Is Your Cash Flow In Jail?

Donald Hunter, MBA, Broker, Certified Financial Planner — Thu, 15 Oct 2009 22:21:22 +0000

Spring Your Cash Flow From Receivables Jail With The Donald’s Factoring Solutions!

I was interviewed as a resource for a San Diego news publication on Tuesday. The reporter, Ms. Go, told me that she is a financial reporter that covers construction, legal, and real estate in San Diego.

Ms. Go asked what I thought business owners could do right now to get cash to grow their businesses. I shared with her the stories of several business owners who have been able to pay for operating expenses like taking advantage of supplier discounts, paying employee salaries, and energy costs.

Ms. Go had never heard of “factoring.” And, maybe some of you haven’t heard of it either…

Factoring is a quick solution to get cash to pay for operating expenses. In many cases, business owners invoice their clients who then take forever to pay for work that has already been performed. In reality, they are getting an interest-free business loan from you and you really may not be able to do much about it.

Your customers may take 30, 45, 60, or 90 days to pay you the money you’ve already earned. That’s a long time when you have employees to pay and mouths to feed at home. This situation can turn into a nightmare if you are taking on new customers and you don’t have the monthly cash to serve them. You may be forced to refuse new business and risk losing great employees if you can’t come up with some quick cash.

When I tell people that this happens, they can’t believe it. They say to me, “Isn’t this illegal. This is unfair!”

I smile and say, “That’s what you call market power.” The government is actually the worst offender in this wise because they pay their subcontractors in some cases as long as 180 days. Can you imagine working for a half of year without getting a pay check? You would be really ready to “Spring” your cash from “cash flow jail.”

What factoring does is to get you cash now by buying your invoices at a discount. You get 60% to 90% of the face value of the invoice. If you get 60% then you know you are bad at managing your cash flow, your customers are having problems making ends meet, or you’re in a highly risky business. If you get close to 90% of your cash upfront from the factor, then you are really cool.

Well, Ms. Go reporter from San Diego got really excited because she didn’t know that this type of financing existed. I told her that factoring has been done in the apparel industry for hundreds of years and large corporations do it all the time for short-term financing.

She was surprised that small businesses have access to easy business loans right now in the new economy. I told her that factoring isn’t a business loan!

Factors buy your invoices out right. We give you the 60% to 90% upfront and when we collect, you get the rest minus a discount.

The fees for factoring can be thought of like credit card transaction fees or giving your customers a net 2% in 10 discount incentive.

In every crowd someone says, isn’t factoring expensive? It’s not compound interest, for one thing, and remember earlier I said to Ms. Go that it isn’t a business loan. Your margins do have to cover the cost of factoring just like a promotion you run to give your customers incentives to take action on your offer.

There is much more exciting information you can learn about factoring. I’m offering you an opportunity to dig in further and really look at how you can “spring” your receivables and purchase orders from “cash flow jail.”

OH! BTW guys if you haven’t signed up for a free consultation it’s time to take advantage of it now because I don’t know how long it’s going to be available. So go ahead and signup now before it’s gone.

Also get my Business Survival Report it’s absolutely FREE! There’s no catch whatsoever this is just a way for me to give back and help small businesses in these tough times. Here’s the link to my Free Business Survival Report again.

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Is Your Cash Flow In Jail?