Following the Treasury’s announcement that the Gross Domestic Product (GRP) increased by 0.1% in the last quarter of 2009, how many of us really believe that this piffling improvement over a three months period proves that we are now out of recession and 2010 will herald a return to the halcyon days of full employment and bulging order books. Probably very few – at least amongst those who are not confined to a mental institution.
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President Barack Obama’s plan to divert $30 billion of federal bailout funds into new small-business loans will prop up thousands of struggling entrepreneurs but is unlikely to break the lending logjam.
“This is a good start. But it’s a small start,” said G. Michael Moebs, chief executive of Moebs Services Inc., a Lake Bluff, Ill., research firm specializing in U.S. banks.
The $30 billion in Troubled Asset Relief Program funds targeted by Mr. Obama represent about 4.3% of the $700 billion in small-business loans held by U.S. banks and savings institutions, according to the Treasury Department. As of November, the 22 largest banks that got capital infusions through TARP had $257 billion in small-business loans, the Treasury said.
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Invoice factoring can be an excellent way for companies to generate capital. In the past, bank financing was the primary way that a company would raise money whenever it needed to. Even then, if a company lacked a significant amount of history and/or had poor or even average credit it was very difficult to receive a loan. Today, it has become even tougher. Banks are simply not willing to loan out money at rates that had in the past. This has been devastating to many businesses, especially those that had come to rely on such monies. Fortunately there are still options. Invoice factoring is one of the very best commercial finance alternatives. It allows companies to raise money in a very short amount of time, typically even within 24 hours.
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Invoice financing is a great way for companies to improve their cash flow without taking on new debt or having to apply for a bank loan. In the past, these were two of the primary ways that businesses raised capital. Many depended on angel investors or banks. With much of this money having dried up, companies are being forced to look for creative, alternative ways to raise money. Invoice financing qualifies on both fronts. Businesses that in the past may have passed on the opportunity to utilize this form of commercial financing simply because they didn’t have to consider it, are beginning to see the benefits of utilizing it.
Invoice financing is a dependable and fast way for a business to raise capital. Companies sell their invoices or accounts receivables to businesses called Factors. These Factors will purchase the invoices for 70% to 90% of their full value. These monies are paid right away which allows businesses to generate capital in a matter of days instead of waiting the 30-60 days that they would normally have had to if the client paid according to the invoice arrangement.
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There are a variety of financing options for companies that need capital. Angel investors, bank loans, venture capital and credit cards are all available options. While each of these has their advantages, there are also many disadvantages associated with them. Businesses must consider these before choosing one of the above options. Amongst the most notable disadvantages, include the fact that it may be difficult for companies to qualify for a number of these types of loans. In the case of credit cards, the astronomical interest rates can cause a business so much money that it becomes very difficult for them to repay. One option that may not be used as often as it should, and which can be an especially advantageous small business financing option, is factoring.
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Purchase order financing (or in short, PO financing) is an excellent way for companies to grow and take business to the next level. This particular form of financing makes it possible to take on larger jobs even when a company does not have a great deal of cash on hand. It can be difficult for companies to compete for bigger jobs when they don’t have the money available to fund them. Because many companies invoice their clients, they may occasionally have cash flow problems. As a result, there will be times when they do not have adequate operational expenses in their coffers. When they do not, they are unable to take on new clients or expand, that is unless they utilize PO financing.
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Business factoring is not new. However, it is quickly becoming an increasingly popular option for companies looking to raise capital quickly and without taking on new debt. While some businesses have been using invoice factoring for some time, others either have not heard of it or only have minimal knowledge regarding it. This article will act as somewhat of a brief introductory course, a business financing 101, so that readers can learn how invoice factoring works. Hopefully, businesses will begin to understand that this is an extremely effective and fast way to infuse cash into their coffers.
Invoice factoring requires three things, a business that invoices their customers and has outstanding receivables, a reputable factoring company, and customers with good credit. If all of these things are in place, it may be possible to strike a deal.
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In this article we will discuss the ins and outs of invoice factoring. Invoice factoring allows companies to receive monies quickly without having to obtain a loan. It is a sort of cash advance that doesn’t have to be repaid. It can be used to quickly generate cash for one’s business without taking on new debt.
A business is able to access money in as little as 24 hours using invoice factoring. It would be a difficult task to list any form of income generation which would allow a company to access money as quickly and easily and without having to pay it back. Often times, not only does money have to be paid back but a company will be forced to pay handsomely for the privilege of borrowing it.
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All companies need cash. Monies are required to sustain a business. Employees, utilities and rent have to be paid. Companies have to purchase materials and supplies. In summary, capital is necessary to both sustain and grow a business. Without it, a company simply would not be able continue to stay in business. Many businesses rely on debt so that they have enough capital to get by. While debt is sometimes a necessary evil, it is not often optimal. This is largely because debt has to be repaid and with interest. When a company has too much debt they are under a lot of pressure to perform and generate revenue so that it can be repaid.
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Jon Anselma spearheads the Paragon Financial Group, which was founded in 1994 with the initiative to afford growing businesses an alternative to conventional Bank Financing. With satellites in Tampa and Orlando, Paragon Financial Group is headquartered in Fort Lauderdale, Florida.
Ralf Bieler, President & CEO of Cash Flow Exclusive, LLC, caught up with Mr. Anselma to talk with him about his company and its business, as well as about his view on the economy and future plans.
CFE: Jon, why don’t you kick us off by telling us your “story”. Who is Jon Anselma? When did you start working in the cash flow business, how and why did you get into it, and how did you get to Paragon?
Jon Anselma: I first learned of factoring while growing up in New York. My best friend’s father was a garment manufacturer in the heart of the garment district in New York City. In those days, numerous factoring companies lined those streets of Manhattan. He explained to me what factoring was and that without it, he wouldn’t be in business. I was enamored with the concept and at 15 years old decided that’s what I wanted to do for a living.
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