Compound Profit Blog

Business lending solutions

Business lending solutions – who can help?

I have heard the question asked lately “when will banks start lending to small businesses again like they used to”.  The answer I hear from many recognized experts on the subject is “probably never.”

Now before you cringe, stop and think about this for a minute.  During the bull markets of the 80s and 90s, when our economy was supposedly sound, money was relatively cheap and easy.  And while some may have seen these as the “glory days”, in truth it did nothing more than mask some bad decisions and practices by both borrowers and lenders.

We saw people pour money into the stock market without any thought as to the instruments they were buying.  The thought process was their money would continue to grow at ten to twenty per cent a year and their retirement strategy was built on this myth.

We all know how would be non qualified buyers actually obtained mortgages for homes they could not afford, putting nothing down and paying interest only.  How’s that working for us?

So it is easy to point at the banks today and say “see what you did”.  But the fact is there is plenty of blame to go around.  Just like an uneducated decision in personal investments for many had catastrophic outcomes, so too did the borrowing practices of many businesses.

Loans came easy and the more money one “needed” for their business the more they would get.  Business growing through the roof?  Take on more debt to pay for the inventory.  Your fleet of trucks not as shiny as they used to be?  Take out a loan and buy some more. Money was cheap and money was easy.

But were those the good old days?  Not at all! Today the business person must be calculating and intelligent about how he or she finances the business.  With banks lending practices significantly altered, the popularity of alternative financing is booming and financial instruments long overlooked are moving into the forefront.

Take AR factoring for example.  Often viewed as a tool for less successful or desperate businesses, now thriving companies are leveraging their invoices for growth.  By selling their receivables to a reputable third party for a discount, these businesses now have cash in hand to invest back into their business without taking on additional debt or selling a part of their business.  Born out of necessity, this practice is proving to be a far better alternative to high growth companies.

Leasing and micro-leasing is also becoming more and more prevalent. Businesses, in order to survive, are looking to protect their cash reserves.  By leasing equipment, signage, or any asset they can they are able to take full advantage of available third party money to grow their business.  Even if the rates are higher, if an investment in an asset shows a positive return (say a new truck) the prudent owner is leasing that product.  As long as the return on the investment is greater than the cost of the lease, it is a wise choice.

Of course positioning yourself properly is always the most important way to secure the financing you need.  Know your numbers, have your house in order, and be able to articulate your needs.  As a start up, try to keep six to eight thousand dollars in your account for six consecutive months to give lenders the confidence you can repay your debt. 

The bottom line is funders, as investors, do not want risk.  They want a guaranteed return on their money.  The better job you can do to assure them their investment in you is safe, the better you will be at attracting the financing you need for your business.

Alex Cherlin is a Cash Flow Expert with Compound Profit of Virginia. Contact him - acherlin@cprofit.com - for more information.

Small business loans stimulus

Small business loans stimulus – will it work?

There may be some relief in sight for small businesses across North America. If the U.S. Senate passes the Small Business Lending Bill, a 30 billion dollar fund will be allocated for small business loans stimulus. This will hopefully spur a rush of new lending inquiries from the small business community.

While funds may become available, there is no indication that the regulations imposed on banks recently are going to be eased. I spoke with a banker today about this, and he stated clearly, “No way”. These regulations have forced banks to look closely at every request for capital. Any minor issue a business owner might have could be cause for a rejection on the small business loan request. Thus, it does not appear that most small businesses will benefit from this move.

B2B Companies needing working capital should consider Accounts Receivable Factoring. It is a viable option that frees the business owner from the requirements of loans and lines of credit, and allows them to get the funds they need much sooner without the paperwork, loan committees, and delays. Requirements do not depend upon funds in the bank or the credit of the business or the owner; rather, the credit worthiness of the company’s creditors is the key to becoming fundable.

Accounts Receivable Factoring involves Compound Profit purchasing a company’s accounts receivable at a small discount. Funding occurs quickly; most of the time, the entire process can be completed and funds allocated within 10 business days. As part of the process, the creditworthiness of the company’s creditors is checked. As funding continues, Compound Profit will check creditor’s credit on an ongoing basis allowing the business owner to be the first to know if a creditor is having problems.

