Monthly Archives: February 2010

NFIB Small Business Credit Report: Affects Construction Factoring

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The NFIB Research Foundation just released the new report “Small Business Credit in a Deep Recession.” The bottom line to these findings show that although obtaining credit has become more difficult, declining sales and depressed real estate values lie at the base of credit problems. See the results below:

55 percent of small employers attempted to borrow in 2009
45 percent did not attempt to borrow in 2009
5 percent of owners, did not try because they did not think they could obtain credit.
40 percent of small business owners attempted to borrow in 2009 had all of their credit needs met
10 percent had most of their needs met
21 percent had some of their needs met
23 percent had none of their credit needs met.

It was reported that the most frequent change was increased interest rates, and the most common planned purpose of credit rejected was to fill cash flow needs.

Real estate ownership is a major reason why small businesses have not yet started to recover, and why larger companies have been able to recover more quickly than smaller businesses.
That means current small business problems will not be solved by simply focusing on lending issues. Policymakers need to also focus on weak demand and real estate.

In the meantime, small businesses can work withing the perameters of accounts receivable factoring to survive. Construction factoring is up, and continues to support the general contractors and builders.
Tackling weak demand requires growth in the economy, not more liquidity in financial markets.

Credit Market News Still Bleak

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The news on the credit market remains bleak, according to a Wall Street Journal report ($) today, stating that bank lending in the U.S. saw its sharpest drop since 1942. Increasing bank lending is key to the Obama administration’s goal to help small businesses create jobs.

The latest report on lending from the Federal Deposit Insurance Corp.,(FDIC) shows the banking industry is still struggling even though the economy shows signs rebounding from the recession.

FDIC statistics also said 702 banks are in danger of failing, a 16-year high; more than 5 percent of loans are past due, the worst performance since officials began tracking data 26 years ago. There were 140 bank failures in 2009. It is expected to exceed that number this year.

Small businesses are seeking alternative funding sources like factoring accounts receivables so they can survive and grow.

The Advantages of Fast Funding Via Factoring

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Also known as factoring accounts receivables, factoring begins with due diligence that usually takes one to two business days. Once completed the client is at liberty to offer invoices to the factor for purchase. Upon receipt of invoices, the factor checks the credit of the debtor named on the invoice and makes sure that the sale has been satisfactorily completed. Next the debtor is advised of the purchase by the factor and the client receives funding.

Factoring is not a loan – it is the purchase of financial assets, or receivables, and it differs from traditional bank loans in that bank loans involve two parties, while factoring involves three parties. Banks base their decisions on a company’s credit worthiness, whereas factoring is based on the value of the receivables.

Also known as factoring accounts receivables, once a factor has approved the debtor, invoice factoring benefits businesses that do not get paid for 30 to 60 or 90 days. Due diligence efforts typically take a day or two, then factor advances up to 90 percent against the invoices. Often the turnaround is in less than 48 hours. What’s more, there are many companies who don’t expect to buy 100 percent of a company’s receivables.

Best-of-Breed Survival Tip for Small Businesses

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There are many businesses that have stayed in business and benefit from the working capital garnered from factoring accounts receivables for small business in the face of tight credit at mainstream banks. First documented in the American colonies before the revolution, at a time when materials and/or goods were shipped from the colonies to the Americas, factoring is not a loan but it’s the purchase of financial assets, also known as receivables.

Factoring benefits businesses that do not get paid for 30 to 60 or 90 days by advancing up to 90 percent against invoices. The factor generally looks at the creditworthiness of the client’s customers and can fund within as little as 24 hours. Most companies do not expect to buy 100 percent of a company’s receivables.

During the Industrial Revolution, factoring invoices became more focused on the issue of credit, as factors guaranteed payment for approved customers. | Invoice factoring became more focused on the issue of credit during the Industrial revolution. It was before 1930 in the United States when factoring occurred and it was primarily for the textile and garment industries, and then after the war years, factoring expanded to other types of businesses.

