Monthly Archives: December 2009

Banks Versus Factoring for Cash Flow

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Small businesses owners are looking for ways to improve their cash flow, so they typically think about going to a bank first for small business funding. Unfortunately, invoice factoring or accounts receivable funding is rarely thought of when someone needs cash flow or working capital. Why? Because most business owners are programmed to seek financial solutions from a bank. Factoring is not a typical bank product so this alternative is confusing for most business owners seeking funding.

If you are seeking working capital you probably already have a specific amount of money in mind, otherwise known as its line of credit or a credit limit. Traditional funding strategies dictate limits on funds available based on the pledged collateral assets. Although small business loans do offer an advantage of a single lump sum for immediate investment, and business loans help bridge financial gaps, the thing is that today they are hard to come by with the tight credit markets.

On the other hand, small business factoring could help provide a steady and reliable cash flow. By selling your invoices, or factoring the invoices in return for an advance of funds, it will cost up to a percentage of the invoice value but today factoring can outweight standard small business loans and overdrafts.

For more information on factoring, go to www.ifgnetwork.com

Small Business Optimism Remains Grim

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The National Federation of Independent Business (NFIB) monthly report released today indicates that small businesses aren’t very optimistic about the economic climate. The report shows that the trends index is still stuck at recession levels.

And that is pretty much reflected in today’s speech by President Obama who addressed small business by mostly talking about the same measures from last February’s Recovery Act. The administration is hoping to keep small-business lending going through 2010, and talked about stimulus provisions that eliminated fees for Small Business Administration loan programs increasing guarantees on the agency’s main loan, the 7(a), from 75 percent to 90 percent. He also mentioned reinstating the fee reductions and guarantee increase for another 12 to 14 months (if they are applied retroactively) would likely cost at least $500 million.

So once again as small businesses continue to experience pain, the age old tactic of factoring is still a good way to keep things moving until things get better.

Factoring companies know that as the year ends, small business owners will need funds to get the New Year started off right. For more information on invoice factoring companies go to: www.ifgnetwork.com

Fed Chairman Ben Bernanke Comments on Small Business

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Even though there are improvements within the financial industry, credit still remains tight for small businesses, said Fed Chairman Ben Bernanke in his economic outlook today. Viewed positively by the stock market, his outlook had no indication of interest rate hikes in the near term. But the Fed chief referred to formidable headwinds that are keeping the recovery from moving faster.

As far as the job market, it still remains weak, but it is no longer contracting at the pace seen in 2008 and earlier in 2009. The Fed has been working to re-start the market for asset-backed securities including those that finance auto loans, credit cards, small business and student loans, and commercial real estate loans.

What all this means is that small businesses will need to continue to be creative when finding funding to grow or stay afloat into the new year of 2010. Invoice factoring is one such tactic.

Nation’s State of Small Business

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The latest report from Obama this week said there was modestly encouraging news about job loss. Only 11,000 jobs lost in November. Unemployment rates ticked down. Overall he said it was the best job report that we have seen since the year 2007. Just in time for the holidays.

However many analyists and journalists are skeptical, stating that a truer measure of unemployment in the U.S. puts the score at 17.5 percent. The last time it was this bad? The Great Depression in 1933 at 25 percent.

That all said, this economic downturn is just about to end the first year of 2009. And smart businesses have done everthing they can to prepare, and many have started implementing invoice factoring.

Small Businesses Use Single Invoice Factoring to Catch Up in the New Year

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Today a news article quoted Chief Executive Eric Schmidt of Google Inc. (GOOG) who said the single most important thing for the economy is to get lending to small and midsize businesses going again.

As small businesses begin to get ready for a more optimistic new year, there are a number of factors to watch out for including the fact that companies are going to be hiring again, so it is important that you not let others steal your own employees. Because some of your employees may have suffered with cutbacks, they may be looking for opportunities to make more money to pay off their bills.

Also be careful about what you spend money on, now that business is getting better. Priorities might include a new security system, or computer, but wait on things that are not really important such as new furniture for the lobby. It is key to think about paying off any debts and beginning to save money again.

Many businesses have learned how to use invoice factoring to stay afloat during the recession. And that tactic can be continued after the new year begins. It is a great way to pay down your debt, while keeping cash flow strong.

Small businesses might want to think about using single invoice factoring, or spot factoring, to bridge the gap between debts versus income. Spot factoring is when you factor only one invoice at a time, so you can use this on as as needed basis until your business is back on track again in 2010.

Troubled Asset Relief Program, Small Businesses and Factoring

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Big banks are still repaying the billions of dollars given to them by the government a year ago and currently they are betting on bonds, commodities and other financial products.

Of the $250 billion that the government initially set aside in its Troubled Asset Relief Program (TARP)to spend for direct assistance to banks, it has spent $205 billion. But banks have only paid back $71 billion. Although TARP is supposed to expire Dec. 31, there are $140 billion still uncommitted so the Obama administration is considering extending a portion of the fund through October 2010.

In addition to helping banks get rid of mortgage-backed assets, TARP’s other goals were to encourage greater lending to consumers and businesses, and to mitigate foreclosures.
What’s more, a new program is supposed to funnel money to small banks at low rates to increase small business lending. Treasury officials say it could cost taxpayers between $10 billion and $50 billion.

It is the nation’s small banks that have been failing at the highest rate since 1992 – and with them, many smaller businesses have gone under. If stabilizing the financial sector was TARP’s main goal, increasing lending was the other.

What many smaller businesses are finding of assistance during these tough times, when they have not been able to get a loan from the unstable banking system, is factoring. A strategy used often during recvessions, invoice factoring can provide just enough extra income fast enough for the small business to make payroll, and order supplies, so they can stay in business.

For more information, contact a leading factoring company such as The Interface Financial Group (http:www.IFGNetwork.com)