Following are some of the industries Compound Profit has provided working capital to through Accounts Receivable Factoring:

- Produce

- Graphic Design

- Cleaning                   

- Transportation

- Garment

- IT Service

- General Contracting

- Maintenance Supply

- Marketing Consultant

- Oil Field Service

- Import / Export

- Manufacturing

- Staffing 

If you own a company that does B2B or B2C commerce and want to know more about this powerful tool - accounts receivable factoring - that allows you to grow your business, you should consider calling us so we can get you the cash you need to radically change the trajectory of your business.

Doug Linder - dlinder@cprofit.com

Advisor / Principal - Compound Profit-Tampa Bay

877-386-3716   Ext 218

Factoring Of Accounts Receivable

I am living in the Tampa Bay area and have been doing so for 20 years. I have started several businesses in the past and as far as I knew I did well in growing those businesses on my own. I sold both of my companies and felt very good about my gains at the time. However, I worked my companies without knowing what I know now.

Do you know about accounts receivable factoring? Have you ever needed funds from your accounts receivable today but did not get them when needed or on time? Did your budget fall short of your goals when growth was possible but the money needed for the project or purchase order just was not there? Did opportunities pass you by because you could not fork up the capital to start the job or win the bid?

I had all of these problems. I wanted to grow but could not afford to hire more help due to 30 net accounts receivable and a lack of equipment. I did most of the work on my business alone and without assistance. Banks would not fund my efforts because I was new in business or they had no programs designed around my needs or because they needed an equivalent amount of financial collateral in order to provide my business with a loan.

My credit was not established enough to gain a credit card which carried a balance significant enough to finance my needs and every card I did get cost me out the yingyang in interest. I did not know where to look for help so I did my best and happily sold my company prematurely. Factoring of Accounts Receivable could have doubled or tripled the value of my company and I had no idea what it was.

Today I have gained the information I needed then and when I found it I decided to get myself into a position to benefit from helping others solve these problems. We are here for you at Compound Profit and we would like to help! We have options in place to help any new business or established company. In some instance such as a new restaurant we can provide financing even if the business was established this morning.

 If you are experiencing these issues and did not know there was a solution and would like us to give you some good insight to your situation contact us and we will get back to you immediately.

David Chapman King
Account Executive with Compound Profit
1-888-317-6830 Ext. # 169

Factoring Solves Accounts Receivable Problems

Most small to medium sized commercial businesses do not have the staff to properly manage one of their largest (in many cases, THE largest) assets: accounts receivable. Entrepreneurs must wear many hats & often the Credit / Collection Manager hat is the last one put on during a normal business day. And, too often, the delay or neglect is costly. Business owners are usually focusing on sales, service and production and only get involved with credit and collection issues when cash flow becomes an issue, or even worse, when an account becomes uncollectible.

Compound Profit Capital Corp. not only enhances cash flow through advances on account receivable but also provides credit checking & monitoring of existing and new clients. This is part of our accounts receivable factoring program; there are no additional fees for this invaluable service. It allows the principals of our client companies and their staffs to devote 100% of their time to selling and servicing their customers, without having to worry about when (or if) they will be paid for the products that were shipped or the services that were rendered.

Bottom line:  When small & medium size businesses allow CPCC to partner with them, their Bottom Line is improved!

Jack Correro brings more than 30 years of experience in the financial services industry to his role as Vice President at Compound Profit Corporation. Correro managed marketing and underwriting activities for Dallas based factoring companies until 2000, when he became manager of the Regional Credit department for a large, national factor. In 2004, he started a financial and marketing consulting practice and joined Compound Profit two years later. Correro received a Bachelor of Business Administration degree from the University of Texas in Arlington and holds a Standard Certificate from the American Institute of Banking.

Accounts Receivable Factoring Fees

Accounts Receivable Factoring Fees Are Often Misunderstood

One common misconception with the accounts receivable factoring fees is that the invoice factoring "discount” rate is an "interest" rate and therefore must have an annual rate of interest. Many business owners incorrectly believe that selling an invoice at a discount from the face value is a loan. Hence, they incorrectly assume there is an interest charge.