When interest rates rose during the 1960′s and 70′s, private factors became popular and it intensified in the 80′s due to the changes in the banking industry and interest rates. Small businesses were forced to find other sources of financing for expansion and growth so factoring became more widespread.

By using factoring, also known as factoring accounts receivables, it is easiest to keep your cash flow flowing, you will have the edge over the other guy, so you can order more supplies to build more products, keep your employees and sales staff on, pay all your bills, and in turn sell more.

Factoring invoices doesn’t work like traditional bank loans involving two parties, as factoring involves three parties. Banks base their decisions on a company’s credit while factoring invoices is about the value of the accounts receivables for a company. There are no minimums or maximums, and no long-term commitments.

Projections ahead for the year 2010 include the fact that businesses will be factoring accounts receivables – less for survival and more for stability and growth.

New Business Entrepreneurs Factor Invoices for Steady Growth

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According to the American Recovery and Reinvestment Act of 2009 from the Executive Office of the President, Council of Economic Advisers, the jobs that were saved or created by the ARRA of 2009 include: for the fourth quarter 20091.5 million jobs were saved. Projections for 2010 are around 3.5 million, and in 2011 the numbers are at 1.7 million, while in 2012 the statistics are at .3 million.

While many Americans are out of work, they have started small businesses t survive. Many have scrambled to borrow money from their savings accounts, family or friends. And now these hard working folks are working to keep their new businesses afloat.

What many new business entrepreneurs don’t realize is how effective the strategy of factoring accounts receivables can be to maintain solid growth. Once their business is up and running, in order not to run into the problem of a cash flow crisis, factoring invoices has become a popular strategic maneuver. And never take funds from an angel investor if you don’t know you can multiply it. What’s more, raising funds from investors is often faster after you have revenues because they like the idea of investing in a business that’s already generating revenue.

Construction Factoring and Trends for 2010

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The 2010 Construction Outlook, was released by McGraw-Hill Construction in October of last year. The report forecasts an increase in overall U.S. construction starts for the following year.

Projections for 2010, thansk to improvements for housing from extremely low levels and broader expansion for public works, is expected to climb 11% to $466.2 billion, following the 25% decline that had been predicted for 2009.

The report idicated that the U.S. construction market in 2010 will be helped by growth for several sectors, following three straight years of decline. Many builders and general contractors used financial tactics like construction factoring to aid their bottom line, and of course they hope to be able to make it until the economy recovers.

Other indicvators stated that the benefits from the stimulus act will broaden and lift not just highway construction but also environmental public works, plus institutional structure types. Institutional buildings will begin to stabilize after losing momentum in 2009.

In 2010 improvements are expected for single family housing, after reaching bottom earlier in 2009, so overall, the level of construction activity should see moderate expansion in 2010. And if not we’ll see a trend towards construction factoring continuing throughout the year.

Credit Card Transparency and Factoring for Debt Resolution

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A new act called the CARD Act was signed into law last May 2009 is promising consumers more transparency about their credit card bills, but cardholders beware! it may require invoice factoring to get out of debt once you are in too deep with credit cards.

Watch our for higher fees as consumers could suddenly find themselves socked with a variety of new charges. In fact, banks and other card issuers have been aggressively implementing new fees or raising existing ones to help make up for any potential revenue lost as a result of the CARD Act.

Three percent was once the standard charge for rolling over a balance from one credit card to another, issuers are now assessing customers a five percent fee. Experts are warning consumers to pay attention to the “Terms and Conditions” section of their statement so they know exactly what they are being charged for.

According to IRA Bank Monitor, it will be harder to get a credit card in the future. Credit is poised to tighten even further. As part of the CARD Act, credit card companies will be severely restricted in how they market cards to college students.

The amount of credit made available to consumers by credit card companies plunged by $252 billion, or seven percent, between March and September of last year.

Consumers with poor or even a mediocre credit history may find it much more difficult to get a card or have their credit limit extended after the new law takes effect today — Feb. 22.

