Monthly Archives: February 2011

A Business Practice and Factoring

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The Business Dictionary online defines a business practice as, “the methods, proceedures, processes, and rules employed or followed by a firm in the pursuit of its objectives.” So it follows that financial processes including factoring, could be in a company’s business plan.

Since the economic downturn, many companies — especially small-to-medium sized enterprises (SMEs) — have turned to the age old business practice of invoice factoring. In the old days, most factoring contracts were all or nothing , meaning you either factored all of your invoices or you didn’t. Recently, a new tactic, or financial “business practice” called single invoice factoring, otherwise known as spot factoring, has become popular. Why? Because SMEs can use a factoring company like the Interface Financial Group (IFG) to factor just one single invoice if that is preferred.

The difference is that when a company uses accounts receivable factoring to factor all of their receivables, IFG will first look at each of your customers’ credit (not yours) and then decide of those which ones they will factor. With spot factoring, only one customer need be qualified, so in most cases, a factor will pay you the majority of what’s owed to you within as little as 24 hours. Basically factroing enables the following:

Cash in 24 hours for first time applicants.
Enrolled customers can receive cash in less than four hours.
A contact management system that includes instant messenger.
No minimums and no maximums.
There are no obligations.
Factoring is not a loan.
There are no upfront fees, nor co-signers required.
There is no account to open.

How Does Invoice Factoring Help Mitigate Risk?

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It is important to know how you feel about any and all risks assocaiated with investing. In fact, the Rutgers University “New Jersey Agrigulture Experiment Station” can give you the “Investment Risk Tolerance Quiz” for a quick read on your risk tolerance.

Financial planning is all about your attitudes toward risk, and your goals. But it also looks at the big picture and includes your company’s insurance, taxes, employee benefits, investments, retirement and estate planning, as well as personal financial statements.

Factoring is another less frequently used financial strategy that has become popular because you can factor as many or as few invoices as you desired. Depending on how riskly you have been with your investments, invoice factoring helps mitigate risk by turning monies that are already owed to you into cash, fast, so you can pay debts, or make new less risky investments.

New Jersey Governor Plans New Budget to Benefit Small Business

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Chris Christie, the governor of New Jersey, has plans for a new budget that will include approximately $200 million in tax cuts to benefit small businesses. The governor’s budget is likely to make large cuts to education as one of Christie’s priorities includes changes and public education reforms.

Also in the news today, President Obama took to the road and ended up in Cleveland Ohio, to share his vision for America’s economic recovery.

A number of small businesses have survived the economic downturn by creativity, faith and the use of strategies such as accounts receivable factoring. A business strategy that many centuries of people worldwide have used during times of crisis, and also as an annual financial growth strategy, factoring is just a good business tactic, because it frees up cash to pay bills, sustain and grow.

Early Financial Spring Cleaning

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This is a new year, so it might be time to take a look at your financial situation for the year, check your investments to makesure they are perfoirming well enough, figure out ways to save money and find a way to pay off debts than create a cash buffer. Even if you are concerned about interest rates and inflation, these are thinbgs that you should be taking a look at.

One way to create some fast cash to help pay for bills and get out of debt is called invoice factoring. Long ago people discovered this as a way to provide peace of mind. Just sell credit-worthy invoices to an accounts receivable factoring company who will help you acquire additional funding for immediate working capital to pay debts or even to pay taxes come April 15th.

U.S. Banks Continue to Struggle with Commercial Real Estate Loans

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According to news today from Treasury Secretary Timothy F. Geithner, who told the Senate Budget Committee today, many small U.S. banks continue to struggle with commercial real estate loans.

He mentioned several U.S. programs developed to help small banks obtain capital at a very economically attractive price has received about 250 applications.

In the meantime, many other businesses have started using strategies like invoice factoring to get by until economic recovery. Factoring companies like IFG have seen an increase in inquiries, as well as customers using construction factoring — and they are one of the few companies providing this type of factoring in the United States.

Reports Indicate Independent Businesses Could Profit From Factoring

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In 2006 the National Federation of Independent Business – NFIB – and their Research Foundation had data stating 90 percent of business owners who wanted credit were able to get it. Today, a recent survey from NFIB’s research division said the demand for small-business credit in 2010 continued to remain weak. Although it was up 7 percentage points from 2009, 52 percent said they did not try to borrow in 2010. This is yet one more reason why small businesses today are finding that alternative financing like factoring better suits their financial needs.


The report said, “The change in momentum from constantly increasing competition and access to credit to an abrupt freeze, if not direction reversal, is tied to the current confusion exhibited by many owners and analysts when assessing small-business credit conditions.”


Lack of sales is worse than lack of access to credit, and until economic growth starts happening again, businesses will need to look to other strategies such as invoice factoring, to sustain and grow. Factoring enables a company to receive cash in as little as 24 hours for outstanding invoices that otherwise may not be paid for 30/60 or 90 days.