“Accounts receivable factoring fees are more analogous to the business owner selling an asset (the invoice) at a discount. The invoice is an asset that the business owner chooses to sell to a finance company at an agreed-upon discount from the face value of the invoice”, says George Douvas, CEO and Managing Partner of Compound Profit of Southern California.

Demystifying Accounts Receivable Factoring Fees

Let's say a business owner has a $1,000 invoice in January and receives 80% or $800 from a finance company in advance. Instead of paying the owner the remaining 20% or $200 when the invoice is paid by the customer 30 days later, the finance company deducts $40 and pays the business owner $160.  Everyone will agree the invoice was purchased for $40 off the face value, or at a discount of 4% for January's transaction.

Let's say this occurs not only in January, but each month for the rest of the year.  In total, the business owner has 12 X $1,000 invoices, for a cumulative yearly amount of $12,000.  A the end of the year, the finance company will have deducted 12 times a discount fee of $40 on each invoice, or a total of $480 per year.

So, in a year, instead of receiving $12,000 from the yearly sales, the business owner receives $11,520.  The $480 discount is only 4% of the total $12,000 yearly sales value.

Many business owners incorrectly assume the annual cost of financing receivables is upwards of 50%, thinking that 4% per month for twelve months = 48% - wrong!

Douvas says “I am often amused when a client says that a rate of 3% for 30 days of accounts receivable financing is too high.  If a client’s customers offered to pay their invoices using a MasterCard, Visa or American Express, would they accept that form of payment?  Most would agree that this method is preferred and are often losing 2, 3% or even more; on top of that, they will be waiting longer for their money to arrive and they receive zero additional services from their credit card processors.” 

Compound Profit of Southern California provides complimentary evaluations of the key aspects of a company’s business and specializes in providing working capital, cost reduction and marketing solutions for businesses.  Additional information regarding CProfit South California can be found at http://www.cprofitofsoutherncalifornia.com

Compound Profit provides working capital and equipment to companies. With decades of experience in finance and business, Compound Profit's team empowers clients with the know-how to make their companies profitable and healthy. Launched in Texas, Compound Profit has expanded nationwide and operates under a successful franchise model. For more information, visit Compound Profit's website: http://www.cprofit.com/

Accounts Receivable Factoring

Accounts receivable factoring, also known as accounts receivable financing, helps small businesses acquire capital without incurring debt.

If you are a business owner with a growing base of customers and sales, or you are just “hanging in there” but are still looking for ways to strengthen your operation, cash flow is probably one of the key issues you have struggled with at one time or another.

Businesses often suffer from “cash flow drain” simply because they offer terms to customers in order to remain competitive. A business that offers payment terms to its customers often must pay its suppliers and overhead well before it receives payments from customers. As sales grow, so does the problem. Every month, a larger portion of working capital is absorbed by meeting these obligations. Businesses become artificial bankers and suffer from shortages of cash needed to meet payroll, pay bills and make investments to help generate growth.

Accounts receivable factoring helps reduce “Cash Flow Drain” for growing businesses

“Accounts receivable factoring essentially converts commercial receivables to cash”, says George Douvas, CEO and Managing Partner of Compound Profit of Southern California (CPSC). “For a small fee and in as little as 24 hours we advance up to 80% of the value of invoices our clients choose to finance. When the customer pays an invoice we send the remaining 20% to the client, less our fee.  There is no debt involved; the client sells the invoice to us at a discount and the customer pays Compound Profit Corporation directly. Many of our customers are able to negotiate better terms by paying their suppliers faster, making the cost of factoring accounts receivable negligible”.

Raj Gupta, Co-CEO of CPSC says “accounts receivable factoring is a no-hassle way for businesses to meet current or future obligations and service new orders and contracts. Many of our clients enjoy our support in checking, monitoring and reporting the credit worthiness and payment history of their existing and prospective customers at no additional charge”, says Gupta.  “And, we make routine collections calls on past due invoices at no additional charge”.

