Nov 15

How To Get Working Capital For Your Company

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Do you own a business? If you are like most business owners, you probably have a lot of responsibilities. First and foremost, you have to meet payroll. Every time. You also need to pay rent and suppliers – on time. All this requires working capital.

However, if you are selling products or services to commercial clients or to the government, you are probably painfully aware that they can take as many as 60 days to pay their invoices. Why? Because if you want their business you have to conform to their terms. There is no other way around it.

But this also leads to an impossible situation. You have bills that need to be paid quickly but customers that want to pay slowly. Unless you have a lot of money in the bank, its not a sustainable situation. Sooner or later youll miss payroll, delay a supplier payment, or turn a large opportunity away.

The solution is simple. You just need working capital. One way to get working capital is to get a business loan. However, business loans are hard to get and can prove to be inflexible. A better solution is to factor your invoices.

Factoring, or invoice factoring as it is most commonly known, is a type of business financing that is ideal for owners who cannot wait up to 60 days to get their invoices paid. It provides you with the necessary working capital to pay rent, suppliers and meet payroll. And, as opposed to a business loan, factoring is easy to get.

Invoice factoring eliminates the usual 60 day wait to get paid by your customers. The factoring company provides you with an advance on your soon to be paid invoices. In effect, it accelerates your invoices. By accelerating your invoices, you get the working capital you need to run and grow your business. And, unlike a business loan, there are no arbitrary limits. The amount of financing you get is only limited by your sales. If your sales increase, so does your financing.

If you are running a business that is growing and you cant afford to wait up to 60 days to get your invoices paid, consider invoice factoring.

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Oct 13

Investment Capital – Putting Brand Capital And Human Capital Above

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Investment Capital – Putting Brand Capital And Human Capital Above Working Capital Or Physical Capital

When you start your own business, you commit to investing your time, talent and resources in the business to make it succeed. You authorize a spending plan; you ask the bank, your credit card company, friends, family, employees, to endow the business to follow your business plan and implement your marketing plan. There’s more to it. You need to determine where you can differentiate your company from the competition, so where should you invest the most resources? To garner the most flexibility, I suggest your investment priorities should be: Brand Capital, then Human Capital, followed by Working Capital with Physical Capital at the bottom of the list.

Brand Capital: Invest the most in your market and marketing to them. Up front this could simply be focusing on a small group of prospects. Do the economics to make them well satisfied customers. So much so, that they provide the testimonials or become the spokespersons for your future sales. Remember, the high value transfer of using relationships.

Human Capital: This is your team and their track record coming on board. Only hire stars, no matter what. Only employ experts in the key roles of your company. For other positions, look for great talent you can mold to your vision, and move around to meet the company’s needs.

In addition, build a stellar Board of Advisors or Board of Directors. A Board of Advisors usually will help you for free, whereas a Board of Directors is paid. The key is to engage thought leaders in your niche who become early adopters of your product or service and advocate for you to their significant networks.

Working Capital: Invest minimally here because there’s no added value to the company or the product. Tying up cash instead of using credit may actually slow your time to market. This could be a critical timing mistake if your competition is racing you to market.

Physical Capital: Invest minimally here because bricks and mortar don’t sell product. Yes, you need a roof and windows that don’t leak (I’ve worked with many startups in the old mills where workstation layout was based on the leaks and drips.). You don’t need to be a miser. And you need the equipment, technologies and conveniences that will make everyone highly productive. Cost- effectiveness should be weighed here too.

Whenever you are investing in your business, recognize that you cannot manage everything, but you can manage the value equation of each investment. Be sure the value to your business is outstanding, so you can win business with every sale.

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Jul 26

Working Capital Solutions With Factoring

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Ideal Candidates for Accounts Receivable Factoring:

Any business that provides a product or service to other creditworthy businesses and is constrained by their day-to-day cash flow situation.

Does your business need:

Cash to Cover Payroll?

Working Capital to Fuel Growth?

