Business Loans

It is very common in business to provide commercial and government clients with up to 60 days to pay their invoices. At the same time, many of the cash flow problems that afflict companies can be traced to the fact that they offer 60 day payment terms to their clients. And, it understandable. The business must cover all expenses – rent, suppliers, and salaries – while waiting to be paid. And since few companies have substantial bank reserves, it only takes a few unexpected large orders to tilt the cash flow balance to the other side and start having problems.

Most business managers have two standard approaches to this problem. The first approach is to try and negotiate quicker payments from clients. Unfortunately, this seldom works and clients almost always have the upper hand. The second approach is to go to the bank for business financing. Your success in obtaining bank financing will depend in your company’s balance sheet and track record. Generally speaking, to qualify for a business loan you will need a rock solid balance sheet and a track record showing consecutive years of profit. However, business loans may not be the best solution for this type of problem since many times business expenses are variable and tied to sales.

The best solution to the problem is to get paid for your invoices quickly. Now, what if your customers agreed to pay 80% of the invoice on the spot, and then pay the remaining 20% after 60 days? Would most, if not all, of your cash flow problems disappear? Most likely. This can be achieved, and without changing your customers’ payment habits. The solution is to factor your receivables.

Receivables factoring provides you with an advance on your invoices. This helps you put your company on a more stable financial footing, enabling you to pay salaries, rent and supplier expenses. Generally, the factoring company advances about 80% immediately, on your invoices for delivered products or services. The remaining 20%, less a small fee, is advanced once the invoice is actually paid by the client.

Invoice factoring, as accounts receivable factoring is also called, has a number of benefits over conventional financing. First, is easy to obtain and can be set up quickly. Second, and more importantly, your factoring financing line is tied to your sales. This makes it an ideal solution to address your changing needs as the line grows in parallel to your business. Your financing grows, as your sales and your company grows.

Author: Marco Terry
Article Source: EzineArticles.com
Provided by: Electric Pressure Cooker

Is factoring a type of loan?

No. Even though invoice factoring is commonly referred to as factoring loans,
it is a financial practice involving a B2B transaction, but no bank.
To further explain, account factoring, it is when a company, like Peacock Capital,
purchases your accounts receivable invoices at a discount and provides you with
immediate cash. A traditional bank loan uses your companys accounts receivable as
collateral, where account receivables factoring looks primarily at the financial
soundness of your customers, not your company. Banks are regulated heavily; large
finance companies generally are public and driven by pressures in the financial
markets. When times are tough, banks and finance companies limit lending. A small
business, too new to have a track record, with a weak balance sheet, with a history
of financial problems, in turnaround mode or undergoing big changes, often cannot
find a willing lender at any price. That is why factoring is best for small to mid-sized
businesses.

Does a bank loan make more sense for my small business than invoice factoring?

No. Banks often have restrictive lending requirements relating to cash flow,
profitability, equity, and years in business, which prohibit them from making
loans to small to mid-sized businesses. Since factoring companies are not
in the lending business and there is really no such thing as factoring loans,
the decision to purchase invoices is influenced primarily by the quality of your
customer base and their financial stability, and not the financial fundamentals
of your company.

Do I have to jump through the same hoops for account receivables Factoring as with
bank financing?

No. All Peacock Capital needs to produce a proposal is a completed pre-approval
form, summary of accounts receivable aging, summary accounts payable
aging and some other basic financial information.

Do I have to be an established business operating a minimum number of years to
start an account factoring relationship with Peacock Capital?

No. Peacock Capital prides itself on working with companies in all stages of
business, including recently developed small to mid-size businesses. Even pure
start-ups are usually not a problem for Peacock Capital. If your company has
verifiable invoices and creditworthy customers, Peacock Capital will happily speak
with you about an account receivables factoring relationship.

Are my receivables held as collateral while my company is factoring?

Yes. Peacock Capital requires a first position on all accounts receivable while you
are factoring with us.

Does Peacock Capital require additional collateral when my company is factoring?

No. Within our traditional account factoring programs, a first position on accounts
receivable is all that Peacock Capital requires while you are factoring. In some
situations, Peacock Capital may take an available security interest in other
companys assets.

Author: Afra AmirSanjari
Article Source: EzineArticles.com
Provided by: Programmable pressure cooker

Getting business financing is one of the bigger challenges for business owners – especially during these times. Although it’s well known that getting a business loan has never been easy, nowadays getting business financing appears to be close to impossible.

Although getting a small business loan may be very difficult, there are other forms of business financing that remain relatively easy to obtain. However, not all solutions are suited for every type of business. For example, most companies that sell to commercial clients have to give customers 30 to 60 days to pay the invoices. However, they need to pay suppliers and employees regularly. This creates a situation where a company may have a substantial amount of money due to it – but very little actual cash at hand.

This creates a very real problem for business owners. On one hand they have a growing business that had a lot of potential, but on the other hand they have their resources tied in unpaid invoices, leaving little working capital to execute their plans.

Ideally, you should be able to go to your clients and ask that they pay their invoices quickly. But that will never work. Large corporate clients tend to demand payment terms as a condition of working with them. It’s a take it or leave it scenario. But what if they did pay quickly? That can be achieved by using invoice factoring.

Invoice factoring is a business financing tool that can eliminate the challenges of waiting for payment. It provides you an advance on your soon to be paid invoices, providing the working capital you need to pay employees and suppliers. It also enables you to take on larger orders, since you no longer need to wait to get paid.

Factoring your invoices is fairly simple. Once the work is completed, you sell the invoice to a factoring company. The factoring company buys the invoice in two installments. The first installment pays for 80% of the value of the invoice. The second installment, paid once the invoice is paid for by your client, pays for the remaining 20%, less the finance fee.

One major advantage of invoice factoring is that it’s easy to obtain. The most important requirement is that you do business with solid commercial clients that pay their invoices on time. Also, you company must be free of commercial liens, judgments and encumbrances.

Given that invoice factoring lines are based on your client base, they usually grow with you sales. This can be a great advantage over a conventional business loan, as your financing will adapt dynamically with your business based on current conditions.

Author: Marco Terry
Article Source: EzineArticles.com
Provided by: Netbook, Tablets and Mobile Computing

Selling your products or services in export markets can be a very profitable and a true engine for growth for your company. Manufacturers, service providers and traders can all benefit from adding foreign markets to their portfolio of customers. However, selling into export markets can also deplete your cash flow. Large companies that have a cushion of funds in the bank, usually have no problems. However, smaller and emerging firms can run into cash flow issues very quickly.

The biggest issue for exporting firms is waiting 30, 60 or even 90 days to get paid for their goods or services. Slow paying customers can really affect your company’s cash flow. This can challenges your ability to pay suppliers, employees or even rent. read more »

photo credit: norhendraruslanA working capital loan is a form of business loan that is commonly allocated to support the daily operations of a business or buy earning assets. This source of funding is often sought when the net working capital is deficient. This circumstance results from a low or even negative figure when the existing liabilities in the form of accounts payable are subtracted from the current asset comprising of accounts receivable and inventory.

For most businesses, their objective in acquiring a working capital loan is to make sure that the business operations are continued until such time that the cash flow coming in is sufficient enough to accommodate the upcoming operational costs as well as the maturing short-term debt.

Working capital loan is ideal for whatever business situation whether an emergency crisis or pursuing a new venture for development. It poses as a great option to come up with a quick source of funds. When you have already decided that a working capital loan is right for you, one thing to learn about it is that different traditional financial institutions may refer to it in varying terms or it comes in different forms such as: read more »