Small Businesses in Jeopardy

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The future of many small businesses could be in jeopardy because their managers are failing to adopt basic business practices. By definition, a business practice includes: methods, processes, procedures, and rulesemployed or followed by a firm in the pursuit of its objectives and goals. And when it comes to financial business practices, the basics include invoice factoring.

Factoring is when a financial institution or factor purchases a company’s outstanding accounts receivables or invoices at a discount, and then gives that company quick access to cash, sometimes in as little as 24 hours. Factoring has been gaining in popularity over the last century, and especially in the last couple of years when loans and credit became difficult for SMEs to obtain.


Most companies need to go way beyond traditional accounting Creating value is rooted in finance and not just accounting. According to research from the Pew Foundation, 70 percent of the value of a business is not reflected in a set of financial statements.

Factoring can help businesses better manage cash flow as well, especially when it comes to their slow-paying clients. And some companies simply don’t want to have a credit department, so accounts receivable factoring becomes their method of choice.


The basic foundation behind a company’s account receivables is its policies and procedures for sales. For instance, do you have a credit policy? How are your customers evaluated for credit? You need to establish sales terms. For example, is it beneficial to offer discounts to speed-up cash collections? What is the industry standard for sales terms?


Small businesss also need systems in place to track their accounts receivables and it should include balance forwards, a list of all open invoices, and at least a generation of monthly statements to customers. An aging of receivables will be used to collect overdue accounts.


It is essential to quickly act and collect overdue accounts. Start by making phone calls followed by letters to upper-level managers for the customer. Try to negotiate settlement payments, such as installments or asset donations. If these collection efforts fail, you may want to hire a collection agency.

SBA Gets 45 Precent Funding Decrease

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It was announced today that the U.S. Small Business Administration (SBA) will be getting a 45 percent funding decrease. The SBA supports companies through its loan programs and disaster assistance, and would get $985 million in the fiscal 2012 spending plan. This budget backs $27 billion in loan guarantees for small businesses, plus administrative spending and funds for Small Business Development Centers would be cut. The SBA provides loans to businesses in federal disaster areas and provides assistance to eligible rentersand homeowners.

Compared with an average of $837 million a year from fiscal 2007 to fiscal 2010, the budget designates $1.1 billion in direct loans for disaster assistance. The The SBA would get $427 million for salaries and expenses, down from $434 million in fiscal 2010. The SBA offers government backing on loans made by commercial lenders, and guarantees as much as 85 percent of a loan.

Many small businesses have taken things into their own hands, and are using financial tactics like accounts receivable factoring. There are a number of factoring companies like IFG, but few cover construction factoring or have as many offices nationwide.

Mortgage Loans, Building and Construction Factoring

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The proposal for overhauling the mortgage market was released today. The Obama administration is calling for gradually shutting down Fannie Mae and Freddie Mac. The government will soon no longer have a role in the housing finance market. Thus far Fannie and Freddie bailouts have cost $150 billion.

Affecting Southern California and other high-cost areas, the proposal suggests a phase-in increase in the down payment requirement for loans guaranteed by Fannie and Freddie to 10 percent, and at the same time reducing the maximum size of mortgages that they can back.

On a more positive note, green building and commercial real estate industry experts are in favor of President Obama’s new federal program to boost energy efficiency in commercial buildings by 20 percent. Slated for the next decade, a package of loan guarantees and tax incentives will encourage owners to go green in building projects.

Currently construction and other related building industries are sill suffering from the economic downturn, and construction factoring has been put in place by many. Sub-contractors havr to wait for payment before starting on the next phase of a project. Factoring enables construction firms to turn around accounts receivable due for completed stages of a construction project – often within 24 hours. This speeds up cash flow so the contrator can buy supplies, and start on the next phase of construction right away.

SBA Overhauls Rules for Set Aside Contracting

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Yesterday the Small Business Administration (SBA) announced an as overhaul of the rules for its main set-aside contracting program, a an effort targeted at reducing fraud. The goals is to make sure benefits and money are paid out properly reaching the right persons. The SBA’s 8(a) Business Development program has been abused for years – as rules have been taken advantage of by big companies and non-disadvantaged people

One example being addressed is how much money can an individual have and still be considered economically disadvantaged? In addition, rules for joint ventures between small and large businesses, will require small businesses to do at least 40 percent of the work. That wasn’t speciofied until now.

The SBA has a number of programs that can assist small businesses today, especially since the economic downturn. But there is one strategy that they don’t talk about, and that is invoice factoring, which is a safety net when invoces are not paid on time. An ability to obtain cash quickly via factoring makes a big difference in the operation of any business and can often be the difference between life and death for the sub-contractor.