to capitalize on the power of their outstanding invoices. This form of financing is a valuable mechanism to turn accounts receivable into immediate cash, enabling businesses to fund their operations.

It’s not widely known, but most businesses can rise immediate funds for their accounts receivable by simply engaging the factoring services of firms such as Charter Capital. Commercial banks do not consider loans based solely on a borrower's accounts receivable, but invoice factoring firms mainly consider the accuracy of the accounts receivable when deciding whether or not to fund its clients. In most cases, a factoring provider can provide funds when a commercial bank cannot.

Dealing with an uncertain economy is never easy, especially for small businesses. Unlike their larger counterparts, small businesses rarely have the resources to monitor and take corrective action for every trend and issue. Even those owners who have weathered numerous business cycles may be faced with new circumstances that confound their otherwise successful instincts and knowledge. But a predictable funding source like factoring can certainly ease the pain associated with an uncertain economy.

BusinessWeek: CIT's Fate Worries Retailers and 'Factor' Industry

2009-10-21T15:04:00.000-07:00

"Lender CIT, which failed to secure a second federal bailout, is a big player in the business of extending credit based on receivables."

BusinessWeek article: http://www.businessweek.com/smallbiz/content/jul2009/sb20090717_348242.htm

The frantic efforts in recent days to keep CIT out of bankruptcy throws a spotlight on the shrinking pool of financing available to small and mid-sized businesses (SMBs).

An Optimistic Future for Small Business

2009-10-21T15:02:00.000-07:00

Recent economic reports have indicated that we may pull through the current economic crisis reasonably soon. Many economists believe that the economy is beginning to show signs of recovery.

However, the fact remains that any rebound from the current recession may be muted and difficult see in real terms. Even if economists see recovery, it is still too far off to have any positive effect on small business. A concrete example of this slow road to recovery is the average bank.

Most banks are still not lending to small business nearly as much as they once were. Even in the wake of positive economic reports, these lenders are still tightly holding onto their funds. So it seems, for small business, the economy has not yet begun to stir. With more and more businesses seeking out the necessary funds to drive their business out of this recession, it's clear that traditional lending is not meeting this need.

Those that are seeking some form traditional bank financing are currently better off looking for private asset-based funding. During troubled times like these, asset-based financing (such as invoice factoring) has come to the aid of businesses many times by providing the necessary financing that traditional lenders are unable to consider.

While banks continue to recover, more business owners are discovering the benefits of a lending alternative like asset-based financing (invoice factoring). With the funds they need, businesses can continue to operate and eventually grow once the recession ended.
While economic optimism is contagious, it may not truly reflect the current conditions and address the needs of businesses today. The truth: The outlook for the economy remains uncertain, but there is light at the end of the tunnel.

Related Articles:
In Tough Times, Innovation Can Fuel Small Businesses Growth
Finance Growth without a Loan
Sales Down? Stop Blaming the Economy and Increase Profits
Improving Cash Flow in Tough Times
Forbes.com Article Endorses Factoring

In Tough Times, Innovation Can Fuel Small Businesses Growth

2009-10-21T13:37:00.000-07:00

Small businesses need an abundance of innovative ideas in order to succeed in this difficult economy. It's all too easy to blame the economy, but there are many ways small businesses can succeed through customer focused innovation.

The good news is: Periods of economic stress are usually followed by new innovative ideas, especially in small business. This stems from a basic business need to retain and attract customers with what the customer perceives as value. Small businesses understand this and are able to fare better in an economic downturn because they think fast. They are in a better position to move very quickly in terms of how they align their resources and address customer needs. That's just the way they're used to doing it, in good times and bad. It all stems from the passion they have for their business and their customers.

Innovation does not come without cost. In these times, small businesses must focus on the customer, costs and cash flow. To fuel innovation, small businesses need to re-evaluate their priorities, and their business model, in order to pinpoint problems and goals to provide innovations to products and service offerings. A Cash flow crunch can sneak up on a business if they are not prepared. It can adversely affect a company experiencing a slowdown as well as one that is rapidly expanding.