Help with Cash Flow Problems?

Help because of Bank Turn Downs or refusal to extend current lines?

New Equipment to Grow?

What is factoring?

In a traditional factoring arrangement, a company actually sells its receivables to another company (a factor) at a discount. After the sale, the receivables balances are carried on the factors balance sheet since title has passed. Because the factor then owns the receivables, it generally provides all the required credit, collection and accounting services necessary to collect the receivables, including assumption of the ultimate loss exposure from the client debtor. The important difference between factoring and asset-based lending is ownership. In factoring, the receivables are purchased and owned by the factor. In asset-based lending arrangements, accounts receivable are pledged to the lender as security for the loan, but the borrower retains ownership and complete control of the receivables and the value of the receivables remains on the borrowers financial statement.

Keeping the cash flowing is a challenge for all businesses. Does your company face cash flow challenges because of slow paying customers? Have you been forced to decline new opportunities because of cash flow issues?

As every business owner knows, sales alone do not measure the profitability of a company. For example, sales may be increasing, but a company may have to wait weeks or even months for payment. During that time, your company cannot purchase materials for more orders, meet payroll, or other basic operating expenses. The solutions may be Accounts Receivable Funding provided through Diversified Funding Services, Inc. Accounts Receivable Funding is quickly becoming a popular choice for its flexibility and rapid injection of needed capital.

Why Accounts Receivable Funding is a Popular Choice in Todays Business World

Accounts Receivable Funding or factoring has been in existence for several decades. Today, virtually any-sized business that extends credit to other businesses for goods or services can enjoy the many benefits of Accounts Receivable Funding.

Simply stated, Account Receivable Funding is the exchange of creditworthy commercial accounts receivable for an immediate injection of working capital. When an invoice is generated, it may be purchased with an advance of anywhere between 75 to 90% of the net invoice amount. When your customer pays the invoice, you will receive the reserve portion minus a nominal servicing fee.

Why Accounts Receivable Funding Makes Financial Sense

Accounts Receivable Funding offers many Advantages:

Initial funding is typically available between 5-7 business days upon receipt of completed formal agreements, and then all future advances are funded within 24 hours.

Accounts Receivable Funding does not create a financial liability on your companys balance sheet and generally no other collateral (outside of the receivables) is required.

The amount of funding available to you is only limited by the creditworthiness of your customers.

Accounts Receivable Funding focus on the creditworthiness of your clients instead of your financial history.

Accounts Receivable Funding allows quick access to working capital, instead of waiting 30, 60 or 90 days to receive payment from your customers, money is immediately available on demand.

Accounts Receivable Funding Programs have been generally designed with the following criteria in mind.

Your company must be providing a product or service to other credit worthy businesses (no consumer sales)

Your company must be selling on terms

Your company must be billing in arrears (no pre-billing)

Your company must have minimum monthly sales of at least $10,000 or annual sales of $120,000

Your company is not required to be in business for any length of time

Your company should have the capability to generate financial reports (A/R and A/P aging reports, etc.)

Your company may have current and/or historical losses or a deficit net worth position

Ideal Candidates

Start-ups
Companies suffering financial setbacks
Service Companies
Companies with seasonal orders
Mature companies seeking cash flow support
Companies seeking credit assistance
Businesses experiencing rapid growth
Non-bankable businesses

An example of the application process:

1. Complete the application
2. Provide your most recent and detailed accounts receivable aging report
3. Provide your most recent and detailed accounts payable aging report
4. Provide an actual sample invoice
5. Provide a copy of your Articles of Incorporation/d.b.a. filing
6. Provide a copy of your customer list
7. Some factoring companies require financial statements, others do not.

Preferred Industries

Service
Temporary Staffing
Security companies
Manufacturing
Transportation
Textile/Apparel
Computer Consulting
Distribution Companies
Printers
Sub-Contractors
All other Industries
Any company that provides a business to business product or service to another credit worthy business!

Thanks for reading!