Compound Profit of Southern California, located in Anaheim Hills, CA, provides complimentary evaluations of the key aspects of a company’s business and specializes in providing working capital, cost reduction and marketing solutions for small and medium size businesses. Additional information regarding the firm and contact information is available at http://www.cprofitofsoutherncalifornia.com

Compound Profit provides working capital and equipment to companies. With decades of experience in finance and business, Compound Profit's team empowers clients with the know-how to make their companies profitable and healthy. Launched in Texas, Compound Profit has expanded nationwide and operates under a successful franchise model. For more information, visit Compound Profit's website: http://www.cprofit.com

Preparing For Equipment Leasing and Factoring

Many small business owners inquire about equipment lease financing without having too much time to take the proper decision. In many of these cases, the business owner needs the equipment leasing / financing "yesterday". It is very important to be prepared in advance, so that you can help make the process run as smoothly as possible.

Almost all funders will require the same information with some tweaks here and there; therefore, it is recommended to have some of the basic information available at your fingertips before you make an inquiry.

Some of the documents you will likely need will be a brief description of your business and the need for equipment, the last three bank statements, a quote or invoice, and articles of incorporation.

Having this information ready will speed up the process and allow the funder to give you a quick opinion on your situation. More information might be needed, but this would give you a good starting point and will speed up the process by a few days.

Preparation for accounts receivable financing is relatively simple. Along with your application, you will need to submit an accounts receivable aging report and a customer list. While this may seem simple, you might be surprised to know that many businesses do not have an accounts receivable aging report readily available. Software such as Quickbooks makes getting this report very simple.

Vincent Mangone is a Principal & Compound Profit Advisor.  Mr. Mangone helps business owners get the capital they need even when the bank says no. Visit his website at http://www.cprofitny.com or contact him at 877-386-3716 ext. 116

Can Bankers Benefit from a Partnership with a Factoring Company?

Bankers hate to say no to their business clients that are seeking a loan or a line of credit.  But, because of the turmoil in the economy and the subsequent constraints on the banks, they are now forced to decline micro-loans requests that they used to accept prior to the credit crunch that began in 2008.

Many small business owners no longer qualify for these micro-loans given the current financial climate and the bank’s more stringent borrowing parameters.  However, bankers know better than anyone that all business owners need cash flow to keep their business viable.  Liquid cash is needed for payroll, taxes, inventory, supplies, equipment, etc. 

Bankers hear these scenarios every day from their business clients…

1. My sales activity is good, but cash is locked up in receivables.
2. My customers are slow in paying my invoices.
3. I have more cash in receivables than in my bank account.
4. I need to use cash for growth, for payroll, for taxes, for additional staff, for equipment / supply purchases, for vendor cash discounts, etc.
5. I could pursue more lucrative contracts, but lack the ready cash for needed materials.

But the bank had to say no to the client’s loan request.

A solution to this cash flow crunch for business owners and for the banker’s plight of having to say NO can be Invoice Factoring.

This is a little known and little used solution to getting needed working capital for the small business owner.  It is not collateral-based, a guaranteed that all the banks require in order to secure a needed working capital line of credit.  Factoring is not a loan so it does not burden the business owner’s financials with further debt.  It is off-balance sheet financing, so it can help build business credit and eventually help the business owner qualify for a bank line of credit.

Benefits of Invoice Factoring for the Bank and the Business Owner

1. Factoring invoices will provide the business the immediate cash that is needed for the survival of the business.
2. As Factors will deposit the cash for the factored invoices directly into the checking account of the bank’s client, the bank will immediately improve their Average Daily Deposit metric.
3. The decision to factor invoices for the business is not based on the owner’s credit, but on the credit-worthiness of his / her customers.  As such, the bank does not have to be concerned about their business client taking on more debt.
4. The end result is that the business client becomes bankable and eventually qualifies for more bank products.