In order to stem cash flow, businesses should be sure to have cash reserves or arrange backup financing. Lines of credit, equity financing, or Invoice Factoring (also known as Accounts Receivable Financing) can provide a boost to cash flow that can fuel the innovations necessary to succeed.

Now is the time for business owners to innovate and make an investment in their business. To build up a customer base that can support their efforts in an economic downturn. What may matter most is the commitment to innovative change, the tolerance for taking risks, a sharp eye on cash flow, and management's ability to lead smart.

Related Articles:
Finance Growth without a Loan
Sales Down? Stop Blaming the Economy and Increase Profits
Improving Cash Flow in Tough Times
Forbes.com Article Endorses Factoring

Finance Growth without a Loan

2009-10-21T13:35:00.000-07:00

Small to mid-size businesses are continually faced with waiting 30 to 60 days to get paid on their invoices, which really puts a strain on their cash flow.

Where large companies can usually afford to wait it out, small and mid-size businesses can’t. This can have a serious affect on managements’ ability to pay the company bill or meet payroll. A cash flow shortfall can also affect the business’ ability to fulfill orders because the cash is tied up in unpaid invoices.

How can you get business cash without a loan?

Invoice factoring, also known as accounts receivable factoring, is a financial tool that allows businesses to capitalize on the power of their outstanding invoices. This form of financing is a valuable mechanism to turn your invoices into immediate cash, enabling you to fund your business operations. It is not very well known, but invoices from strong credit worthy commercial clients are excellent collateral, especially for factors. Most banks will not accept accounts receivable as collateral, but invoice factoring firms are more than willing to provide you with financing based on them. In most cases, a factoring provider can provide funds when a commercial bank cannot.

Why use Invoice Factoring?

The reason many businesses make this move is to ensure the continuous flow of cash to the business without sacrificing equity or incurring debt. Essentially, businesses that use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

In today’s struggling economy, freeing up working capital through factoring can prove to be vital. Access to immediate cash can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

Related Articles:
Sales Down? Stop Blaming the Economy and Increase Profits
Improving Cash Flow in Tough Times
Forbes.com Article Endorses Factoring
Survey: 2009 Expected to be Rough For Entrepreneurs

Factoring: Industry's Best Kept Secret?

2009-10-21T13:34:00.000-07:00

Did you know that Invoice Factoring allows you to get a cash boost for your business, but doesn't show as debt on your balance sheet?

Find out more at: http://www.chartercapitalusa.com/

Sales Down? Stop Blaming the Economy and Increase Profits

2009-10-21T13:31:00.000-07:00

Given the current conditions, it's easy to blame the economy when sales stagnate. However, the economy may be only partly to blame.

The fact of the matter is that the holes in the sales process are hidden when the economy is good. Whether the economy is up or down shouldn't matter as much as how your sales team adjusts to the slowdown.

When organizations encounter a sales slowdown, they should adjust their game plan accordingly and not get trapped into doing more of whatever activity is not working. Management should be willing to make an investment to change their approach faster than their industry changes in order to avoid a more severe downturn.

There are no guarantees that your business will never face a sales slump, but there are things you can do to ensure your sales team has a better chance of success.

Change is Good Change can be hard for a lot of people. However, your sales team must learn to love change as a part of your sales culture.

"Change is the law of life. And those who look only to the past or present are certain to miss the future."
- John F. Kennedy

Try to view change as an opportunity to try something new and to adapt new ideas to the current circumstances. Encourage change by challenging your sales staff to be creative with sales techniques and reward successful new ideas. If something doesn't work, encourage them to learn from the mistakes and keep the new ideas flowing.

Take Risks
If you want to be remembered, do something that makes you stand out from the pack. Although a giant purple inflatable gorilla may not fit with your company image, it is an excellent example of an "attention getter". Remember, when you're average, you're just as close to the bottom as you are to the top.

Training and Education
Encourage a passion for learning an foster an environment of self-improvement. Your sales team has talent, or else you would not have hired them. Augment your current sales program with access to self-improvement opportunities, giving your sales team the ability to become more talented than the competition.