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Jul 04

How Do I Obtain Capital To Invest In My Business

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How Do I Obtain Capital To Invest In My Business Start Up?

Youll almost certainly need to raise money to start up your company, unless you already have sufficient capital yourself. The typical costs of starting up are in obtaining premises, manufacturing your product if you have one, buying materials, stock or equipment, marketing and fees for external consultancy such as legal help, accountancy etc. Then when youre off the ground, youll need working capital to keep you afloat in the gaps between paying your own invoices and receiving payment from customer invoices.

Again, your business plan is essential at this stage of setting up your business. In it you will already have scoped out what your money needs are and how you plan to raise the capital, and youll be using it to persuade potential investors and lenders of the benefits of funding your company. Your financial calculations in your business plan therefore need to be thorough and accurate and presented with confidence.

Everyone expects that theyll be able to stick to their plans and only need to borrow the absolute minimum, but more often than not something unexpected crops up to throw a spanner in the works. It therefore makes good business sense to include a contingency element in the amount you request. Its better to do that now and have the extra cash as a safeguard than it is to have to return to your lender or investor not far down the line to ask for more money. If it wasnt in the original plan they are likely to be concerned about your financial ability and your request may be rejected.

How much money should you request? This question worries all start-up business owners. You want to make sure you have enough to keep you going without struggling, but how much will your investors or lenders be prepared to give? Most experts would advise that you should pitch somewhere in the middle dont leave yourself short by requesting the minimum, but at the same time dont be greedy (and lazy) in asking for too much. You want to keep costs to a minimum and invest your money wisely in your company, while still having the security of a little extra for backup if required. What you borrow should give you a realistic challenge for your business but should not be too risky. And back up your calculation with evidence in your business plan it has to be credible.

People raise money for their company in many different ways, not always from professional business investors or high street banks. How you raise your capital will depend on your business needs and your own circumstances. Heres some information on various different sources of funding.

Your own money if you have enough cash to spare, putting up your own money for the business means you dont have to be in debt to anyone. It will also give you full freedom over the running of your company as you wont be responsible to any other interested parties. On the other hand, youre risking a lot personally by investing your own cash and you could lose it all and not just your business, but perhaps also your home if you obtained the money by taking out a secured loan or increased your mortgage, for example. You should also be aware that personal borrowing rates often have much higher interest repayment rates than business deals.

People you know if they have anything to spare, family and friends are often more willing to give you cash than external lenders or investors. Again, though, there is a high level of personal risk, both for your family or friends who could lose money, and for you it can cause relationship tensions. If you do take money from family or friends, treat it as a formal business arrangement as you would with external funding and agree clear terms and conditions. You want to protect both your interests and ensure that there are no misunderstandings.

The bank high street lenders usually have a variety of different packages and theres usually something to meet everyones requirements. Youll have to do a sales pitch to get your money though, and depending on financial circumstances you might also be required to find a guarantor or provide some sort of security. Dont just go to your own bank look around for a good deal and do your pitch to various lenders. If nothing else, it will give you good practice! If you think you might have more of a chance of obtaining money from your own bank where you already have a strong relationship and good financial history, then dont put it first on your list of visits present your case to a few different lenders first to hone your presentation and persuasion skills to a tee! Even if you cant find a lender to give you money, there is a government programme that may be able to help. The Department of Trade and Industry offers a Small Firms Loan Guarantee, in which it offers three quarters of the borrowing amount to the lender as a security guarantee. In return, you must pay an annual fee (which will be a small percentage of the remaining loan amount) to the Department of Trade and Industry. Up to quarter of a million pounds can be borrowed over a maximum 10-year period.