Conclusion.  If you are a small to medium size business owner that is short of working capital, or if you are a banker that would like to improve the Average Daily Deposit metric and eventually expand the financial products for your business clients, consider invoice factoring as a solution to both problems.  It is a financing facility that can solve the business owners’ cash flow problems by unlocking cash tied up in receivables.  It is a very effective means of accelerating cash flow for companies in a growth mode or could be growing if access to ready cash was available… and it is a very effective way for bankers to improve an important bank metric.

Robert Jacobs is an Account Executive with Compound Profit.  Mr. Jacobs helps small to medium size business owners get capital for growth and cash for operating expenses… when the bank has to say no. Visit his web site at http://www.cprofitrj.com/  for more information.  He can also be reached at (877) 386-3716, ext 134.  Learn more about Compound Profit’s SMART CAPITAL ADVANCE solution for business owners and for bankers at http://smartcapitaladvance.com/jacobs/

Passing The Buck In Mesopotamia - by Alex Cherlin

Just what the world needs: another middle-aged man jumping on the social media bandwagon and starting a blog to talk about improving your business through cash flow... right?

Right.

It seems, after beating our collective heads against many walls in Richmond, Va and pounding our chests to virtually anyone who will listen, the message still hasn't been internalized by many small business owners. There is help out there for your short term cash flow needs and it doesn't necessarily have to come from the bank. It often exists in the unlocked potential of one of your most valuable assets: your accounts receivables.

What's frustrating to many professionals is the number of people who share stories about the demise of their business by saying "if I only knew about alternative financing when I had my business I may have still been in business today."

The beginning of early alternative financing forms, such as factoring, dates all the way back 4000 years to the time of Hammurabi and the Mesopotamians. Yet it seems today about as many people are familiar with factoring as are familiar with Hammurabi and the Mesopotamians.

So here's the deal:

Some businesses find themselves needing capital to grow and manage their business. At times, these businesses are unlikely to obtain a traditional bank loan because of unacceptable debt to income ratios or low personal or business credit scores!

Many businesses, no matter how well they are run, cannot qualify for traditional bank loans due to personal credit issues, too few years in business and / or limited cash reserves.

When a capital need strikes, they face few smart alternatives to the bank, and then the owners must turn to family money, personal loans, or even cash advance firms that may charge astronomical rates.

Enter the "Factor". By outsourcing accounts receivables to a reputable company, one can have cash in hand, usually within 24 hours, for a nominal fee (1... 5%). These are the added benefits:
- The focus is on the business and not on collections.
- With cash in hand the owner can now negotiate better terms with suppliers.
- The business can now invest in equipment, hire new employees, start a marketing campaign and more.
So before the pain reaches the point that one decides to go to some of the last resort "boot strapping" measures, or before one’s business is perilously close to failure, seek the help of a cash flow expert to look for alternative and prudent ways to sustain and grow your business.

The solutions are out there. You don't have to be Mesopotamian to know that.

Alex Cherlin is a Cash Flow Expert with Compound Profit of Virginia

Factoring helps win contract with City of Omaha - by Dennis O'Connell

Compound Profit's purchase order factoring recently helped a small, minority-owned construction company win a major contract with the City of Omaha.  Dennis O’Connell, Regional Director for Nebraska and Iowa, says “Our financing solution allowed the construction company to show the City that they had the funds to meet their supplier obligations along with payroll requirements”. 

The contractor chose Compound Profit because of the hands-on relationship and trust we were able to build along with our local presence.  Additionally, our understanding of the construction trade and the requirements for getting funding, our ability to work closely with bonding companies and to be very competitive from a pricing perspective allowed us to create a winning team.

Factoring is the purchase of some or all of the valid Accounts Receivables for goods and services that have been completed in business to business, or business to government transactions, at a discount. In many ways, factoring (also known as Accounts Receivable Funding) is similar to improving your working capital cash-flow by offering your customers a cash discount for paying their invoices more quickly.

So why would anyone want to using factoring? Because it will allow you to grow your business and allow you to accept contracts that you normally couldn't fund because you don't have the cash reserves to make payroll or purchase the needed equipment or supplies.

As shown in the above example, using factoring we helped a small business in Omaha win a major contract and fulfill their dream to grow and prosper.