27. October 2009 by admin.

As the economy continues to struggle, companies of all sizes are looking for ways to assist their cash flow requirements.  Larger companies that have the power are unilaterally deciding to slow their payments to their vendors.

A recent article in the Wall Street Journal states, “In an example of corporate Darwinism at work, the recent round of quarterly earnings results showed companies with annual revenue of more than $5 billion sped up their collection of cash from customers while slowing their own payments to suppliers.”

The trickle down effect of this is tremendous, as the suppliers, typically small or medium sized businesses, are realizing a cash flow crisis.  Typically, established businesses would have no problems turning to their banks for a credit line to help finance this cash flow gap.  But many companies have discovered that that type of financing has dried up, which leaves the suppliers in a bind.  Do they give up on the slower paying (but large) customers?

A flexible factoring product, like the spot factoring option Interface Financial Group offers, can help a company get through these tough times by advancing funds on accounts receivables weeks or even months before the company expects to get paid.  This influx of cash can allow small and medium sized businesses to continue to function until the availability of more traditional bank funding returns.

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20. October 2009 by admin.

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20. October 2009 by admin.

Factoring is a unique type of financing.  “Niche” or “specialty” financing are terms that come to mind.  What it IS NOT, however, is well understood.  Many times I will have a conversation with someone who compares it to a bank loan.  “You loan money on receivables, right?”  “What is your interest rate?” ”Factors are lenders of last resort.”  Unfortunately for the factoring industry, these questions and statements display the misunderstandings people have about factoring.  This post is an attempt to clear up those misunderstandings.

So, how does IFG’s factoring differ from a bank loan?  Let’s start from the top.

1.  Submitting an Application

Most banks require that a company have at least 2 or 3 years of business financials and tax returns before considering them for a conventional loan.  If a company doesn’t have this kind of history, the application process may be cut short right here.  Factoring companies, on the other hand, are looking for accounts receivable, and are not overly concerned with the length of time a company has been in business, just the quantity and quality of the companies invoices.

2.  Increasing the Funding Amount

When a company is growing and is looking to increase its bank line of credit, it will often times have to reapply to the bank for additional approvals.  This process can take weeks (or months!) to complete.  However, once a company has established an IFG factoring relationship, additional funds are easy to come by.  In fact, because receivables typically increase as a company grows, and IFG funds a percentage of those receivables, a company’s “credit limit” automatically increases as well.

3.  Repayment

Loans are typically paid back on a set schedule, usually monthly or quarterly.  This schedule may or may not correspond to the exact times cash is received in a business.  For example, if a client borrows $100,000 for 30 days, and the client’s customers pay on 45 day terms, there is a good chance the client will not be able to pay back the loan.  On the other hand, a client’s customers are actually paying IFG, and thus there is no hard and fast due date that might cause a client to default on the financing.  IFG is paid when the customer makes payment, not on an arbitrary date.

 Hopefully this post highlighted a few of the major differences between Factoring and Bank Loans. 

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13. October 2009 by admin.

I received this video via email.  The email stated that this video was played at its annual shareholders meeting this year.  Whether or not that is true, the video points out some pretty amazing things about the evolution of our world.  I hope you enjoy it.

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7. October 2009 by admin.

Recently, I have noticed a larger amount of calls coming in from companies asking if we will factor a single invoice from a single client.  Of course I respond in the affirmative, but many times when I hear that question, I know what is coming next.  As part of our pre-qualification questionnaire, we inquire about the total amount of accounts receivable the company has.  The client normally responds with, “I thought you said you can factor a single invoice, why do you want to know about all receivables?”  I explain that an IFG spot factoring is a full recourse transaction, and is not intended to be used as the client’s dumping ground for delinquent accounts.  If an invoice becomes deliquent, IFG looks to exchange that invoice for another that the client has in their receivables portfolio.  IFGs Terms and Conditions document is quite clear about payment default and how it is resolved. 

I have found when a client begins the conversation with the single invoice question, they are often times looking to collect from a delinquent or deadbeat customer.  They have given up hope or don’t want to spend the time chasing the debtor, so they are trying to offload the bad invoice to us.  Many people do not understand the difference between spot factoring and collection activities.  Many feel that IFG should take over the collection activities for them.  While this may be more common among traditional factors, most factors operate on a full recourse basis. A little education about what spot factoring is usually clears this up quickly.

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