Outside investors often referred to as business angels, private investors are rich professionals, often successful entrepreneurs themselves, who are able to offer a great deal of capital in return for an expected large profit and dividends when the company starts to make money. The advantage of obtaining finance from an investor rather than a lender is that they will not expect any financial returns until your business is turning a profit. Also, as successful business owners themselves, they can be a valuable source of advice to guide you in the right direction with your company. A combination of investment and lending might be a good option. Your business will seem a much more attractive and secure prospect to lenders if you already have a sum of capital to back it up. Investors will no doubt have a level of influence and decision-making power in your company, though. Most will want to be kept informed of what is going on they will want to protect and develop their investment, of course, so you will have a responsibility to them. Also, when you start to turn a profit, it will be divided among everyone who has invested so you wont get the full whack. Finally, youll need to put forward a very good business case to attract an investor these are very wise, shrewd and experienced entrepreneurs.

Government schemes theres a whole raft of options available to small business owners from the government and local authorities in the form of low-cost loans and grants in fact far too many to mention here. Your local business enterprise centre, chamber of commerce or local council will be able to advise on what options are available for your type of business. The loans are usually offered at very reasonable rates and grants are of course non-repayable (although competition can be tough). Such incentives are often given to certain types of businesses in certain industries located in certain areas, particularly in areas that are being regenerated and in fields such as science, research or engineering.

In conclusion, the key message is that however you get the money you need for your business, youll need a very strong business plan and youll need to practise your skills of presenting to ensure you make a good impression and a convincing case.

The presentation of the document itself is also important. Keep it clean, crisp and sharp. Use a business-like typeface, use colours sparingly and use spreadsheets to create neat graphics. Have someone else look over it for you when its done to check for mistakes. Print it on good paper and hold it together in a presentation folder or comb binding.

Dont just plan to read out your business plan people can do that for themselves. Turn it into a slick presentation with a strong argument for your case. Write down what you want to say and rehearse it several times in front of a mirror at first and then to family or friends. Confidence is key and this will come with practice. Ensure that you know the details of your plan inside out, including the figures. You dont want the facts to trip you up. Its also a good idea to consider what questions investors or lenders might ask and how you can answer them confidently and convincingly.

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Apr 02

Working Capital & Cash Flow Solutions: Should I Borrow From

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Working Capital & Cash Flow Solutions: Should I Borrow From A Bank?

Recently, my newspaper reported that a local bank …earned a four star excellence rating for the sixty-fourth consecutive quarter. Thats sixteen years of four star excellence! The article went on to say that the rating is based on a complex formula that includes capital safety levels, quality of loan portfolio, and the ability to meet obligations The press release was designed to showcase the value of this bank and demonstrate its prominent position in the economy.

As a former banker with over seventeen years of commercial experience, I chuckle at this information being tossed around by the bank and its regulatory agencies for self promotion and marketing purposes. I suppose that if you are a blue-hair whose purpose is to find somewhere other than under the mattress to keep your retirement funds, this article was good news. But what does it mean to the business owner or entrepreneur looking for a Funding partner to participate in an opportunity to grow, increase jobs and profit? In a nutshell this type of information should be a wake up call to find another bank-heres why.

Lets explore the underlying meaning to business customers behind a portion of this complex formula.

Capital Safety Level

In laymans terms this means that the bank has more than adequate reserves of Cash. Cash that is available, but not loaned out its Capital Safe. Banks that have high reserves of Capital can be presumed to be low on the scale of aggressive lending. They hoard Cash – even though they cannot make the same return on reserved Cash as they can on employed Cash. But for the bank, its less risky to hoard Cash than to loan Cash, and therefore contributes to their four-star excellence rating.

Quality of Loan Portfolio

A high quality loan portfolio means that the banks loan loss experience is at or above levels set by regulatory agencies. One can infer that the bank therefore takes fewer risks. Bankers are not supposed to be entrepreneurial or take risk. A banker has never been rewarded for taking risk! The banking system rewards those who can decline any borrowing request outside of the underwriting parameters. Loan portfolio quality thats high = low loan accessibility to business owners. It stands to reason that banks are not risk takers based upon the low returns they are willing to accept.