Whereas invoice factoring is a solid financial strategy to get our of dept, contact IFG Network to see if there’s a solution for you too.

Factoring: Alternative Funding Solutions for Businesses in Arizona

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The Interface Financial Group (IFG) Principal Phyllis Rector spoke about IFG’s working capital and alternative funding solutions such as factoring for business at a special Greater Phoenix SCORE event Thursday, February 18, 2010 at the Scottsdale Arizona Doubletree Paradise Valley Resort.

The event also honored Maryanne Weiss, president of Gustare Ltd. Weiss is the current chairman of Greater Phoenix SCORE and a Skills Commissioner for the State of Arizona Dept. of Education. Arizona Congressman Harry Mitchell presented Weiss with an Extension of Remarks Certificate of entry of the “Woman of the Year” award into the Congressional Record. Banking and business guests learned about the IFG working capital solution for B2B business customers.

Other participating speakers at the Meet the Smart Teams from Greater Phoenix SCORE event included Arizona Congressman Harry Mitchell 5th district, Arizona who presented the Congressional Record certificate to Maryanne Weiss, Deborah Bateman, executive vice president at National Bank of Arizona, Tom Horne, Superintendent of Public Instruction of the State of Arizona, and Phyllis Rector, principal of IFG, who hosted the event.

Many Arizona businesses are finding the IFG solutions including accounts receivable factoring, to be an excellent way to stabalize while getting back on their feet ferom the economic downturn.

Construction Factoring During Economic Recovery

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Since the beginning of the recession in December 2007, employment in the construction industry has fallen by 1.6 million. Job losses in the nonresidential construction mounted in December 2009 with the loss of 7,700 jobs in December, according to the Jan. 8 report by the U.S. Labor Department. Nonresidential building construction shed 105,300 jobs, or 13.1 percent, to bring employment to 698,200 for the entire year.

As nonresidential specialty trade contractor employment fell by 8,800 jobs in December, jobs fell across the board with a loss of 388,000 jobs, or 15.8 percent, since December 2008.

Many builders are struggling, while others with outstanding invoices for recent jobs are able to use invoice factoring to collect past due accounts receivables.

3,800 jobs were lost in December in the residential building construction category, and 98,000 jobs, or 12.7 percent, since the same time last year. Year osss were at $934,000, or 13.7 percent, for the year. Job losses in the construction industry accounted for more than half of the net job loss in the United States in December.

For more information on construction factoring, contact IFG. www.ifgnetwork.com

The total employment in all industries shrank by 85,000 jobs in December following a revised gain of 4,000 jobs in November. Over the past 12 months, employment totals are down 4,164,000 or 3.1 percent. The nation’s unemployment rate remained at 10 percent for December 2009.

Small Business Stimulus and Factoring

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The Administration is trying to assist small businesses applying for loans, as well as U.S. House of Representatives legislation toward increasing the ceiling on federal government loan programs. Congress is looking atg offering two lending programs for small businesses, hoping to create more jobs as part of President Obama’s strategy for economic recovery.

Typically small business is a stimulus for new jobs in a struggling economy and this commitment to small businesses will be measured carefully over the next five years, along with job loss statistics.

Unemployment rates fell from 10.0 to 9.7 percent in January while the number of unemployed persons decreased to 14.8 million.

The American Recovery and Reinvestment Act of 2009 from the Executive Office of the President, Council of Economic Advisers, says the jobs that were saved or created by the ARRA of 2009 include: for the fourth quarter 20091.5 million jobs were saved. Projections for 2010 are around 3.5 million, and in 2011 the numbers are at 1.7 million, while in 2012 the statistics are at .3 million.

Smart small business owners are familiar with another stlimulus that works well in a down economy -the strategy of factoring invoices to turn their accounts receivable into fast cash. It’s used as a short-term solution for some, while others have discovered factoring as a long term, or permanent, business funding tactic. Now, the Obama Administration is expanding two lending programs for the owners of small businesses, hoping to create more jobs as part of his strategy for economic recovery.