Lead by Example
Business owners and sales managers need to approach the sales effort with the mindset that they have an obligation to continually demonstrate the kind of sales behavior, attitude, and philosophy that they want their team to employ. They should also demonstrate the principles of creativity and respect, and encourage an open and fun work environment.

Now is the time to make an investment in your sales effort. To build up your sales team that can produce in an economic downturn. What may matter most is the commitment to initiating change, the tolerance for taking risks, dedication to employee training, and management's ability to lead smart.

Related Articles:
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Solutions for Small Business Bankers
Small Business Optimism
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Return to: Small Business & Factoring News from Charter Capital

Improving Cash Flow in Tough Times with Factoring

2009-10-21T13:29:00.000-07:00

A common challenge for many small businesses is the feast-or-famine nature of managing cash flow. Poor cash flow can mean certain doom of an otherwise healthy business.

Beware, a cash flow crunch can sneak up on you if you aren't prepared. It can affect a company experiencing a slowdown or one that is rapidly expanding.

Here's a list of a few simple ways to improve your cash flow position:

Accept Responsibility For Minding Your Company's Cash Flow - Even if you hire an accountant to help keep the books, don't expect them to tell you everything you need to know. Stay informed and educate yourself on how best to manage your business finances.

Bill Promptly and Accurately - Billing right away for your products or services will only help to facilitate a prompt payment. Also, avoiding billing errors and mistakes will not only increase payment turnaround, but will help to build trust with your customer. There's nothing like regular billing errors to strain a business relationship.

Actively Monitor Your Cash Flow - You should always know the financial status of your business (monthly sales, expenses for the month, how quickly clients are paying, etc.).
Avoid Slow Pay/No Pay Customers - Don't be shy about checking credit references or even paying for a credit check if the client is significant enough.

Regularly Analyze Your Finances and Adjust Your Strategy Accordingly - Actively monitoring your cash flow helps catch small problems before they become unmanageable. If something is off, start asking questions until you get answers. The answers will help to define your business strategy.

Organize Backup Financing or Cash Reserves - Factoring, lines of credit or even equity financing can help get you through a cash flow crunch.

Lease Instead of Purchase - Although leasing costs more in the long run, buying on an installment basis means less cash up front and can be a boon to your cash flow.

Control Spending - Look over your expenses and see where you can trim the fat without causing the business to suffer. Add employees slowly and cautiously. Watch inventory and be careful not to over stock (this can easily bleed your company of cash).

Accelerate Receivables - Don't be shy about asking customers for advance payments and reward early payers with a discount. Just putting out friendly reminder calls ("Did you get my bill, when can I expect payment?") can significantly augment your cash flow.

Related Articles:
Forbes.com Article Endorses Factoring
Solutions for Small Business Bankers
Small Business Optimism
Survival Instincts: American Small Businesses Doing What It Takes

Forbes.com Article Endorses Factoring

2009-10-21T13:28:00.000-07:00

A recent Forbes.com article has some excellent tips for small businesses about managing cash flow through factoring.

URL: http://www.forbes.com/2009/01/29/finance-factoring-debt-entrepreneurs-finance_0129_finance_print.html

The article concedes that factoring is a great way for some businesses to get immediate cash without going into debt. What most concerns factors is the credit worthiness of the end customer, not the business or its owners.

The reason many businesses make this move is to ensure the continuous flow of cash to the business. Essentially, businesses who use factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

It's even more important for small businesses to free up working capital through factoring. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

Related Articles:
Solutions for Small Business Bankers
Small Business Optimism
Survival Instincts: American Small Businesses Doing What It Takes

Survey: 2009 Expected to be Rough For Entrepreneurs

2009-10-21T13:26:00.000-07:00

According to a recent survey by the National Association for the Self-Employed (NASE), small businesses and many entrepreneurs are generally pessimistic about 2009.

In the survey, half of the respondents are already feeling the effects of the slow economy, and 43% indicated that this is the worst downturn that they've experienced.

Most of those surveyed indicated that they would use their personal savings to shore up their business, scale back the purchase of inventory or equipment, lower prices, or cut pay.

"Cash is king," as they say. Since quick access to cash is critical for small business, and access to credit is scarce at best, many business owners feel that cutting back or tapping into personal savings will provide a much needed boost to cash flow.