Banks with four star excellence ratings seek out commercial customers who are stable and have limited need to borrow. The other 72% of business customers are left outside the circle of these banks. Where do these businesses turn to Cash Flow the Working Capital needs of their business? Where do they go to fund opportunities for growth and development of new market niches? More often than not they turn to the widely accepted world of non-traditional funding sources – preferred SBA lending companies for real estate and fixed asset needs, leasing companies for equipment needs, and Factoring companies for Working Capital needs. These non-traditional funding sources evaluate opportunities to participate by lending funds to small & medium sized businesses. Non-traditional lenders rates on borrowed funds may be higher than traditional bank rates, but their mission is to employ funds to obtain a return, not to let cash sit idle on the sideline in order to obtain a four star excellence rating. Their pricing reflects the perceived risk. And, they are not restricted by regulatory bureaucracy or fear of losing their four star rating as banks are.

In this ever changing world, business owners are advised to explore opportunities outside of the traditional financing channels. Before a need arises a business should be familiar with alternative funding sources. And perhaps, when your bank informs you that they continue to achieve a four-star excellence ratingit would be wise to investigate your options pertaining to Working Capital and Cash Flow solutions.

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Feb 27

Man Business Owners Tend to Underestimate The Importance of Working

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Man Business Owners Tend to Underestimate The Importance of Working Capital!

Businesses in todays economy are thriving today more than ever. Many people are putting their dreams of owning a small business to work with the opportunities todays financial markets offer. A few decades ago, starting a small business meant saving or somehow acquiring a large amount of capital one ones own. Losing the business meant losing everything. Today, one can greatly decrease the risk of business failure by having the financial resources one needs to not only give the business a strong start but to keep it going during the good times and the bad. The main reason for this is having working capital finance programs.

Utilizing working capital financing is not a bad idea, and is implemented by many major corporations. Not only does it protect a company from disruption of events in unexpected circumstances, but also allows revisions and expansions when a business decides a new strategy could be of benefit. Working capital financing gives a business strength, flexibility, and stability. Thats why so many smart business owners today choose to have capital financing working for them.

New businesses and small firms often find themselves in working capital crunches. Without adequate working capital, they cannot build inventory or purchase raw materials. As a result, the company cannot sell enough products to generate the profits needed to rectify this situation. This is extremely dangerous and can be destabilizing for the company or even cause it to collapse. At best, the company will never realize its potential. With a capital loan working for you, you can make sure that your business gets a strong start.

The availability of credit or financing is therefore a key determinant in the likelihood and ability of a small firm in expanding and succeeding. To lessen problems for startup and pre existing businesses, some private lenders have created flexible working capital loan programs.

The laypersons understanding of a working capital is quite vague. In fact, few non-financial personnel will be able to give an accurate definition of working capital. The dictionary definition of working capital is the different between its current assets and current liabilities. Also known as net working capital, the working capital of a company ultimately reflects its ability to meet its obligations as they come due. It also infers the stability of a company. The amount of working capital a business has can strong influence the character and scope of the business. A capital loan working for you can make all the difference in whether your vision succeeds or not.

Although most businesses still require traditional collateral for a working capital loan, a new breed of innovative companies that has emerged can give new and pre existing businesses excellent working capital loan programs without requiring security. The options and prospects for todays businesses have grown dynamically, and it is of essence for each entrapaneur today to turn his fabulous ideas into a fabulous reality.

With working capital, you know you can fulfill the needs of your business and your target market no matter what kind of unexpected situation happens. You and your business can rise to the challenges and changes of todays ever growing and rapidly evolving business world. Working capital finance plans allow your business to have the safety of the financial backing it needs.

Today you can get a great working capital finance plan without many of the challenges of yesterdays traditional lending procedures. Innovative new online lenders are offering unsecured business loan products. That means you can equip your business with working capital finance even if you dont have collateral. Today, there is no reason to leave your business in the open. Maximize the chances of starting and operating a lasting and successful business idea. You can protect it with a working capital finance plan.

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