Monthly Archives: October 2010

Financial Planning is Key to Small Business Success

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On average eight of ten new small businesses fail. Why ? Because of poor financial planning. Management of finances is key to being able to establish, maintain and grow your business. Not only does it affect the employees you hire, but also the materials and products or services you sell. In order to be successful in today’s tough economic environment, small businesses need many strategies to succeed.

Essential to planning for success, learn how to forecast sales and profits on a short-term basis – which would be from one to three years out. Estimate future business performance based on the results from prior periods. It will enable you to modify the business as needed.

If times get so challenging that you are afraid you may not succeded with your small business, use a solid age old financial tactics known as accounts receivable factoring.?  A factoring company will factor invoices that are 30/60 or 90 days out, and use the cash you get in less than 48 hours, for paying bills and expanidng your business.

New PayNet Data Boosts Small Business Confidence

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PayNet said that small business loans are safer than junk bonds, and are expected to get even less risky over the next couple of years. The company’s analysis of default rates since 2006 shows that, on average, small businesses reneged on loans at an average rate of 6.9 percent.

In an analysis of PayNet data, Stanford University Business School professor Darrell Duffie says that small businesses defaults are expected to decline, on average, to 4.6 percent in 2010 and 3.9 percent in 2011.

Factoring companies are assisting small businesses and will continue to provide cash on demand in less than 48 hours for outstanding invoices.

SBA California Calls on US Office of Advocacy for Bank Lending Study

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Small Business California President Scott Hauge has called upon the United States Small Business Administration (SBA) Office of Advocacy’s approval for the SBA to conduct an impact study of bank lending practices and the resulting adverse effects on small businesses nationwide. Hauge also asked that the findings and recommendations available to the public. Small Business California is an advocacy organization with a network of over 5,000 small businesses and more than 100 trade associations

One of the biggest concerns of small businesses today is access to capital and the fact that big banks are pulling loans, while interest rates for credit cards are at 30 percent.

Some small businesses have discovered invoice factoring, which is helping cash flow and spurring growth. When invoices are outstanding for 60 to 90 days, factoring helps them get cash in about 24 to 48 hours.

Construction Factoring Supports Industry Outlook

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Trends in the building industry include consolidation of development and construction firms, with focus to debt reductionrisk management and cost. McGraw-Hill Construction Outlook 2010 Midyear Update for the year 2010 says this was viewed to be the first year of recovery for total construction starts, however, given the slower expansion surrounding the overall U.S. economy, the improving trend for single family housing paused in late spring, therefore the gain for full year 2010 will be smaller than previously forecasted. On a more positive note, there has beenstronger activity for environmental public works and a rebound for healthcare facilities.

In 2010 the loss of momentum for commercial building has not been as severe as it was for the year 2009, but losses remain fairly substantial. Institutional building retreated, and was made worse by the eroding state and localized fiscal situation. And, while the lift to public works construction from the federal stimulus act is still present, the push directed at highway and bridge construction has subsided. Eventually in virtually all real estate markets a bottom will be reached and business will pick up gradually. But for now, many major development projects have been cancelled, downsized, or delayed.

The Interface Financial Group (IFG), North America’s largest alternative funding source for small businesses, uses the index to gage the construction factoring marketplace. IFG is one of the few companies that handles construction factoring, and has for more than twenty years. For more information on construction factoring, go to www.ifgnetwork.com

Federal Survey in New York Shows Small Business Credit Gap

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Small businesses in the New York area are showing “widespread reports of unmet credit needs,” says a new survey by the Federal Reserve Bank of New York. 426 small businesses were surveyed in New York and neighboring states in June and July 2010, and 59 percent of those polled had applied for credit in the first half of 2010. Of these, only half got any loan approval at all, while and three quarters of them said their needs for borrowing simply were not met. Two-thirds of these same businesses reported that their sales declined since the year 2008.
One central question of the recovery as asked: Why has borrowing declined among small businesses? The volume of outstanding loans to small businesses has dropped by $45 billion, or about 6 percent, since 2008.

The New York Fed survey suggests that the contraction isn’t driven by lack of demand from borrowers. Companies that successfully got credit tended to be more established and showed sales growth through the recession. The forms of credit with the highest approval rates were financing for vehicles and equipment, in which 63 percent of applicants were approved, and 46 percent for personal credit cards. The forms that were approved least often were applications for business loans, whereby only 20 percent were approved, and 27 percent were approved for new business credit lines. The survey also found that companies that had obtained credit successfully in 2008 were not any more likely to be approved.

With so few smaller businesses being approved for credit, companies should be advised that there are other strategies and tactics that could be of use during these difficult times – such as accounts receivable factoring.

In fact, The Interface Financial Group’s single invoice factoring service is user friendly, fast, flexible, and cost effective. If the client chooses to offer further invoices to IFG, the total transaction time is often reduced to two to eight hours. IFG’s professional rates are competitive; each client’s circumstances will vary and may have an impact on the fees.

Watching Trends Like Factoring in Finance

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If you are a passionate entrepreneur you may be tracking and applying trends to your business every day — understanding and applying consumer trends and insights. Today’s consumer behavior and preferences are changing fast and also on a global scale, so focusing on consumer trends is more important than ever. Tracking consumer trends can provide inspiration for new products, and can help support services for your customers. Ultimately, trends promote profitable innovations.