While most of American small and mid-sized businesses continue to struggle with the current economic environment, there is a silver lining. As we noted in a previous article "Factoring: The Small Business Loan Alternative", business owners have a little known alternative choice to a traditional bank loan, line of credit or any of the cash flow boosting mechanisms listed above.

Experts agree that, despite the economic slowdown, entrepreneurs can start and even grow their business with the right tools (See "Small Businesses Can Face Economic Downturns With Confidence").

While there is no crystal ball that accurately predicts the future, small business owners can take steps that will help their enterprises endure the worst of times, and position them for success when conditions inevitably improve.

Related Articles:
Solutions for Small Business Bankers
Small Business Optimism
Survival Instincts: American Small Businesses Doing What It Takes

Press Release: Houston Firm Offers Loan Alternative for Small Business Bankers

2009-10-21T13:24:00.000-07:00

Charter Capital ( http://www.chartercapitalusa.com), Charter Capital, a Houston based specialty financial services company, announced today that in light of the capital constraints faced by many lenders today it is doubling its capacity to provide accounts receivable funding to small businesses.

Houston, TX October 24, 2008 -- Overextended on credit lines that often were based on home equity, small businesses are increasingly hard-pressed to service debt in an atmosphere of slowing sales. “On top of limiting loans in order to maintain capital requirements, small business bankers have been pressed to tighten credit standards due to general uncertainties associated with a slowing economy” says Joel Rosenthal, Managing Director. "Many small businesses saw the handwriting on the wall months ago and were quick to warm up to the concept of obtaining funding from alternative sources such as Charter Capital.” Mr. Rosenthal suggests that bankers appreciate the synergies gained by referring “difficult to qualify” borrowers to Charter Capital for funding and related factoring services. “While Charter Capital is charged with providing funding to the business through its factoring services, incentives are given to the business referral to maintain its checking and depository business at the referring bank”.

Charter Capital is not a bank or depository. Rather, it is a specialized finance company structured to provide funding and accounts receivable management services to its clients via a process commonly referred to as factoring. Charter Capital's FactorLine services are geared to accommodate small businesses that have difficulty qualifying for conventional commercial bank loans. FactorLine services are intended to be complementary to traditional commercial banking services, leaving the bank free to concentrate on satisfying other relationship-driven services demanded by small businesses, services such as checking, payroll, and personal banking.

Headquartered in Houston, Texas, Charter Capital ( http://www.chartercapitalusa.com), provides working capital funding via a process commonly referred to as "factoring of accounts receivable", asset-based lending, and cash flow solutions for businesses nation-wide including: freight delivery and transportation, repair, maintenance and inspection service providers, consulting firms, most other service providers, staffing firms, distributors, wholesalers and manufacturers. Charter Capital also serves business in Dallas, TX; San Antonio, TX; Austin, TX; Atlanta, GA; Albuquerque, NM; Phoenix, AZ; Nashville, TN; Indianapolis, IN; Oklahoma City, OK; and cities nationwide.

Factoring: The Small Business Loan Alternative

2009-10-21T13:20:00.000-07:00

It has always been a challenge for small business owners to obtain bank financing. It’s especially true in today’s economy that most small businesses just can’t qualify for conventional business loans. The requirements can be a significant barrier: the company must have sizable assets, years of profitability and audited financial statements.

A majority of business owners do not consider other forms of business financing because they don’t know that there are alternatives to a traditional bank loan or an SBA loan. Many times they give up any hope of obtaining financing when they get turned away. The truth is that many times those alternatives can work better that conventional financing.

The biggest challenge for nearly all companies is their Accounts Receivable – the 30 to 60 day wait until the invoice is paid. During this waiting period, the Accounts Payable becomes due, employees and suppliers need to be paid. This leads many businesses into a “cash flow crunch”. While this is fine for large, well capitalized, companies with adequate banking reserves, it is a significant challenge that many business owners face every day.

There are many ways to maintain a positive cash flow when growing your business and dealing with Accounts Receivable issues. One popular way to increase cash flow is Invoice Factoring. Invoice Factoring (also known as Accounts Receivable Financing) is the practice of selling your accounts receivable (invoices) at a discount to another company. You get the money from the company that you sold your accounts receivable to and they become responsible for collecting on the invoices.