There is an assumption that human beings – consumers – do not really change that much, at least their behavior does not really change, and their deeper needs remain the same. So successful ventures usually just satisfy existing needs in new ways. Experts recommend tracking least three trend levels: Macro trends, industry trends, and consumer trends. One of the latest trends in business, for example, is the age old concept of factoring.

Due to the recent slower economy, many businesses are slow to pay their invoices. So if you have invoices out that are due on 30 days, many vendors are paying in 60, or 90 days. The problem is that a business always needs cash to operate, so one of the latest trends is invoice factoring, so businesses can stay afloat and pay bills, employees,and for continuous inovation.

And the next time you are watching trends in your business, don’t assume that one particular consumer trend will affect or be embraced by all consumers. Be open minded and remember that observing instead of judging the world means success. When you notice something new, instead of immediately looking for shortcomings, ask “why.”

Last, remember that your own professional interests should be broader than your personal interests. Look to other industries for innovative ways to reach your customers.

The Best Start Up Businesses and Tactics to Survive

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There are many unemployed people are now becoming entrepreneurs seeking a new business startup idea. And some of these are co-entepreneurs, couples who both have lost their jobs.?  Sometimes an entrepreneur’s initial attempt to start a business doesn’t work — either the customers are not there, so the profits are not there, or the idea is too difficult to execute. According to a study released in January 2010 by the Kauffmann Foundation, the number of new businesses incorporated annually in the U.S. has remained fairly consistant over the years. Although recessions often lower the cost of entry for new companies and make customers more willing to explore less-expensive alternatives to current products or services.


There are many various types of businesses — wholesale, retail, manufacturing or a service business and service industries do offer some advantages as a start-up business. Service businesses are usually local so you usually don’t have to compete with as many national companies as you would in a retail, wholesale, or manufacturing business. Service businesses also require less capital. And typically you don’t need to finance large inventories. When you are in a service business, the customers can usually be asked to pay immediately upon completion of the work. And sometimes you can even request cash!


Becauseit may be difficult in today’s economic times for a start-up business to get a loan from traditional financial institution today,many companies know that a factoring company can help keep your cash flow going because factoringincreases working capital and helps you grow your business. And just as the economy is making it difficult for many business owners, large and small, customers are also struggling, and often cannot not pay right away. If you have a start up service business, you can take advantage of finding a factoring company so you can get cash today – or in 24 to 48 hours – for invoices that will pay in 30, 60 or 90 days later.

The Differences Between Factoring Companies

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Cash-strapped companies, especially small businesses, are searching for financing in today’s tight economy, and factoring companies are getting their business. There is some confusion, however, about factoring versus accounts receivable financing. Factoring is the purchase of a business’s outstanding accounts receivables by commercial finance companies known as factoring companies, who purchase invoices from their clients.


On the other hand, accounts receivable financing is more like a traditional bank loan backed strictly by a pledge of the business’s assets associated with the accounts receivable to the finance company. When a business goes onto an accounts receivable financing arrangement, a borrowing base of 70 percent to 90 percent of the qualified receivables is established at each draw against which the business can borrow money.


Further, neither factoring nor accounts receivable financing should be confused with collection agencies who work with businesses that have customers who have simply not paid their bills. Factoring companies work with businesses that have customers who do pay their invoices.

Factoring Can Fund Expenses

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If your company employs road warriors, or sales people that travel, you may be underestimating the amount of time your employees and the people in your accounting department spend on accounting for travel and entertainment (T&E) expenses. In addition to this, accounting spends additional time on the other items that your company buys such as supplies, computer equipment, etc.

Expense management software is available to handle expenses through a number of vendors and it can help save time on all the accounting of business expenses for those on the road, and those who have to approve and process the expense transactions. Most expense management packages make it possible to manage the entire process, from requests to reimbursements. However when the cash flow is low, implementing a strategy like accounts receivable factoring may be able to help pay these expenses quickly. Many companies, even midsize ones, will find this method cost-effective. Factoring is a tactic long used by small businesses to sustain and grow.

In most companies, growth is all about cash flow, so when sales teams require pay-back for expenses, and the funds are low accounts receivable financing help. When employees expenses get paid on time, they also have more cash to continue to be road warriors, selling more so the company earns more revenues.

How Factoring Aids in Expense Management

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For some companies, travel and entertainment (T&E) expenses for their road warriors can become a virtual nightmare for everyone involved. And if you are on the road a lot for business, you know how much time you spend filling out those dreaded reimbursement forms. There is software for T&E — expense management software — that you pay only for via a monthly subscription.

There are a number of good reasons for automating expense management including the fact that it’s a much more efficient means of handling the process of requisitioning, expense reporting, reviewing, and final payment. If you’re the CFO or controller of a company that employs a sales team of road warriors, you know how much of time goes into accounting for reimbursements of these expenses.

Automated expense management also saves time for the people who are requesting approval for purchasing equipment or office supplies and it helps save time for those who must process the transactions. Most systems enable users to quickly drop information from electronic corporate credit card statements into their expense reports.

But if you are one of the many smaller companies in the United States, you may not have a budget for automated expense programs, let alone as much of a cash flow, so when sales teams require pay-back for expenses, and the funds are low, this might be a good time for invoice factoring to be able to pay expenses more quickly. Factoring is a tactic long used by small businesses to sustain and grow, and because sometimes customers’ invoices don’t get paid on time, invoice factoring can fill in the gaps, so employees expenses get paid on time, and they also have more cash to continue to do more business.