The reason many businesses make this move is to ensure the continuous flow of cash to the business. Essentially, businesses who use invoice factoring are focusing on having most of the money now rather than all of it later. It can take time to collect on an invoice, so when a company finances its accounts receivable, they are getting their money faster and without the hassle of the collection process.

With small businesses, it is even more important to free up working capital through factoring. The money can be invested into new equipment, used to pay bills, or used toward payroll. Of course, the alternative is to chase the customer for the invoice payment and defer everything else while the money is tied up in the collection process.

As you can see, invoice factoring provides the needed working capital to meet business expenses without worrying about when your client will pay. It’s the business loan alternative that provides businesses with predictable cash flow and positioning them for growth.

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Survival Instincts: American Small Businesses Doing What It Takes

2009-10-21T13:18:00.000-07:00

For all businesses, being resourceful is essential when costs rise. With the current economic conditions, many companies are finding creative ways to deal with rising costs. At the top of this list is the cost of energy and fuel. In an April survey, American Express found that 86 percent of small-business owners are feeling the effects of higher energy and gas costs.

Many business owners are using this lull in the economy to closely assess their costs and cash flow. In lean times, savvy business owners make management improvements that they have thought about for years. Discipline and resourcefulness established in difficult periods can help give business owners the tools they need to maintain their business over in the long term. Simple, but meaningful, strategies can make a big difference to the bottom line: Reviewing/revising budgets, and sticking to them; Outsourcing (payroll, accounting, HR, IT); Getting receivables in line (Charter Capital can help with that); Cutting postage and overnight fees by sending document via email; Buying used equipment for non-critical tasks.

Since approximately fifty percent of every dollar in the economy is generated by cash-starved small businesses, their effects can be felt throughout the economy. If they are unprepared and their operating expenses go up, they may not be able to pass along these costs quickly enough to keep their cash flow positive. Without proper planning and some outside help, very few small businesses have large enough cash reserves to ride out a recession.

In an increasingly competitive global marketplace, small business owners shouldn’t take anything for granted. Entrepreneurs should always be looking at ways to stay lean and efficient. No matter the size of the company, it should be a part of the “corporate culture.”

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Solutions for Small Business Bankers

2009-10-21T13:16:00.000-07:00

Charter Capital is a non-bank provider of working capital funds and accounts receivable factoring services to small businesses. Commercial bankers regularly refer to Charter Capital their small businesses customers constrained in their ability to qualify for conventional financing. By employing its factoring services, Charter Capital quickly becomes a predictable source of working capital for many such referrals.

The lending and funding problems that have beset retail banking are spreading into small-business banking as well. Overextended on credit lines that often were based on home equity, small businesses are increasingly hard-pressed to service debt in an atmosphere of slowing sales. Working capital, often held in bank deposits, is coming under strain as well.

Shifting into protective mode, banks are ratcheting up the emphasis on credit quality and core funding in their small-business portfolios. And this has created a particular problem for small-business banking officers, who are being redirected from a former bull market for loans to what increasingly is a bear market for deposits.

Problem solved
Charter Capital provides incentives to small businesses to maintain their deposit relationship with the referring bank. The banker helps the small business establish an alternative source of funding and preserves the deposit business it would otherwise most certainly lose to the competition.

American Banker: "Mood Edges Upward for Small Business"

2009-10-21T13:14:00.000-07:00

American Banker Tuesday, August 26, 2008

"Small-business owners' confidence in the state of the U.S. economy inched upward again this month after setting a record low in June, according to Discover Financial Services.

The Riverwoods, Ill., credit card company said Monday that its Small Business Watch index rose 2.3 points, to 86.9. The reading in June was 71.8, the lowest since the index was introduced in 2006 and pegged at 100. Last month the index rose 12.8 points.

Sixty percent of small-business owners said this month that they think the U.S. economy is getting worse, down from 71% last month, and 23% said they think it is improving, the biggest share to see improvement since August 2007.

About 51% rated economic conditions as poor, compared to 54% in July; 15% rated conditions as good, up from last month's 11%.

Despite this optimism at the macro level, many small businesses are having problems at the micro level. Forty-two percent of respondents said they had experienced cash-flow issues in the past 90 days, up significantly from the 33% who said so in July.

Thirty percent said they think economic conditions for their businesses are getting better, compared to 28% who said so last month, but 44% said conditions are getting worse, up from 43% last month.

'We saw an increase in their confidence in the direction of the overall economy, but that was offset by more owners saying they're having cash-flow issues,' Ryan Scully, Discover's director of business credit cards, said in a press release. 'Their perceptions of the conditions for their own businesses were flat, making this gain harder to pin down. There is still a great amount of caution out there.'"

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The New York Times: "Worried Banks Sharply Reduce Business Loans"

2009-10-21T13:11:00.000-07:00

July 28, 2008
"Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.

Two vital forms of credit used by companies — commercial and industrial loans from banks, and short-term “commercial paper” not backed by collateral — collectively dropped almost 3 percent over the last year, to $3.27 trillion from $3.36 trillion, according to Federal Reserve data. That is the largest annual decline since the credit tightening that began with the last recession, in 2001.

The scarcity of credit has intensified the strains on the economy by withholding capital from many companies, just as joblessness grows and consumers pull back from spending in the face of high gas prices, plummeting home values and mounting debt."Click here for the full article

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Weathering the Storm: Banks Continue to Tighten Amid Losses

2009-10-21T12:56:00.000-07:00

Weathering the Storm:
Banks Continue to Tighten Amid Losses

Unless you live under a rock, you have probably noticed that there is a banking crisis. Banks are continuing to struggle with multibillion-dollar losses in real estate and are continuing to tighten-up on all forms of credit. In a recent New York Times article (‘Worried Banks Sharply Reduce Business Loans’), the Federal Reserve reported that new commercial loans have seen the largest drop since 2001.

This classic "credit crunch" is leaving many businesses with the feeling that they are without a mechanism for growth. What’s more, this could leave already cash strapped businesses out in the cold.

Financial planning in today’s economic climate is the key to ensure your cash flow is healthy. Problems can be avoided with proper planning with your accountant or CPA and implementing an immediate review of internal costs. What savings can be made? Do staff numbers need to be cut? Moreover, run credit checks on customers or clients who may be a bad risk and review whether it’s worth keeping them.

Fore many businesses, the factoring of accounts receivable can be a healthy way to “weather the storm” without incurring debt. The process is simple and straight forward; and in many cases, less expensive than a traditional bank loan. Click here to find out more about Invoice Factoring

If you run out of cash before you run out of month you're in trouble; do it month after month and you're out of business. Remember: Cash is king. The management of it is the secret to success.

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Return to: Small Business & Factoring News from Charter Capital

Small Business Optimism

2009-10-21T12:48:00.000-07:00

If you spend enough time following the news, it's enough to make you wonder if small business can survive. Granted, things like the falling housing market and soaring gas prices are certainly real problems for everyone.

However, when you hear about some corporate-type whining that they had to give up their Starbucks because the economy's so bad, the line between real problems and a shortage of common sense becomes pretty blurry. So, is the sky really falling? According to a recent study, small business owners say no.

The study, which surveyed more than 700 small business owners with 100 or fewer employees, found that 90% said they see opportunity under current economic conditions and 75% said they expect their business to grow.

Nearly half of those surveyed said the economy levels the playing field between small business and their corporate counterparts, and 65% said they have had experience leading their business through a tough economy. 63% of those surveyed say it's about customer retention, and others say it's maintaining good cash flow, which is a big part of what drives small businesses and allows them to do well in any economy.

Small businesses are able to fair better in an economic downturn because they think fast. They are in a better position to move very quickly in terms of how they align their resources. That's just the way they're used to doing it, in good times and bad. It all goes back to the passion they have for their business and their customers.

In spite of where the economy is currently headed, America's entrepreneurial spirit has never been stronger. People are going to see that, as small businesses continue to grow and are a more important part of the economy, it will boost entrepreneurship even more.

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